Rémy Estran-Fraioli - Scientific Climate Ratings (an EDHEC Venture): “After months of preparation, at a crucial time, we are embarking on a intense journey with knowledge and tools that are unique in the sector"

What specific gap is Scientific Climate Ratings (an EDHEC Venture) addressing for investors and issuers?

We launched Scientific Climate Ratings (an EDHEC Venture) (SCR) because even though climate risks are accelerating, most financial decisions still overlook them — or treat them as vague, non-financial concerns (1). Infrastructure, in particular, is highly exposed due to long asset lifespans and a dependency on physical integrity for revenue generation. However, existing assessments were often too generic, overly qualitative, or disconnected from financial metrics (2).

Part of the issue stems from the ESG industry itself. ESG providers (and scores) tend to bundle everything together — governance, social issues, and environmental factors — with climate representing only a small portion of the “E,” which is, in effect, just “one-third” of the whole. As a result, climate is often sidelined or diluted, and its financial materiality isn’t properly evaluated (3) (4).

Our goal is to fill that gap by translating climate science into forward-looking, decision-useful ratings that quantify financial materiality, in line with the spirit and broader culture of EDHEC Business School, which has been interested in these issues for many years (5).

We’re not merely identifying risks — we’re quantifying their potential costs over time across various scenarios, providing transparency and rigor for investors, companies, and public authorities. We began by evaluating more than 6,000 infrastructure assets across 25 countries and 35 sectors. In 2026, we plan to broaden our approach to analyze the financial materiality of climate-related risks for over 5,000 major publicly listed companies around the globe.

How would you describe the specificity of your venture and its mission?

First and foremost, our venture is rooted in EDHEC and its incredible scientific ecosystem in finance and climate finance (6). The intellectual connection between the various historical initiatives that were EDHEC Risk Institute and Scientific Beta, and now EDHEC Climate Institute (7) and EDHEC Infrastructure and Private Assets Research Institute (EIPA), is a strength for us – we are surrounded by researchers and advisors and share our efforts with other in-house entities.

This enables us to move quickly and influences our approach, as much of our work, tools and ratings are accessible to everyone (8) – with more detailed data and expertise available for purchase by professionals and investors.

The main distinction from other players in the sector lies in both focus and format. ESG scores are generally broad, combining a wide range of social and governance elements that weaken the clarity of the climate signal. Even most climate data providers limit themselves to hazard exposure or emissions estimates, without connecting them to financial impact.

We do three things differently.

Firstly, our ratings focus exclusively on climate risk and its financial impact. We provide two key types of assessments. The first, called Potential Climate Exposure Ratings (PCER), measure how exposed companies currently are to future climate risks, based on the most likely scenario given today’s global policies. These ratings, available online, use a scale from A (least exposed) to G (most exposed), allowing for consistent comparisons. The second type, Effective Climate Risk Ratings (ECRR), goes a step further. They incorporate climate data into financial valuation models to estimate how a company’s net asset value (NAV) could be affected by 2035 and 2050. These ratings also range from A to G and include a dollar estimate of the expected impact, offering stakeholders a clear financial metric to work with.

Secondly, unlike traditional “what-if” models that focus only on extreme scenarios like net zero or climate disaster, the ECRR approach evaluates a wide range of possible futures — each with assigned probabilities. This allows us to estimate likely financial outcomes, not just theoretical risks. This work is notably based on the groundbreaking research by Riccardo Rebonato – EDHEC Professor and EDHEC Climate Institute Research Director and Senior Advisor – and his co-authors (9).

Thirdly, climate risk isn’t only about exposure. It’s also about how vulnerable a company is and how well it can adapt. That’s why our ratings factor in company-specific strategies for decarbonisation and resilience, drawing on the ClimaTech database from the EDHEC Climate Institute (10). For each type of infrastructure, the database identifies relevant strategies and shows how effective they are — in terms of both reducing emissions and limiting physical damage. This helps ensure our assessments reflect real-world efforts to manage climate risk.

How do you define “science-based” ratings, and in what way do they provide actionable guidance?

“Science-based” means our ratings rely on peer-reviewed climate models, globally recognized hazard projections — including those from the IPCC and Copernicus — and validated economic damage functions. Using forward-looking scenarios derived from the NGFS, we translate physical and transition risks into expected financial losses across various pathways: Orderly, Disorderly, and No Transition. These risks are integrated into established financial valuation frameworks, ensuring they are accurately reflected in expected asset performance.

A central element of our methodology is the ClimaTech database (10). What sets it apart is the depth of scientific and technical research it draws upon. It consolidates insights from more than 240 sources — including academic studies, technical papers, industry analyses, and specialized reports. This solid foundation of evidence guarantees that our adjustments for decarbonization and resilience strategies are comprehensive and grounded in scientific credibility.

In short, every step of our methodology — from forward-looking climate data to scenario modeling, financial valuation, and rating adjustment — is grounded in scientific research. And this isn’t just a label. It’s reflected in the team itself: every member of our management holds a PhD in either finance or climatology. That may seem anecdotal, but in a field often dominated by opinion and noise, we believe it matters. It underscores our commitment to analytical rigor and methodological integrity.

What key patterns have emerged from your work that infrastructure investors should be particularly aware of?

