Scenario analysis can shine a light on an airport’s climate exposure

S&P Global Ratings, in an exploratory analysis, analyzes the physical climate risks of 367 major global airports, in a report published today, "Scenario Analysis Shines A Light On Climate Exposure: Focus On Major Airports."

"We explore how climate change physical risk data might enhance our dialogue with rated airports regarding future risks, the possible range of exposures, and how airports have adapted or plan to adapt," said S&P Global Ratings Adaptation and Resilience Specialist and credit analyst Dr. Paul Munday.

The data, which comes from Trucost (part of S&P Global), are derived from publicly available information, licensed datasets, and its own models. The climate scenarios arising from the data are not part of our base case for ratings on airports.

Physical climate risks are key credit considerations for airports given their long-term nature, capital intensity, and fixed locations, which cannot be diversified away. Adaptation measures help build resilience but may be expensive and payback is not always immediate.

Nonmitigated exposure could weaken our assessment of airports' long-term fundamentals and competitive position, while adaptation actions could lead to more highly leveraged balance sheets in the absence of support provided by regulatory frameworks or other stakeholders. Both can weigh on our views of credit quality.

"Asia-Pacific airports are the most exposed to heat waves under the most extreme Representative Concentration Pathway (RCP) 8.5 in 2050," said Dr. Munday. "The number of heat wave days could increase by up to three months a year for the most exposed airports."

Heat waves can damage infrastructure and cause disruption, as flight take-off weight restrictions apply. In addition, wildfire exposure is rising, specifically on the U.S. west coast and in Australia.

Storms are already an important challenge for airports in North and Central America as well as Asia-Pacific. Scientists generally expect an increase in the frequency of more intense storms, though predicting their precise frequency, timing, and impact on assets—including airports not captured in this analysis--is difficult.

"Exposure to flooding and sea level rise is a significant long-term risk beyond 2050, and U.S. airports rank among the most exposed under the RCP8.5 scenario," Dr. Munday said. "San Francisco International Airport (A/Negative) is highly exposed to flooding, but its plan to build a sea wall is expected to provide protection to the year 2085."