The challenge Finding globally-consistent, climate-conditioned flood risk data
Climate change is forcing businesses to re-evaluate how they operate both today and in the future.
Floods and other natural disasters are becoming more frequent and severe under changing climatic conditions. They’re striking all kinds of critical assets—from energy and communication networks ato manufacturing plants and distribution networks. This disruption destabilizes global supply chains and diminishes the value of assets. In Australia alone, flooding cost the economy $4 billion in losses in 2022 (Sigma report, Swiss Re, 2023).
Asset owners and operators alike are increasingly being tasked to demonstrate that they truly understand the scale and impact of these physical climate risks. And, importantly, that the plans created are credible, auditable, and consider climate change-driven future risks – as well as the risk of today.
ERM is the world’s largest advisory firm focused solely on sustainability. It works with many leading industry organizations to help them prepare for climate change. These businesses are across sectors including energy, pharmaceuticals, mining, and finance. Increasingly, ERM was being asked by its customers to provide services that considered the physical impact of flood risk, alongside more commonly available transition scenarios. In February 2022, ERM launched the Climate Impact Platform. This uses the latest climate science and data to give clients a comprehensive picture of how floods and other physical climate risks could affect their assets. ERM’s consultants provide this picture through risk metrics for each asset and maps that show spatial variation in risks.
Getting access to scientifically robust flood data was a key challenge for ERM prior to working with Fathom. They needed the right flood risk data to integrate within the Climate Impact Platform that would deliver:
Consistency at the global scale.
Flood risk data are incomplete at the global level. They are often compiled using different methods for different regions. As a result, businesses struggle to compare risks to assets across international portfolios.
Risk varies between neighboring assets. ERM and its clients needed a globally consistent resolution that differentiates risk at the zip code level.
Businesses need to understand the reasoning and scientific methodology behind the results of their risk metrics to develop effective risk-management strategies.
ERM needs credible sources of data to instil client trust, as well as investor and regulator trust in the client’s subsequent decisions and reporting.
Data without these qualities could compromise the quality of business decisions, adaptation and mitigation plans, future investment and climate-risk reporting.
“Regulators and lenders are pushing companies to embed climate change mitigation strategies within corporate strategy. If companies keep doing business the old way, with simple cost-benefit analyses of the financial requirements for a current situation, they will overlook the risks posed by climate change.”
—Valeria Maraglino, Consultant, ERM
The solution ERM accesses Fathom’s Global Flood Map within Climate Impact Platform
ERM extensively analysed the market for flood-risk data providers. It selected Fathom as the provider of flood data due to its unique global coverage and high quality.
Fathom supplies ERM with pluvial and fluvial flood hazard data from its Global Flood Map. These data are globally consistent, based on the latest, quality scientific research and produced using a transparent methodology.
The high resolution data enables consistent risk assessment of individual assets. Of further value, Fathom’s data allow users to assess risk with and without flood defences. This flexibility is important for users who have access to highly detailed defense information, who want to enhance the precision of their assessments by combining these two datasets together.Further adding an additional layer of detail and customisation to their analysis.
All Fathom’s data are based upon peer-reviewed research by its team of industry leading scientists. The data are fully transparent and published in world-leading academic journals. “Fathom provides all their documentation and methodology behind the data, and its science is very reputable,” says Matt Dzaugis, ERM’s technical lead for the climate database that underpins the Platform. “Our clients are always pleased to hear that the data are peer-reviewed.”
“We extensively analysed the market for flood risk data. Fathom’s data offered us the best combination of global coverage and quality of modeling.”
– James Hubbard, Partner, ERM
The results Using Fathom data to support climate mitigation strategies
Through ERM’s Climate Impact Platform, Fathom’s flood risk data support the commercial competitiveness of global firms, safeguard their long-term financial sustainability and ensuring the long term resilience of their assets and operations.
Since 2022, ERM’s consultants have used the data to support a number of client needs. These include:
Enterprise risk management.
