By Xinxin Wang, Jascha Lehmann, Russ Bowdrey & Lisa Eichler

Corporate asset locations are a critical source of financial-risk intelligence for investors. More so when coupled with powerful overlays related to physical climate risk. MSCI’s new study, conducted in collaboration with Swiss Re Risk Data Solutions, analyzed more than 11,000 companies and 500,000 physical assets underpinning the listed-equity portfolios of 18 leading asset owners, representing USD 4 trillion in AUM. Location isn’t just geography, it’s financial risk exposed. The location of companies’ assets affects returns and volatility. For investors, location can magnify portfolio drawdowns when hazards strike investee companies’ facilities. Hazards striking key production sites, data centers or supply hubs can amplify risk through both direct asset damage and costly business interruptions. Yet these risk exposures are often invisible in traditional portfolio analyses. Our analysis found that 55% of the companies in their listed-equity portfolios already face severe physical hazards today. By value, this equals 25% of their total equity holdings, with small- and mid-cap companies particularly exposed. Where there are risks, there are also opportunities, however. Even within the same sector and region, companies can be impacted by physical risks in very different ways. As tools to assess and manage these risks continue to advance, investors are increasingly able to move from being merely exposed to being well-prepared, transforming hidden risks into opportunities for building stronger, more resilient portfolios.

Get the report here