Moody’s Including Four Twenty Seven Climate Risk Data in Research and Ratings

Four Twenty Seven’s physical climate risk data now informs Moody’s ratings and research on US commercial mortgage-backed securities and commercial real estate collateralized loan obligations. Moody’s presale reports include a physical climate risk table for the property backing the loan, showing its exposure to floods, heat stress, hurricanes & typhoons, sea level rise, water stress and wildfires in the next 10 to 20 years. Read the press release from Moody’s Investors Service:

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New York, August 11, 2020 —

  • Four Twenty Seven measures the degree of risk from floods, heat stress, hurricanes and typhoons, sea level rise, water stress, and wildfires
  • Moody’s presale reports now include physical climate risk tables for the properties backing the loans in CMBS and CRE CLO transactions

Moody’s Investors Service is now including climate risk data and analytics from majority-owned affiliate Four Twenty Seven in its research on and ratings process for US commercial mortgage-backed securities (CMBS) and commercial real estate collateralized loan obligations (CRE CLOs). While Four Twenty Seven climate risk scores inform Moody’s ratings, they are not a direct input into Moody’s rating models.

“CRE market participants are particularly exposed to physical risks associated with climate change, which could impact both properties and the surrounding communities,” said Nicholas Levidy, a managing director with Moody’s Structured Finance Group. “In the coming decades, climate hazards could disrupt access to certain locations and operations, damaging infrastructure and, where climate events become chronic, undermining an asset’s viability. The Four Twenty Seven scoring system provides a systematic way for us to monitor the impacts of gradually worsening extreme weather hazards.”

As extreme weather events and conditions become more frequent and severe, anticipation of these hazards will be increasingly reflected in insurance costs, and eventually also capital expenditures and commercial property valuations, Levidy says. Climate change could also raise utility costs due to factors such as higher demand for energy or a lack of water.

“Four Twenty Seven leverages global climate models to help investors and lenders understand what future risks related to climate change are likely to emerge,” said Emilie Mazzacurati, founder and CEO of Four Twenty Seven. “Our analytics look 10 to 20 years into the future, with this data compared to historical conditions to produce a measure of expected disruption from climate change.”

Four Twenty Seven provides aggregated climate risk scores and portfolio analytics that quantify a property’s exposure to the impacts of each of the six physical climate risks, with scores ranging from ‘no risk’ to ‘red flag,’ or extremely high risk. Four Twenty Seven scores are “gross” exposure scores, which Moody’s considers and supplements in the context of any property- or borrower-specific risk mitigants that may exist such as insurance, building systems, age of buildings, infrastructure improvements or government intervention measures.

Moody’s presale reports now include a physical climate risk table for the property backing each loan in a CMBS or CRE CLO transaction. The table provides the risk level and a site score for the given property, as well as a country benchmark score, for each of the six climate hazards.

The combination of data and analytics will enable commercial real estate professionals to better understand the exposure of their properties to the physical impacts of climate change, and to factor that insight into their investment decision-making processes.

For more information visit Moody’s Investors Service.