Only enforced standards reduce default risk (Assab 2025).
3 · Risk analysis
Expected damage — total
—
riverine + coastal · Eq. 3
PD uplift
—
+99 bps per 1 s.d. of expected damage
Adjusted PD
—
Flood depth by return period
RiverineCoastal
Depth-damage function
What flood risk does to the probability of default
baseline vs. flood-adjusted vs. flood-adjusted with the selected adaptation standard
Method: WRI Aqueduct Floods v2 inundation depths sampled at the asset location; damage via the selected depth-damage
function; ExpectedDamage = Σj Damage(dj)/RPj per flood type (Eq. 3);
+99 bps PD per 1 s.d. (0.043) of expected damage; enforced standards −4% PD, policy-only +2% (illustrative). Paper:
Assab (2025).
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