Clarity AI launches new Physical Risk Assessment Platform.

Sustainability data and analytics firm Clarity AI unveiled its new asset-level climate risk assessment solution to help banks, investors and asset owners assess individual asset physical climate risks. The answer lies in the detailed insights into climate risk assessment, physical climate risks, sustainable investing, ESG data analytics and asset-level risk analysis.

The launch is in response to a growing challenge for financial institutions to gain a deeper understanding of how climate-related events might impact investment decisions, asset values and the long-term financial performance, the company said. As extreme weather events and environmental shifts are increasingly relevant to investment decisions, they're looking for more granular climate information than the data currently available, said Clarity AI.

The demand for detailed climate risk data is on the rise.The need for climate risk data is increasing.

Physical climate risks are increasingly a factor for institutional investors in their financial calculations, according to Clarity AI. Over three-quarters of institutional investors say climate-related risks are expected to have a bigger impact on asset prices over the next five years, and more than half say the impact of extreme weather conditions on investment decisions has increased over the past year.

Limited asset-level information is one of the difficulties the financial sector is experiencing in quantifying physical climate risk, the company said. Traditional climate risk assessment may give a more general climate risk assessment, whereas asset-level analysis can look at risks related to individual assets and activities.

Solution covers Multiple Climate Hazards and scenarios

Clarity AI’s Physical Risk solution assesses climate-related risks across 16 climate and nature hazards, nine climate scenarios and five different time horizons. This platform includes over 3 million assets in over 17,000 companies—including over 2 million material assets identified using Clarity AI's proprietary framework.

The system identifies assets deemed critical to a company's core business, giving institutions the ability to concentrate on assets in locations and facilities that could have a more significant impact on business continuity and financial results, the company said.

Support for Investors and Financial Institutions

The new solution enables institutions to upload their own asset data or get coverage beyond the available “asset universe” from Clarity AI. This feature is designed to enable the users to compare physical climate risk exposures of various portfolios and investment strategies.

The platform will enable the company to offer financial decision support tools by offering climate risk data to be integrated into investment and lending, strategic and other assessments, the company said. The solution's goal is for financial organisations to gain a deeper understanding of how hazards may affect them, including extreme weather events and environmental changes.

Clarity AI highlights need for financial risk measurement.

“Investing used to mean a different way of looking at climate risk analysis; investors now demand a better understanding of the financial risks posed by environmental issues,” said Alice Borgonovo, Climate Solutions Lead at Clarity AI.

The discussion about climate has shifted, and it's not enough to say that there's a risk. Investors must be aware of how it affects their finances and take it as seriously as they would any other financial risk,” Borgonovo said.

As institutions seek to assess the impacts of climate change, detailed and transparent physical risk data is growing in significance for investment, lending and strategic decisions, she added.

Climate data plays a growing role in financial planning.Climate data is becoming more instrumental to financial planning.

The launch reflects the wider shift among financial institutions towards using climate data and analytics as part of risk management processes. With increasingly climate-related events hitting the business and infrastructure in the world, the asset level assessment is emerging as a crucial tool to identify vulnerabilities.

Clarity AI anticipates that the new offering will address the need for detailed climate risk information, such as how institutions can evaluate exposure under various scenarios and time horizons and integrate climate risk into financial risk assessments.