Financial Impact Analytics

Modelling the financial impact of climate change

Overview

AlphaGeo's Financial Impact Analytics models the impact of climate change on key drivers of cashflow and asset value, empowering strategic financial decision-making. Leverage our OpEx (e.g., insurance, utilities, maintenance costs) and CapEx (e.g., retrofit) cost forecasts to enhance budgeting and forecasting, or combine them with our climate-adjusted Discount Rate for more robust discounted cashflow modelling, valuations, and investment analysis.

Financial Impact Calculator on the AlphaGeo platform

Our Approach: Beyond Risk Management to Strategic Finance

Most climate financial analytics on the market focus on forecasting expected losses based on known asset valuations, producing metrics such as Climate Value-at-Risk (CVaR) or Average Annual Losses.​ While crucial for downside risk management, these metrics are insufficient for strategic financial analyses that require an understanding of climate's cashflow impact – such as for valuations and investment analyses, or financial and capital budgeting

Our cashflow-focused Financial Impact Analytics were developed with this in mind, and are designed to integrate seamlessly into investment and corporate finance models (e.g., DCF) that are critical to strategic financial decision-making.

Product Features

Financial Impact Analytics:

1. Insurance cost impact: Climate-induced annual rate of change in insurance costs

2. Utilities cost impact: Climate-induced annual rate of change in utilities cost

3. Retrofit cost impact: Additional CapEx for thermal comfort/hazard reinforcement retrofits

4. Discount rate/exit cap rate impact: Climate-adjusted discount rate/exit cap rate

5. Maintenance cost impact: Annual rate of change in the costs of upkeep and repairs caused by changing climate conditions and extreme weather events

6. Operational downtime impact: Annual change in operational downtime due to risks to continuous operations

7. Operational efficiency impact: Annual rate of change in operational efficiency due to temperature effects on HVAC systems and equipment performance

8. Insurability Index: Indicates whether a location is likely to become "uninsurable" due to climate risks

Core to the Financial Impact Analytics module are our forecast's of climate's impact on insurance and retrofit costs, utilities demand, as well as the climate risk discount rate.

Climate Valuation Calculator (SaaS subscribers): Estimated NPV impact based on the metrics above

Subscribers to our native SaaS platform, AlphaGeo Explorer, also receive access to a NPV calculator that models the impact of climate change on an asset's Net Present Value, based on a user's OpEx, CapEx, and investment assumptions.

Use Cases:

• Valuation and investment analyses

• Financial planning

• Capital planning

• Public budgeting and economic modelling

Visit this article for an example on how these metrics can be applied in cashflow modelling.