Flood risk assessment is an important and growing concern for real asset investors. But measuring the threat of flooding to assets and locations is stuck at an embryonic stage and faces challenges stemming from limited historical data as well as data incompatibility. This makes translating scientific analysis into reliable inputs complex, and it leaves investors struggling to properly factor in flood risk to support investment decision-making.

Investors must first differentiate between general flood risk assessment and climate-dependent flood risk assessment. Matthias Kemter, an associate at MSCI ESG Research, explains that the former has been done for decades and is applied to estimate and mitigate flood risk globally. “It is based on the assumption that floods [river, surface and coastal] of a certain intensity have occurred at a certain frequency in the past and that this intensity-frequency relationship will persist in the future,” he says.

This approach, howev