Chapter 5: Asset-Level Physical Climate Risk Disclosure
Natalie Ambrosio Preudhomme and Emilie Mazzacurati
As businesses increasingly incur the costs of extreme weather events and chronic stresses driven by climate change, there is a need for transparency around corporate exposure to physical climate risks. Understanding risk exposure is an important first step toward managing risk and building corporate resilience. This chapter discusses pharmaceutical companies as a case study to examine how risk exposure aligns with corporate risk disclosures. We compare asset-level climate change risk exposure based on Four Twenty Seven’s database of corporate facilities’ risk to climate hazards with the risks the companies report in their financial filings and CDP reports. We find a lack of detailed, forward-looking, and consistent risk disclosure by corporations—and that the information disclosed does not align with the risks identified in Four Twenty Seven’s separately established climate change risk analysis. The chapter concludes by discussing elements of risk disclosure that companies can improve to provide more decision-useful information to investors, including consistent risk assessment methodologies, risk metrics, and systematic risk management strategies.