Dr. Terry Thompson is co-founder of The Climate Service, or TCS, a climate risk analytics data provider that S&P Global acquired at the beginning of 2022.

Attitudes towards climate risk have shifted dramatically since I cofounded The Climate Service in 2017. Back then, we would often find ourselves being asked the basic question: What is climate risk?

Over the next few years, public awareness of climate change grew vastly alongside more frequent headlines related to flooding, heat waves, hurricanes and wildfires. By year four, TCS was fielding much more sophisticated questions: Can you calculate the risk associated with sea level rise? Can you tell me how often certain flooding events will occur, and how that frequency might change in the future? Can you do this for several different visions of the future?

This evolution makes sense. Climate change impacts everyone, from the public at large to the decisionmakers who convened for Climate Week NYC in September.

How are we using climate science at S&P Global Sustainable1 to understand the physical risks on the horizon? Simply put, greenhouse gases change the behavior of the atmosphere and the oceans. We start by looking at how these alterations lead to changes in what we call hazards: higher temperatures, more extreme precipitation-related events, more extreme storms, and higher likelihood of wildfires and droughts, to name some examples.

The next step in physical risk analysis is related to what we call impact functions — the relationship between a hazard metric, like the number of extremely hot days in a particular location, and the impact on something — for example, a business asset like a factory, warehouse or data center. The impacts differ depending on the asset.

Take the example of several consecutive very hot days and nights. For a data center, the financial impact of this hazard is that cooling costs are likely to temporarily rise.

Now consider a different asset, such as a company that operates unairconditioned warehouses. The impact would be significant for the workforce that has to operate in those conditions. Employees will feel initially uncomfortable when experiencing high temperatures, but after several extremely hot days and nights, we might find people are getting sick. Heat waves can lead to lower productivity and, in some cases, to illness and mortality.

These are some of the topics facing the decisionmakers convening next week for the Conference of the Parties, the United Nations Climate Conference known as COP27. They will grapple with questions like: How do we mitigate climate impacts over the coming decades? And how do we adapt to the inevitable changes even after we mitigate what we can? Simply put, mitigation means reducing humanity’s impact on the climate, primarily by reducing greenhouse gas emissions; adaptation refers to the way we adapt to climate change.

Heading into 2023, much of the world understands that climate change is not some distant, future event that might impact us in a couple of decades. It's an emerging emergency — already upon us and worsening in measurable ways. We're on the cusp of more rigorous and concentrated efforts to address it in terms of both mitigation and adaptation. Climate science is on the bleeding edge of scientific, economic and sociological knowledge — and will continue to be at the heart of our response to the climate crisis.

This blog is adapted from an interview with Terry on the ESG Insider podcast from S&P Global Sustainable1. Listen to the full episode here.