CVM 218 in practice: how to calculate and report physical climate risks

CVM 218 does not just require reporting risks. It requires quantifying them. And the report will only be credible if the numbers are backed by data — not narrative.

For physical risks (storms, heat waves, droughts, floods), the big challenge is converting raw climate data into reportable financial metrics. Here is a practical method.

Step 1: map physical exposure by asset

For each relevant operational asset, survey the hydrometeorological hazards that affect it. Not "the company is exposed to flooding." But "terminal X is 200 meters from river Y and the operating floor is 3 meters above the river's mean level."

Resolution matters. 25 km data (public forecast) covers the municipality. 1 to 3 km data covers the asset.

Step 2: calculate historical frequency and severity

With 10 to 20 years of historical reanalysis for each asset's coordinates, you can calculate:

1. Historical frequency of each hazard (e.g., flood stage above terminal floor occurred X times in 20 years);

2. Typical severity (water depth, duration, affected area);

3. Probability of occurrence in future scenarios (RCP 4.5 and 8.5, as required by ISSB).

Step 3: translate into financial impact

The step that separates a mediocre report from a robust one: cross-reference hazard probability with the asset's operating cost.

1. Direct cost: downtime hours × hourly operating cost + damage repair;

2. Indirect cost: demurrage, regulatory fines, higher insurance premiums;

3. Total exposure: probability × impact, for each hazard, at each asset.

Step 4: structure the report

CVM 218 requires disclosure by scenario. The ideal report organizes data as:

1. Affected asset;

2. Climate hazard;

3. Probability (short, medium and long term);

4. Estimated financial impact (by climate scenario);

5. Mitigation actions underway.

The first mandatory report is due in May 2027. The assessment needs to start now — because quality historical climate data cannot be improvised in 12 months.