The data are used to stress test firms’ resilience to climate change. The granularity and transparency of the data are particularly valuable in this respect. “The results can be completely embedded into the client’s risk matrix,” explains ERM’s Valeria Maraglino. “We also have a much stronger sense of what the risk really means for the individual client so they can decide whether to take action.”
The insights help reveal whether a proposed acquisition, for example, is likely to flood and to what depth. The client can then assess whether the asset will retain value under climate change and whether the risk is manageable.
The data produce reports for various reporting frameworks including the Task Force on Climate Related Financial Disclosures (TCFD) and, in the EU, the Corporate Sustainability Reporting Directive (CSRD). In the near future for the US, reports will be filed to the Securities and Exchange Commission (SEC). “It satisfies the regulators more when you can have an audit trail back to where the data come from,” says ERM consultant, Liz Dobson, of understanding the data’s provenance.
The Climate Impact Platform can rapidly screen hundreds of assets across a client’s portfolio to identify which are at risk of flooding. The client can then conduct in-depth investigations using remote sensing or drone surveys.
Ultimately, by making Fathom’s data available within Climate Impact, ERM has given its users the ability to make swifter, more informed decisions on flood risk for adaptation, resilience and regulatory reporting, both for present day and the future.
Global pharmaceutical firm Pfizer is one of many ERM clients to benefit from Fathom’s data. ERM used the Climate Impact Platform to screen Pfizer’s global network of R&D facilities, manufacturing plants and suppliers for climate risks. Pfizer is now using this intelligence to inform its climate change adaptation and mitigation strategy and enable operational preparedness. For more information: ERM Sustainability Report 2023 (p59).
Example in practice From reactive to proactive: ERM’s Climate risk assessment mitigates future threats for global manufacturer
In 2021, an international manufacturing company approached ERM for support in assessing climate change risk as its operations were severely affected by flash flooding events in Germany, Belgium, and the Netherlands in July of that year, causing more than 100 deaths and billions of Euros in damage. ERM provided support in helping to understand and quantify risks posed by climate change by performing a combination of desktop analyses, site surveys and site validation. The assessment included several steps including:
- Agreeing on a set of future scenarios that aligned with client requirements.
- Summarizing a set of risks across 14 global assets.
- Reviewing findings gained with site personnel.
- Conducting on the ground data validation.
Considering the site’s past experience, particular attention was given to two hazards: extreme rainfall flooding and river flooding. The global and fine-grained data available from Fathom allowed ERM to design and develop a consistent approach suitable to be used across the client’s global operation, allowing for both high quality and comparability of results.
ERM used different future climate scenarios and multiple time horizons to generate risk scores used to view potential changes in risk over time at specific assets. This risk value helped the client to gain insight on the magnitude of potential each of their assets may have from negative impacts of climate change. A high risk score indicated greater possibility of physical damage or disruption. Each of the analysed assets could see a minimal to significant increase in exposure by every time horizon (Figure 1).
Detailed results showed (see Figure 2) that some sites had high and very high risks in the present day (or ‘baseline’) which increased further in future time horizons. This set of findings enabled a prioritisation of specific sites for which to further understand the impact and so to identify whether any adaptation measures were already in place, and whether any further ones should be proposed. With this insight, the information obtained was directly used to inform senior management decisions for prioritizing planning and risk management at the site level.
Related case studies
The Nature Conservancy
The Nature Conservancy worked with Fathom to understand flood risk and identify large scale exposure to flooding across different demographics and the impact of future climate scenarios.
Texas Water Development Board
Texas Water Development Board uses Fathom data, and others, to accelerate the development of the first state-wide flood planning program in the absence of publicly available flood data.
Bank of England
Fathom supported the Bank of England in their analysis of submissions for CBES 2021 using the Fathom-UK CAT model.
Quote We would like to express our gratitude to both the physical risk open data providers as well as to the plethora of technical experts for all of their contributions to this exercise over the past two years.
Global (re)insurer, Canopius, used Fathom-US flood hazard data to quantify their exposure to flooding to inform pricing and facilitate exposure management.