This article explores how Apollo Global Management, one of the world’s largest asset managers, is overhauling its risk review process to integrate the financial consequences of extreme weather into everyday investment decisions.
By shifting from broad, portfolio-level climate reviews to detailed, company-level assessments, Apollo is signaling that climate-driven physical risks are now core determinants of asset value and long-term performance.
Why Extreme Weather Has Become a Financial Priority
In recent years, floods, storms, and wildfires have moved from being rare “black swan” events to increasingly frequent, disruptive forces.
For globally diversified investors, these events are no longer hypothetical stress scenarios; they are direct drivers of asset impairment, operational downtime, and heightened insurance and repair costs.
Reflecting this reality, Apollo Global Management is expanding its risk review process to explicitly factor in the physical impacts of extreme weather.
The firm now recognizes that physical climate risk can materially affect asset valuations across its entire portfolio, from infrastructure and real estate to operating companies in nearly every sector.
From Isolated Events to Systemic Risk
What has changed is not just the frequency of severe weather, but its systemic implications for capital markets.
An asset exposed to repeated storm surges or wildfire smoke may be facing structural devaluation over time.
As insurance terms tighten and repair costs rise, the risk is increasingly borne by owners and investors.
Shifting from Top-Down to Granular Climate Risk Analysis
Since 2023, Apollo has conducted top-down analyses to understand its overall exposure to climate-related risks.
These reviews looked at the broad, portfolio-level picture—asking how climate patterns might influence large asset classes, sectors, or geographies over time.
While this approach offers strategic insight and aggregate risk reporting, it can obscure the nuances that drive risk at the level where capital is actually deployed: individual assets and companies.
Company-Level Assessments for Better Decision-Making
Apollo is now broadening its framework to encompass granular, company-level assessments.
The goal is to evaluate physical climate risks before deals are finalized, rather than discovering vulnerabilities after capital has been committed.
Embedding Climate Risk in Core Investment Processes
The enhanced process is not simply an add-on checklist; it is a way of embedding physical climate risk into the heart of Apollo’s investment decision-making.
Embedding climate risk at this level typically involves integrating new data, tools, and expertise into standard workflows for due diligence and risk approval.
From Sustainability Side-Note to Financial Core
Historically, climate considerations were often treated as a subset of corporate responsibility or ESG reporting.
Apollo’s shift illustrates a broader evolution: physical climate risks are being treated as fundamental inputs to cash flow modeling, credit risk assessment, and asset pricing.
What Apollo’s Move Signals for Global Asset Management
Apollo’s initiative underscores how large asset managers are adapting to climate-driven threats as a core financial concern.
In a market where capital is increasingly sensitive to climate resilience, integrating these risks is not just a matter of good governance; it is a competitive necessity.
As more firms follow this trajectory—from high-level climate awareness to rigorous, asset-specific analysis—the financial system becomes better equipped to price climate risk accurately, direct capital toward more resilient assets, and support companies in adapting to a changing physical environment.
The Future of Climate-Aware Investing
The expansion of Apollo’s risk review process is a sign of what is likely to come across the industry. Climate-aware investing now treats physical risk as an integral component of valuation, not a separate sustainability exercise.
For investors, companies, and policymakers, this shift marks an important step toward aligning financial decision-making with the realities of a warming world.
Here is the source article for this story: Apollo Expands Asset-Level Risk Reviews to Reflect Impact of Extreme Weather