Following up on the launch of our new Asset Risk Exposure Analytics (AREA), which combines the locations of 4+million corporate assets with our industry-leading geospatial risk data, our new whitepaper explores how global investors and banks can better identify and understand the key global risks that can affect the performance of the companies in their portfolios.
Under here, you can see the whitepaper’s Executive Summary, but the full analysis of how location-based asset-level risk data can improve financial decision-making is available through the download link.
Executive summary
Companies are intricate networks of people, fixed assets, processes, financial operations, and supplier and client relationships dispersed across specific sites or assets in different geographies across the world. Each location carries its own unique set of risks, resources, opportunities, and potential impacts. These asset-level exposures constitute a company’s geospatial risk. They profoundly shape a firm’s overall risk profile, its potential impacts on the world around it and, subsequently, its performance.
However, for those reliant on aggregated headquarters-level data for their decision-making, such as equity and corporate debt investors and banks, exposures ranging from fast-moving political risks and accelerating climate change, to the degradation of nature and entrenched human and labour rights risks, remain largely unmeasured and unmanaged.
The consequences of this data gap are far-reaching. Without asset-level risk intelligence, investors and banks can struggle to accurately price potential negative outcomes, such as asset stranding, major disruptions or regulatory sanctions, at the security or portfolio level. Meeting growing sustainability-related stakeholder expectations and reporting obligations is much more challenging than it otherwise would be. The lack of granular geospatial risk data also hinders the financial sector’s system-level ability to effectively address nature-related and other sustainability impacts.
Verisk Maplecroft’s Asset Risk Exposure Analytics (AREA) have been developed to provide a specific solution to address this need. For the first time, banks and investors can analyse the entire global risk exposure of the public companies in their portfolio to all relevant political, climate, environmental, social and human rights issues from the ground up, across 4+million corporate assets.
To achieve this, AREA brings together three layers of data in a powerful new combination:
- A comprehensive geospatial risk dataset covering 198 countries and 85 key issues, drawn from Verisk Maplecroft’s portfolio of Global Risk Data, that is scientifically derived from diverse sources including: satellite imagery, remote sensing, and unstructured data using machine learning
- Global firmographic data that disaggregates 50,000 listed companies into their individual asset locations worldwide
- Verisk Maplecroft’s Industry Risk Dataset, which provides sector-specific adjusted risk scores for 50 issues and 80 industries
Delivered via API, AREA offers a scalable, transparent and completely objective way for financial institutions to incorporate comparable, standardised and up-to-date asset-level risk exposure metrics directly into internal models and processes. It can be applied to a range of political risk, climate and sustainability-related workflows from security selection to portfolio and risk management and regulatory or client reporting. It fills long-standing data gaps and complements traditional policy, disclosure and controversy-based corporate ESG metrics to make them more useful.
The product’s applications are diverse and impactful:
Risk analysis: AREA reveals hidden exposures, such as the fact that 40% of S&P 500 market capitalisation located overseas often faces higher political risks than US-based assets
Climate and nature reporting: The product uncovers critical insights, like 29% of S&P 500 company revenues coming from locations with very high water stress
Enhanced stewardship: Investors can conduct more targeted and effective company engagements, addressing specific asset-level risks. For example, investors can risk assess all company assets in their portfolio against any one of 29 human and labour rights issues included in the dataset and use the results to engage selected companies with questions about specific assets and operations
Complementing traditional ESG metrics: AREA adds crucial geographical context to policy, disclosure, and controversy-based assessments, and enables due diligence processes to fully align with international standards, such as the OECD Guidelines for Responsible Business Conduct
The need for such granular, asset-level risk analytics has never been more pressing. Global political instability is on the rise. Financial institutions face unprecedented pressure to use their influence to help address twin climate and nature emergencies. The need for robust asset-level analytics on geospatial risks and potential impacts has consequently never been greater. AREA has been designed to meet this challenge.
