Art. 173: Lessons Learned from Climate Risk Disclosures in France

March 21, 2018 – 427 ANALYSIS. The first year of reporting under Art. 173 in France saw limited uptake of disclosures of physical risk and opportunities. Our review of disclosures from 50 asset owners in France shows 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 portfolio, 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.

Art. 173: the world’s first legal requirement to disclose climate risk

Article 173  of the French Law on Energy Transition and Green Growth passed August 2015 requires major institutional investors and asset management companies to explain how they take Environmental, Social and Governance (ESG) criteria into account in their risk management and investment policies. These institutions are also asked to report on the impacts of both physical risks and ‘transition’ risks caused by climate change on their activities and assets.

The law applies to French companies, meaning that French subsidiaries of large financial groups are potentially subject to requirements that do not apply to their parent companies. Its implementing decree invites these organizations to establish scenarios and models to take into account climate risks impacts on the value of their portfolios.

Article 173 covers publicly traded companies, banks and credit providers, asset managers and institutional investors (insurers, pension or mutual funds and sovereign wealth funds). In addition, asset managers managing funds above 500 M€ and institutional investors with balance sheets above 500 M€ are subject to extended climate change-related reporting obligations, including both physical impacts of climate change and transition risks (impact of the transition to a low-carbon economy).

The inclusion of physical impacts of climate change in financial risk analysis is in line with the industry-led Task Force on Climate-related Financial Disclosures (TCFD) recommendations report, released in July 2017.

What did financial institutions report?

We conducted a desktop analysis of the 2017 reports (applying to 2016 portfolios) to understand how financial institutions responded to the requirements laid out by Art. 173 in the first compliance year. We reviewed 50 asset owners in France, including public pension funds, sovereign wealth fund and insurance companies, with an aggregate €5.5 trillion euro ($6.8tn) under management. Our analysis included all the public entities covered by the Article 173, as well as private insurers with asset under management above €2bn. Insurance companies play a particularly important role as asset owners in France, where individual savings are massively invested in life insurance savings products. French pension funds, on the other hand, are relatively small due to France’s pay-as-you-go retirement system.

We were able to find Art. 173 reports for 36 out of 50 organizations. It is possible that, in spite of our best efforts, we failed to locate reports. However, Art. 173 has a ‘comply or explain’ provision which also makes it acceptable not to publish a report if one can justify climate change is not a material risk.

Among the Art. 173 reports, we found 29 from insurance companies and seven from public entities. Among them, 20 organizations (40%) discussed only their carbon footprint and/or their exposure to energy transition risk, without including physical risk disclosures.

A small group of organizations (8%) mentioned physical risk as a topic they were exploring but not yet able to report on. Most of them emphasized the lack of tools and models as a major impediment to reporting physical risk.

All in all, we found 12 financial institutions (24%) of the institutions under review made an explicit attempt to disclose their exposure to physical climate risk.

We broke down this latter group in three categories. Eight companies (16%) provided an analysis of the physical risks threatening either their operations or property portfolios (for insurance), ranging in scope from a few buildings to €15bn worth of assets in the case of AXA. Most of the reports contain limited details on methodology and findings.

Two companies (4%) performed what we call a “top-down” analysis, working with investment advisor Mercer to perform a multi-asset class, sector-level analysis of climate risk using Mercer’s proprietary climate risk model, which blends transition and physical risk. Finally, two high profile investors, pension fund ERAFP and sovereign wealth fund FRR, included an initial assessment of climate risk in their equity and fixed income portfolios, at the asset level.

 

 

Table 1 presents a detailed breakdown of how those organizations take physical climate risks into account:

 Case Studies: How do Investors Report on Physical Risk?

AXA

The best student in this 2016 reporting vintage is AXA France. AXA received the “International Award on Investor Climate-Related Disclosures” from the French Ministry for the Environment, for analyzing 15 billion euro of assets (real estate and infrastructures). The analysis takes into account most frequent European natural disasters and the geographical location of each individual asset as well as the destruction rate of their building materials. They found out that, over 30 years, the accumulated loss would aggregate to 24 million euro. The insurance company also reported that if a centennial storm was to occur, the portfolio would be impacted by a 15.2 million euro loss. While AXA provides some of the most detailed analysis,  it also noted that “this new kind of analysis needs to be improved in order to take into account more natural disasters and other portfolios”.

