Cervest Announces New Version of Climate Risk Rating System

Cervest, which calls itself a “climate intelligence” company, this week announced Cervest Ratings, its latest approach to measuring and specifying climate-related risks of any sort of asset, including physical property but also portfolios, companies, and financial securities.

ESG (environment, social, and governance), and the implications of climate, has become an important consideration for real estate investors. Buildings and land can be particularly vulnerable to climate change-driven events. A CoreLogic estimate suggests that insured and uninsured damages from Hurricane Ian will run between $41 billion and $70 billion.

The company’s service is called EarthScan. That system allows companies to build portfolios either from “millions of assets … already mapped and verified” or uploaded new properties. The software uses machine learning technology combined with data modeling, data engineering, and scalable computing. Cervest Ratings replaces a previous ratings methodology called EarthScan Ratings.

EarthScan uses “petabytes of quality assured climate data from authoritative public and partner sources including weather stations, reanalysis, satellites, climate models, and direct observations.” Then it models and calculates “hazard exposure risk signals.”

Cervest Ratings map climate-related risk currently for 500 million of assets across the globe,” the press release explains. “Using Cervest CI, ESG, sustainability and risk management leaders can quickly understand and report on climate risk exposure across the assets they own and manage, and also the critical assets they rely on throughout their supply chain.”

The system provides a school-style A through F rating. A means that climate-related risk is very low, while F means extremely high climate risk.

“With Cervest Ratings, customers can screen, compare and prioritize their assets for climate-related risk across multiple climate scenarios, time horizons and hazards simultaneously, and identify the key physical risk metrics driving their rating so that they can make more informed decisions about their adaptation planning,” the company says. “Cervest Ratings are available at five-year time intervals from 1970 – 2100 across multiple IPCC-aligned climate scenarios and across all existing risk categories: heat stress, flooding (riverine and coastal), drought, precipitation and extreme wind.”

The concept of measuring climate risk is of particular interest because there is a lack of universal measurement standards. As the Bank for International Settlements noted in a 2021 report, “While conventional risk management tools may serve as a springboard for climate-related financial risk measurement, the impacts from climate risk drivers contain unique features that could challenge the incorporation of these risks into existing processes.”

Expect a variety of organizations to offer risk modeling in attempts to push their approaches into globally accepted methodologies.