Morningstar Sustainalytics Enhances its Physical Climate Risk Assessments for Public Companies

June 22, 2023

Physical Climate Risk Metrics enables investors to assess the financial impacts of portfolio companies' direct and indirect climate risks 

CHICAGO and TORONTO, June 22, 2023 /PRNewswire/ -- Morningstar Sustainalytics, a leading global provider of ESG data, research, and ratings, announces enhancements to its Physical Climate Risk Metrics product, including the addition of two new reports offering deeper views into companies' exposure, loss, and financial resiliency as it relates to physical climate risk. Within these reports, new indirect risk metrics have been added to better meet the Task Force on Climate-related Financial Disclosures (TCFD) recommendations of disclosing on both direct and indirect physical risk and providing insight across the entire business value chain.

In a hot house world scenario where climate policy efforts are insufficient to stop global warming, leading to irreversible climate change and severe consequences from related physical risks, companies with average physical climate risk exposure within Physical Climate Risk Metrics universe may lose an equivalent of $0.45 for every $1 of cumulative operating cash, between now and 2050. As part of Morningstar Sustainalytics' evolving set of climate-focused solutions for investors, the comprehensive Physical Climate Risk Metrics dataset provides visibility into the financial impacts of physical climate risks, considering a company's revenue, physical asset value, and operating cash flow.

"With the increasing global adoption of climate-related regulation to accelerate decarbonization and within the limited time to mitigate the effects of global warming, investors need data and insights to understand their exposure to financial risks stemming from the increasingly frequent and devastating climate events," said Azadeh Sabour, senior vice president of Climate Solutions at Morningstar Sustainalytics. "With net-zero insights from our recently launched Low Carbon Transition Ratings coupled with asset-level data-based insights from our Physical Climate Risk Metrics, we empower investors with a suite of climate solutions that align with the TCFD's guidance."

The Physical Climate Risk Metrics are a bottom-up assessment of climate change-related adverse impacts from physical hazards, including major storms, wildfires, floods, and others. The dataset can support investor alignment with the TCFD recommendations and provides transparency into a company's expected financial losses between now and 2050. Developed in collaboration with XDI (Cross Dependency Initiative), an award-winning physical climate risk analysis leader, these metrics cover over 12,000 companies, spanning 12 million assets, 135 sectors, and 235 countries.

Collecting and parsing large amounts of asset-level and climate data requires vast technological resources unavailable to many investors. Additionally, the asset-level data to define exposure has been historically limited in its availability. With the Physical Climate Risk Metrics, investors can quantify the physical climate risks facing their portfolio companies and have access to multiple assessment views, including specific hazards, countries, estimated asset damage, estimated revenue losses, time series, and climate scenarios.

Morningstar Sustainalytics' Physical Climate Risk Metrics are currently available as a standard package of five reports through its Data Services, and company-level reports will be available via its online client portal, Global Access, later this year. Learn more about Morningstar Sustainalytics' Physical Climate Risk Metrics and its full suite of Climate Solutions here.

About Morningstar Sustainalytics
Morningstar Sustainalytics is a leading ESG data, research, and ratings firm that supports investors around the world with the development and implementation of responsible investment strategies. For more than 30 years, the firm has been at the forefront of developing high-quality, innovative solutions to meet the evolving needs of global investors. Today, Morningstar Sustainalytics works with hundreds of the world's leading asset managers and pension funds who incorporate ESG information and assessments into their investment processes. The firm also works with hundreds of companies and their financial intermediaries to help them consider material sustainability factors in policies, practices, and capital projects. Morningstar Sustainalytics has analysts around the world with varied multidisciplinary expertise across more than 40 industry groups. For more information, visit

Morningstar Sustainalytics produces various metrics, ratings, and assessments, which include assumptions of future events, which may or may not occur or may differ significantly from what was assumed. These metrics, ratings, and assessments are statements of opinions, subject to change, are not to be considered as guarantees, and should not be used as the sole basis for investment decisions. Morningstar Sustainalytics does not provide investment advice or any other form of (financial) advice and nothing within this press release constitutes such advice. 

Caution Concerning Forward-Looking Statements

This press release contains forward-looking statements as that term is used in the Private Securities Litigation Reform Act of 1995. These statements are based on our current expectations about future events or future financial performance. Forward-looking statements by their nature address matters that are, to different degrees, uncertain, and often contain words such as "may," "could," "expect," "intend," "plan," "seek," "anticipate," "believe," "estimate," "predict," "potential," or "continue." These statements involve known and unknown risks and uncertainties that may cause the events we discuss not to occur or to differ significantly from what we expect. For us, these risks and uncertainties include, among other things, failing to innovate our product and service offerings or anticipate our clients' changing needs. A complete description of these risks and uncertainties can be found in our filings with the Securities and Exchange Commission, including our most recent Annual Report on Form 10-K. If any of these risks and uncertainties materialize, our actual future results and other future events may vary significantly from what we expect. We do not undertake to update our forward-looking statements as a result of new information or future events.

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