First of all, climate risk is highly granular and specific to each asset. Two infrastructures located in the same country — even within the same city or street — can experience very different levels of exposure. Minor geographic factors, such as proximity to water, local drainage systems or ground elevation can cause significant differences in physical risk, especially for hazards like flooding. This variation occurs not only across sectors but also within asset classes. It’s no longer enough to say “airports are vulnerable” or “ports are at risk”: the specifics depend on which asset, its location, and the conditions it faces. That’s why asset-level, science-based analysis is crucial for informed decision-making.

Next, transition risk goes beyond direct emissions. For instance, airports may have relatively low operational carbon footprints, with some nearing net zero, yet they remain highly vulnerable to systemic changes (climate policies, consumer behavior, regulations….). Understanding exposure along the value chain is essential.

Finally, resilience can be a decisive factor (11). Many infrastructure assets have already put strong adaptation measures in place — like levees, sea walls, flood defenses, or storm-resistant designs — but these efforts are often overlooked in current financial analyses. Our ratings address this issue by quantifying both the costs of inaction and the benefits of adaptation, through estimates of avoided losses across different climate scenarios. This allows investors to better evaluate the financial value of resilience strategies, which could substantially alter risk profiles in the coming years.

Together, these insights emphasize the need to move beyond broad sector-level assumptions toward detailed, asset-level climate risk assessments.

How will you measure your impact on how climate risk is priced, managed, or disclosed?

The ideal situation for us would be to be able to shift the market norm: from ignoring or vaguely acknowledging climate risk to systematically pricing it in (12).

We’ll measure impact in two main ways: how widely our ratings are adopted, i.e used in investment, lending, and risk management decisions across the financial system; how often our insights drive real-world changes, such as issuers investing in resilience, improving disclosure, or the market correcting mispriced risk.

We will monitor signals in behavioral changes and financial results — ranging from improved climate adaptation strategies to variations in credit spreads or asset valuations that capture distinct climate risks.

Ultimately, our goal is to create a credible financial language for climate risk — as clear and integrated as credit ratings are today.

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References

(1) Climate Risk and Equity Valuation: Should Investors Worry? (2024) Riccardo Rebonato, Dherminder Kainth, Lionel Melin. EDHEC Climate Institute - https://climateinstitute.edhec.edu/climate-risk-and-equity-valuation-should-investors-worry

(2) Climate change: Why are infrastructure investors aware of the risk while failing to measure it? (2024) Noël Amenc, Frédéric Blanc-Brude, Alice James. EDHEC Vox / EDHEC Infrastructure & Private Assets Research Institute - https://www.edhec.edu/en/research-and-faculty/edhec-vox/climate-change-infrastructure-investors-aware-risk-while-failing-to-measure-it

(3) Frédéric Ducoulombier : « The double-materiality serves both investors and civil society » (2023) EDHEC Vox - https://www.edhec.edu/en/research-and-faculty/edhec-vox/frederic-ducoulombier-edhec-risk-climate-double-materiality-serves-investors-and-civil-society

(4) Nicolas Schneider: "For investors and industries, more granular information on physical risk impacts means a better adaptability to future shocks" (2025) EDHEC Vox / EDHEC Climate Institute - https://www.edhec.edu/en/research-and-faculty/edhec-vox/nicolas-schneider-investors-industries-granular-information-physical-risk-impacts-better-adaptability

(5) Noël Amenc: « We provide finance decision-makers not only with research results but also with accurate tools and concrete solutions » (2024) EDHEC Vox / EDHEC Climate Finance - https://www.edhec.edu/en/research-and-faculty/edhec-vox/noel-amenc-we-provide-finance-decision-makers-research-accurate-tools-concrete-solutions

(6) Why EDHEC Business School is a major player in Sustainable Finance (2024) Noël Amenc, Frédéric Blanc-Brude, Frédéric Ducoulombier, Emmanuel Jurczenko, Emmanuel Metais. EDHEC Vox - https://www.edhec.edu/en/research-and-faculty/edhec-vox/why-edhec-business-school-major-player-sustainable-finance

(7) Introducing EDHEC Climate Institute: a new interdisciplinary hub for climate research and action (2025) Anthony Schrapffer. EDHEC Vox / EDHEC Climate Institute - https://www.edhec.edu/en/research-and-faculty/edhec-vox/introducing-edhec-climate-institute-new-interdisciplinary-hub-climate-research-action-schrapffer

(8) See for example : https://scientificratings.com/map/

(9) How to Assign Probabilities to Climate Scenarios (2025) Riccardo Rebonato, Lionel Melin, Fangyuan Zhang. EDHEC Climate Institute - https://climateinstitute.edhec.edu/publications/how-assign-probabilities-climate-scenarios

(10) ClimaTech Project, The Business Case for Implementing Efficient Climate Risk-Reduction Strategies - https://climateinstitute.edhec.edu/climatech-project

(11) EDHEC Infra & Private Assets Contributes Key Insights at AlterCOP29 on Resilience and Adaptation (2024) - https://www.edhec.edu/en/news/edhec-infra-private-assets-contributes-key-insights-altercop29-resilience-and-adaptation

(12) How climate risk will reshape banking in Europe (2025) Rémy Estran and Camille Angué. The Banker - https://www.thebanker.com/content/8540a433-c1b7-4f56-95ca-4f3d840f6f62