Four Twenty Seven’s monthly newsletter highlights recent developments in climate adaptation and resilience. This month, don’t miss our update on upcoming EU regulations, our analysis on lessons learned from Art. 173 in France, and our conference calendar for the spring!
In Focus: Advancing TCFD Guidance on Physical Climate RIsk and Opportunities
An initiative from the European Bank for Reconstruction and Development and the Global Center for Excellence in Climate Adaptation
The European Bank for Reconstruction and Development (EBRD) and the Global Centre of Excellence on Climate Adaptation (GCECA) are hosting an event: “Advancing TCFD guidance on physical climate risk and opportunities,” which will be held on 31 May at the EBRD’s headquarters in London. This event will be a forum for senior representatives from the financial and business community to discuss and identify the way forward for the development of metrics for disclosing physical climate risk and opportunities, as well as pointers for integrating physical climate risk considerations in scenario-based decision making by businesses and financial institutions.
In preparation for this event, the EBRD has been hosting working groups focused on advancing and fleshing out the recommendations from the Task Force on Climate-related Financial Disclosure’s (TCFD) final recommendations released for the G20 summit last June. The TCFD recommended the inclusion of metrics on physical climate risk and opportunities in financial disclosures and called for further research and concrete guidance on what the appropriate metrics would be.
The conference will feature the findings from expert working groups that include representatives from Allianz, APG, AON, Bank of England, Barclays, BlackRock, Bloomberg, BNP Paribas, Citi, DNB, Deutsche Asset Management, Lightsmith Group, Lloyds, Meridiam Infrastructure, Moody’s, OECD, S&P Global, Shell, Siemens, Standard Chartered, USS and Zurich AM
EU Moves Towards Regulation for Climate Risk Disclosure
EC Releases its Action Plan: Financing Sustainable Growth
Earlier this month the EU laid out a clear plan to move towards mandatory climate risk disclosure as part of a new set of regulations to finance sustainable growth and support the transition to a low-carbon economy. The European Commission’s Action Plan lays out a two year timeline for implementation, with a goal to create a taxonomy for climate adaptation finance by the end of 2019. These regulations from the EU will drive change into financial markets globally and set standards on reporting, disclosures and infrastructure resilience that will likely set the bar for the rest of the world.
The EC based the Action Plan on the High-Level Expert Group on Sustainable Finance’s (HLEG) final recommendations for actions to drive the transition to a sustainable financial system. The HLEG was created by the EC in December 2016 to determine how the regulatory landscape should transform to support efforts towards the goals of the Paris agreement and promote the financing of a sustainable, resource-efficient economy. As the group’s report was eagerly awaited as a blueprint for market transformation in Europe, the EC’s Action Plan is expected to propel that transformation forward while prompting international conversation.
How are French investors reporting physical risk?
A Four Twenty Seven analysis
The first year of reporting under Art. 173 in France saw limited uptake of disclosures of physical risk and opportunities. We reviewed disclosures from 50 asset owners in France and found that only a quarter of respondents included substantial analysis and metrics on their exposure to physical impacts of climate change. We find insurance companies AXA and Generali provided the most detailed analysis for property portfolios, while FRR and ERAFP were the only pension funds to provide an initial assessment of physical risk exposure in their equity and fixed income portfolios.
Whether it’s extreme heat diminishing worker productivity, winter storms damaging roads and power lines or one of countless other impacts, extreme weather causes harm to businesses’ facilities, their workers and supply chains, and leads to financial impacts. The World Resources Institute’s recent report, “Water Shortages Cost Indian Energy Companies Billions,” highlights findings that India’s thermal power is so reliant on water for cooling that the largest thermal utilities had to close at least once between 2013-2016 and lost about $1.4 billion in revenue. In the article “5 Things Companies Can Do to Grow in a Water-Stressed World,” Water Deeply describes ways that companies are mitigating their risk by proactively addressing water resource limitations.
Climate-related Risk for Telecommunications
Companies in different sectors will be affected differently by three types of climate risk. Novethic’s article “L’impact des risques climatiques sur les entreprises, le cas d’Orange,” provides direct examples of how physical climate risk, transition risk and reputation/legal risk directly threaten companies. In a discussion of Orange, a telecommunications provider, the article highlights the complex factors that companies must consider in addition to their impact on CO2 emissions. Such considerations include a company’s potential to promote innovations for resilience in society through programs ranging from apps that organize carpooling to smart metering.
Inside the Office at Four Twenty Seven
Meet Guest Researcher, Nora Pankratz
Four Twenty Seven is excited to welcome Nora Pankratz as a guest researcher. Nora is a Ph.D. candidate in Finance at the European Center for Corporate Engagement at Maastricht University in the Netherlands. Her research focuses on the impact of extreme temperatures on the financial performance of public firms. For the next several months Nora will be based in Berkeley, working with data collected by Four Twenty Seven to develop a research project on the translation of climate risks into financial risks.
Join the Four Twenty Seven team in the field at these upcoming events:
March 19-21:ClimateCon, Asheville, NC: Katy Maher, is at this convening of science and businesses professionals focused on building climate resilience.
April 2: ICARP TAC Quarterly Meeting, San Francisco, CA: Natalie Ambrosio will participate in the Adaptation Vision Framework workshop hosted by the Governor’s Office of Planning and Research.
April 3-6: Sustainatopia, San Francisco, CA: COO Colin Shaw, will speak on a panel on ESG investing and a panel on climate risk at this annual convening of sustainability and financial experts.
April 9: Financing Climate Change Adaptation, New York, NY: Founder andCEO Emilie Mazzacurati will participate in a private investor workshop on financing adaptation in US cities, organized by C40, NY City and GARI.
April 10-11: Responsible Investors Asia, Tokyo, Japan: Meet with the Four Twenty Seven team to discuss physical climate risk in equities and infrastructure portfolios.
June 5-6: Responsible Investors Europe, London, UK: Meet with the Four Twenty Seven team to discuss ratings and engagement on physical climate risk in equities.
June 18-21: Adaptation Futures 2018, Cape Town, South Africa: Director of Advisory Services, Yoon Kim, will facilitate a session exploring integrating climate risks into infrastructure investment decisions.
August 28-29: 3rd California Adaptation Forum, Sacramento, CA: Save the date for this opportunity to join over 600 climate leaders in workshops, sessions and networking around adaptation action in California.