Let’s get physical: Comparing metrics of physical climate risk

Investors and regulators require reliable estimates of physical climate risks for decision-making. While assessing these risks is challenging, several commercial data providers and academics have started to develop firm-level physical risk scores. We compare six physical risk scores. We find a substantial divergence between these scores, also among those based on similar methodologies. We show how this divergence could cause problems when testing whether financial markets are pricing physical risks. Hence, financial markets may not adequately account for the physical risk exposure of corporations using available risk scores. Finally, we identify key sources of uncertainty for further investigation. •Currently available metrics of firm-level physical climate risk diverge substantially•The choice of metric is consequential for the outcome of climate risk analyses•Financial institutions should account for uncertainties in physical risks metrics•We highlight key sources of uncertainty in physical risk metrics for future research