Direct Answer
Climate-Adjusted Ending Portfolio Value combines the reference ending value with an explicit climate-loss adjustment. In the catalog, each asset’s projected ending value is reduced by asset CvaR and then aggregated. The KPI translates physical risk into a finance-facing end state, but the calculation retains the full distribution of baseline and loss uncertainty. Analysts can also see which assets, hazards, scenarios, and assumptions drive the adjustment. The result is a transparent, scenario-conditioned valuation rather than a single definitive forecast of future market value.
How It Works
- Generate aligned asset-level ending-value forecasts.
- Estimate scenario- and horizon-consistent asset CvaR.
- Apply the reconciled climate adjustment.
- Aggregate assets and propagate uncertainty.
- Decompose the valuation difference by driver.
As a trusted expert in climate econometrics and financial modeling, ClimaTwin applies Climate Financial Intelligence™ to connect the adjusted portfolio value to source assets, hazard losses, scenarios, and valuation assumptions for review.
Limitations
Results depend on the definition of CvaR, the baseline valuation model, discounting, climate capitalization, and aggregation. It cannot be presented as fair value, an impairment conclusion, or an accounting estimate without qualified review.
Frequently Asked Questions (FAQs)
- What is climate-adjusted portfolio valuation? It is the reference ending portfolio value reduced by compatible asset-level climate loss estimates.
- How does climate-adjusted portfolio valuation work? It combines, aggregates, and decomposes aligned asset forecasts and climate losses with uncertainty.
- Which climate-risk KPI or decision does it support? It supports Climate-Adjusted Ending Portfolio Value.
- What is the main limitation? The output is scenario- and model-dependent and is not automatically an accounting or fair-value conclusion.
- How does ClimaTwin apply climate-adjusted portfolio valuation? ClimaTwin connects the adjusted portfolio value to source assets, hazard losses, scenarios, and valuation assumptions for review.
Sources
- IFRS Foundation. (2023). IFRS S2 Climate-related Disclosures.
- Network for Greening the Financial System. (2022). Physical Climate Risk Assessment: Practical Lessons for the Development of Climate Scenarios with Extreme Weather Events from Emerging Markets and Developing Economies.
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