Moody's adds climate risk scores on its analytics platform

Moody's Analytics, a leading provider of financial information, announced the launch of proprietary climate risk scores on its commercial real estate (CRE) analysis platform, REIS. The climate risk scores quantify the exposure of commercial properties to the impacts of climate change to help investors, brokers and lenders gain a more comprehensive view of risk exposure.

A woman holding wheat in a wheat crop
October 2021

Accounting for climate risk in credit models should occur at every stage of the creditlife cycle: from credit origination to reporting.

Indeed,frequent extreme weather events result in significant losses to the public,businesses, banks, and insurance companies and pose a serious threat tofinancial stability. As a result, lenders need to review their risk assessmentmodels.

“This integration marks an important step in the evolution of our property analytics platform into a full-service risk assessment proposition for the CRE industry,” said Luis Amador, General Manager of Moody’s Analytics CRE Solutions. “The ability to view property level climate risk data alongside traditional performance metrics offers a competitive advantage at every stage of the CRE lifecycle, from loan or investment screening to ongoing evaluation and reporting. It enables CRE industry participants to build resiliency into their portfolios and engage in more forward-looking decision-making.” 

The realestate industry is exposed to risks from weather-related hazards such as floodsand wildfires that can damage real estate assets.

From a supply and demand standpoint, chronic physical threats such as sea level rise or heat stress can dramatically disrupt real estate markets.

Source : Moody’s 

A recentMoody's Analytics study on the impact of climate change on the real estatemarket found that in the Miami metropolitan area, developers are not includingclimate risks in their valuations, even though the Miami metropolitan area hashad one of the highest percentages of properties exposed to flooding.

While theseresults contradict the basic idea that risk should lead to less development,another theory supports the possibility of less impact in more affluent and/oramenity-rich areas.

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