METHODOLOGY
Transparent by design.
Our methodology is built on a simple principle: if you cannot see how a number was derived, you cannot rely on it. Every Quanturisk output comes with a full audit trail — from headline result to underlying assumption.
CORE APPROACH
Externality internalisation, quantified
Externality internalisation is the process by which costs that have historically sat outside corporate accounts — carbon emissions, water consumption, physical climate damage — are being forced back onto balance sheets through regulation, litigation, carbon pricing, and shifting market expectations.
Quanturisk measures the financial magnitude of this process for individual companies and their value chains. We quantify — in currency terms, under explicit scenarios, with every assumption visible. The goal is not complexity but clarity: outputs that leadership teams can read, understand, and act on without needing to reverse-engineer the model behind them.
SCENARIO FRAMEWORKS
Two risk categories, two distinct scenario approaches
Physical climate risk and carbon transition risk are driven by different forces and unfold on different timelines. We use a separate scenario framework for each, designed to capture the specific dynamics at work.
Physical Climate Risk — NGFS Scenarios
Physical risk is modelled across three scenarios defined by the Network for Greening the Financial System (NGFS), the central-bank consortium that sets the standard for climate scenario analysis in finance. Each scenario produces country-level GDP loss projections for every year from 2025 to 2050, capturing both chronic impacts (gradual temperature rise, declining labour productivity) and acute impacts (cyclones, river floods, heatwaves, droughts).
Current Policies
No new climate legislation is enacted. Global temperatures continue to rise sharply, producing the most severe physical impacts. GDP losses are highest — in some geographies exceeding 10-15% by 2050.
Net Zero 2050
Immediate, coordinated global action achieves net zero emissions by 2050, consistent with the Paris Agreement's 1.5°C target. Physical impacts are still significant but materially lower than under Current Policies by mid-century.
Delayed Transition
Meaningful policy action is delayed until the 2030s, resulting in a more abrupt and economically disruptive transition. Physical impacts fall between the other two scenarios. This is the disorderly pathway.
We translate these GDP loss projections into company-level financial impact by mapping each company to its country of domicile and applying a sector-specific physical risk scalar that reflects the different asset intensities — and therefore different exposure levels — across industries.
This top-down approach provides broad coverage even where detailed asset-level data is unavailable. We are also developing a complementary bottom-up methodology that models physical risk at the individual asset level — location-specific, hazard-specific — for companies where the data granularity exists to support it. Where it does, the bottom-up view will deliver a more precise risk profile. Where it does not, the top-down framework ensures every company in the portfolio still carries a defensible physical risk estimate.
Carbon Transition Risk — Internalisation Pathways
Transition risk uses a different framework, built around the U.S. EPA Social Cost of Greenhouse Gases (SC-GHG) — the authoritative, publicly audited schedule of the full economic cost per tonne of CO2 emitted, published annually from 2020 to 2080.
The key uncertainty in transition risk is not which climate pathway the world follows, but how quickly companies will be required to pay the full social cost of their emissions. We model this through two independent dimensions:
Three discount rates (2.5%, 2.0%, 1.5%)
Reflecting different views on how heavily future climate damages should be weighted relative to present costs. A lower discount rate produces a higher social cost of carbon today.
Three timing curves (linear, concave, convex)
Reflecting how quickly the gap between today's effective carbon price and the full social cost closes by 2050. Linear = smooth ramp-up. Concave = front-loaded (rapid near-term action). Convex = back-loaded (delayed action, sharp adjustment).
The combination produces nine independent model runs (3 discount rates × 3 timing curves), each representing a distinct, internally consistent scenario for how carbon costs materialise. These are not stress tests applied to a base case — each is a complete annual cost profile from 2025 to 2050, applied to the company's Scope 1 and Scope 2 emissions.
Note on data availability: The current U.S. administration has removed the EPA Social Cost of Greenhouse Gases study from its publicly available website. Quanturisk retains the full SC-GHG dataset and can make it available to clients upon request. We are also evaluating alternative authoritative sources to complement or replace the EPA data in future model iterations.
Why two frameworks?
Physical and transition risk move in opposite directions. Under Current Policies, physical risk is highest (warming is unchecked) but transition risk is lowest (no new carbon pricing). Under Net Zero 2050, physical risk is lowest but transition risk is highest (aggressive carbon pricing). Reviewing both together is essential for a complete picture of climate-related financial exposure — and for understanding the trade-offs between pathways.
Together, the three physical risk scenarios and nine transition risk scenarios give decision-makers the full range of outcomes they need for robust planning — rather than a single-point estimate that assumes one future.
In development — extending the social cost framework
ROADMAP
We are developing two additional risk categories using the same social cost methodology that underpins our carbon transition risk model:
Social Cost of Water
Just as the EPA Social Cost of Greenhouse Gases captures the full economic cost per tonne of CO2, we are building an equivalent framework for water consumption — quantifying the gap between what companies pay for water today and the true social cost of that usage. As water pricing moves towards full-cost recovery globally, this gap represents a measurable contingent liability that will follow a similar internalisation trajectory to carbon.
Social Cost of Land Use
The same logic applies to land-use practices — deforestation, soil degradation, biodiversity loss. We are developing a social cost of land framework that quantifies the financial exposure from land-use externalities that are increasingly subject to regulatory action and supply chain due diligence requirements. This category encompasses biodiversity-related financial risks.
Both will use the same structure as carbon transition risk: authoritative social cost schedules, multiple discount rates, and timing curves reflecting different internalisation speeds — producing a comparable range of scenario outputs that integrate directly into Adjusted and Fully Adjusted EBITDA.
THE AUDIT TRAIL
Six layers of transparency
Every number in the platform can be traced through six levels of detail.
Every number in the platform can be traced through six levels of detail.
LEVEL 1
Headline result - Adjusted EBITDA and Fully Adjusted EBITDA, absolute and relative to reported EBITDA.
LEVEL 2
Cost components — the breakdown by risk category (carbon transition, physical climate, and — as they become available — water and land use).
LEVEL 3
Calculation logic — how each cost component is derived, including the formulae applied.
LEVEL 4
Input data — the specific data points used (emissions volumes, revenue geography, sector classifications).
LEVEL 5
Scenario parameters — the NGFS pathway assumptions for physical risk; the discount rates, timing curves, and social cost schedules for transition risk.
LEVEL 6
Source attribution — where each data point and assumption originates (academic sources, regulatory publications, company disclosures).
This is what separates Quanturisk from a rating or a score. You are not asked to trust a number. You are given the means to verify it.