How high-resolution data translates flood risk into financial risk

Fluvial or river flooding is one of many climate hazards expected to worsen because of human-caused climate change. About half of the world’s population lives within 3 km of a freshwater body, and for about 88% of people, that freshwater body is a river — making the prospect of more intense river flooding a widespread risk.

In many regions, climate change is projected to drive an increase in the frequency of low-probability, high-impact river floods, turning a 100-year event into a 75-year or 50-year event.

While flood defenses such as levees are a common feature of towns and cities with structures and infrastructure alongside rivers, these defenses have a breaking point. The 100-year flood depth is often considered the benchmark for flood defense design, and so in regions where climate change increases the frequency of deeper floods, the chances of historically projected structures becoming inundated by overtopping of defenses increases.

Understanding flood exposure down to the level of individual buildings is critical for companies, investors and banks with real estate exposure because flood depths can vary widely over small areas. The difference between nuisance flooding and material structural and operational damage is determined at hyper-local scale, and that increases the need for high-resolution flood analytics to enable financial institutions to stress test their lending and investing exposures for current-day and future climate physical risk.

In this research, S&P Global Sustainable1 uses new high-resolution climate projections of flood hazard in a series of case studies to show how more detailed modeling can identify structures exposed to material flood depths and how exposure patterns change over time. We examine flood and property damage projections for three cities: Sacramento, California; Frankfurt, Germany; and Bangkok, Thailand.

This climate-conditioned model provides fluvial flood depths at 30-meter resolution globally. It combines baseline, present-day probabilistic flood hazard and defense data from flood-modeling firm JBA Risk Management with climate projections and interpretation from S&P Global Sustainable1. Flood depths are modeled for the current climate (the 2020s decade) and projected to the end of the century under four climate scenarios. The model data are probabilistic and cover a range of outcomes — from frequent nuisance flooding of shallow depth (2-year return period) to rare catastrophic flooding (1,000-year return period). JBA also provides information on local and regional flood defense systems such as levees, and these measures are reflected in our projections of flood depths for the four future climate scenarios.

Access the full report: Sacramento

In our first analysis, covering Sacramento, the projections show that:

• A 20-year flood could inundate more than 5,000 homes with at least 0.5 meters of flooding in the 2030s.
• A 100-year flood risks overwhelming Sacramento’s current flood defenses in the 2030s, putting more than 19,000 homes at risk of 0.5 meters or more of flood depth.
• The total cost of property damage to single-family residential real estate is estimated at $378 million for a 20-year flood and $3.6 billion for a 100-year flood during the 2030s.

These projections represent results for one climate scenario (SSP2-4.5) as an illustration of a potential outcome for the evolution of flood risk in the future. Our projections of flood depth and potential damage reflect the current state of municipal flood protection and make no assumptions about the effectiveness of future improvements to flood defenses.