Index Methodology

How the Climate Repricing Pressure Index is computed, what data it uses, and what it can and cannot tell you.

What It Measures

The Climate Repricing Pressure Index measures the gap between climate exposure and disclosure quality across publicly traded companies. When companies in high-exposure industries disclose climate risks poorly, repricing pressure builds. When disclosure catches up to exposure, pressure eases.

The index answers a specific question: how much climate risk hasn't been priced into the market yet, and is that gap growing or shrinking?

A rising index means disclosure is falling behind exposure — the market has repricing work ahead. A falling index means companies are catching up — disclosing risks more fully than before.

The Formula

For each SEC filing, the engine computes a repricing pressure score from three components:

repricing_pressure = exposure × (1 − DQI) × momentum_adjustment

Three inputs, each measuring something different:

Exposure

A 0–1 score reflecting how exposed a company's industry is to climate risk, based on its SIC code. Petroleum refining scores 0.95. Software scores 0.15. These base scores are adjusted (±0.2 max) using effect sizes extracted from the academic research corpus — if peer-reviewed papers document larger impacts for an industry, its exposure rises.

Disclosure Quality (DQI)

A 0–1 composite score measuring how thoroughly a company discloses climate risk in its filing. Four dimensions, weighted:

Dimension	Weight	What it measures
Section Breadth	30%	Fraction of key filing sections (Item 1, 1A, 7, 8) containing climate language
Materiality Signal	35%	Co-occurrence of climate and financial materiality terms (risk, impact, financial)
Normalized Volume	20%	Climate keywords per 10k words, log-scaled to remove filing size bias
Novelty	15%	Fraction of climate terms new versus the previous filing of the same type

High DQI means the company is disclosing climate risks thoroughly. In the formula, (1 − DQI) means better disclosure reduces repricing pressure — which is the point.

Momentum

Year-over-year change in DQI, sigmoid-clamped to 0–1. A company whose disclosure quality is declining (momentum < 0.5) gets an upward adjustment to pressure. Improving disclosure (momentum > 0.5) reduces pressure. The effect is capped at ±15% to prevent momentum from dominating the signal.

momentum_adjustment = 1.0 + 0.3 × (0.5 − disclosure_momentum)

Quarterly Aggregation

Individual filing pressures are averaged per calendar quarter to produce a raw quarterly score. This raw score is then normalized against a base period:

index = (quarterly_raw / base_quarter_raw) × 100

The default base period is Q1 2021, chosen as a stable post-COVID reference point. The base quarter always shows index = 100 by definition. Values above 100 mean repricing pressure has increased relative to the base; below 100 means it has decreased.

Quarters require a minimum of 10 filings to be included. This prevents noisy early-data quarters from distorting the trend.

Sector Indices

Each GICS sector gets an independent index computed from its own constituent filings. Sectors require at least 5 unique companies per quarter. Each sector is normalized to its own base quarter value, making cross-sector comparison intuitive: “Energy rose from 100 to 160 while Technology went from 100 to 110.”

Data Sources

The index is built entirely from two public data sources:

SEC EDGAR filings — every 10-K (annual) and 10-Q (quarterly) report. The engine parses four key sections: Item 1 (Business), Item 1A (Risk Factors), Item 7 (MD&A), and Item 8 (Financial Statements). No third-party data, no surveys, no proprietary scores.
Academic research corpus — peer-reviewed papers on climate impacts to specific industries. Effect sizes extracted from these papers are used to adjust industry exposure scores. This is a bounded adjustment (±0.2) — the research informs exposure but cannot override it.

Signals update whenever new filings appear on EDGAR — in practice, daily during peak filing seasons.

Limitations

The index is designed to be transparent about what it can and cannot tell you:

Keyword-based DQI — disclosure quality is measured by the presence and distribution of climate-related language, not its semantic truth. Companies can score higher by adding climate vocabulary without changing actual risk management.
Lagging indicator — SEC filings are published weeks to months after the reporting period. The index reflects past disclosure, not current exposure.
Equal-weighted — every company contributes equally regardless of market capitalization. This is deliberate (breadth of repricing pressure matters more than dollar-weighted impact) but means the index does not reflect market-cap exposure.
Exposure approximation — SIC-based exposure scores are expert heuristics. They are reasonable but imperfect. The research adjustment is bounded to prevent bad parses from distorting scores.
No survivorship correction — delisted companies drop out of the index. There is no backfill.

For details on how individual company signals are computed, see Signal Engine.