How physical climate risk affects business results

MSCI has acquired First Street, a company that provides climate risk analysis, to improve its capabilities in assessing physical climate risk in financial decision-making. The United Nations has warned that the world is on track to exceed the 1.5°C limit set at the Paris Summit, with 2023 and 2024 seeing record temperatures. A report by First Street found that companies are 6.5 times more likely to issue a profit warning after an extreme weather event than two decades ago, with climate disruption costing a typical real estate investment trust (REIT) around 1% of its annual revenue, or approximately $3.1 billion.

The report also found that nearly 80% of data center capacity is located in areas exposed to acute hazards such as floods, strong winds, and wildfires.