Moody’s whitepaper analyzes how physical climate risks such as floods, hurricanes, and wildfires impact U.S. commercial real estate lending, highlighting both direct property damage and indirect economic effects like rising vacancies and reduced rent growth. Using a representative portfolio and risk modeling framework, it shows that incorporating physical risk increases probability of default by about 18 percent and expected losses by over 22 percent, leading to significant financial impact. Results indicate that risk varies by property type and geography, with higher exposure in coastal and high-risk regions. The study emphasizes the importance of climate analytics, geographic diversification, and dynamic risk modeling to strengthen resilience and improve long-term portfolio performance.

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