The following graphs demonstrate the physical risk exposure to windstorms for the analyzed infrastructures. On the left, the graph displays the annual average destruction rate, which is linked to the average loss generated by windstorms every year (0.8M€ on average). The map on the right shows the destruction rates due to a 100-year event, with an estimated loss of 15.2M€.

Source (Award on Investor Climate-related Disclosures, AXA Group, October 2016: https://cdn.axa.com/www-axa-com%2Fcb46e9f7-8b1d-4418-a8a7-a68fba088db8_axa_investor_climate_report.pdf)

Generali

Generali France also provided a complete and detailed evaluation of the potential impact of physical risks on their property assets. They analyzed 112 assets, mainly in the Paris Area, accounting for 60% of their owned assets. Generali took into account two kinds of physical risks, flood and drought, to rate their assets from “high” to “very low” risk. Regarding drought, 3 assets enter the medium-risk category. As only 12 assets have been analyzed (Paris and the overseas departments being excluded), this risk is important as it accounts for 25% of their analysis. On the other hand, 10 out of 112 buildings owned by Generali France are exposed to a high risk of flood. They are mainly located in the Paris Area and would be heavily affected by a Seine flood.

To sum up, both AXA and Generali reports are valuable examples of emerging best practices as they show the willingness of those organizations to take physical risks into account in their reporting practice. However, their analyses would benefit from being extended to a broader portfolio and to other natural events.

FRR

In November 2017 the French pension fund, “Fonds de Réserve pour les Retraites” (FRR), released a report addressing Article 173 requirements. Four Twenty Seven performed the analysis, and applied its proprietary methodology to measure the types and levels of climate risk embedded in FRR holdings. Portfolio exposure was evaluated according to their respective industry and sector. The analysis produced a sector risk score based on three indicators:

  • the sector’s supply chains’ geography ;
  • its dependency on climate-sensitive natural resources inputs ;
  • its sensitivity to weather variability.

This hotspot analysis gave FRR tools to get an initial understanding of its portfolios’ exposure. It highlighted strongly exposed sectors such as Materials and Consumer Staples, due to their dependency on natural resources, and Pharmaceuticals and Electronics hardware, due to their complex and global supply chains. Conversely, the results brought out the low exposure of service-based industries such as Media and Telecommunication.

Conclusion

Reporting on physical climate risk is a challenging task for financial institutions – many organizations lack the tools, models and data to perform a comprehensive assessment of their portfolios, whether they’re composed of real assets or equities. As TCFD reporting becomes standard for financial institutions and corporations, pressure will increase to report on physical risk. We expect fast changes in disclosures in this regard, starting as early as the 2018 reporting season.

This analysis was written with support from Thomas Poloniato.

Four Twenty Seven’s ever-growing database now includes close to one million corporate sites and covers over 1800 publicly-traded companies. We offer equity risk scoring and real asset screening services to help investors and corporations leverage this data.

Winter Storm Riley Threatens Pharmaceuticals and Airlines

March 2, 2018 – 427 ANALYSIS. As Winter Storm Riley threatens to flood the Boston area, we find pharmaceuticals and airlines industries are most exposed to flood risk.  Boston is a hub for both research and industry and the long-lasting financial consequences could be dramatic for some of the corporations with facilities in low-lying areas. 

Only two months after Winter Storm Grayson flooded Boston with its highest water level on record (4.88ft), Winter Storm Riley is now inundating the city and is predicted to bring water levels about 4.5ft above average high tide levels. The timing of Riley exacerbates this flood risk, as the storm surge is on top of already higher than average tides associated with the full moon.

Figure 1. Facilities in downtown Boston and Cambridge are particularly exposed to coastal flooding. Red represents the most exposed facilities while green shows the least exposed. Source: Four Twenty Seven

The greater Boston area is a hub for both research and industry and as this flooding is expected to worsen into the evening, the long-lasting financial consequences could be dramatic. Four Twenty Seven’s database of corporate facilities shows several industries and companies most exposed to coastal flooding. Our coastal flooding risk indicator measures exposure for low-lying facilities considering a combination of future sea level rise and storm surge from storms of varying intensity. A facility with high risk is likely to flood even during low intensity storms (e.g. 1 in 10 year events) and is also likely to experience a relatively large increase in storm surge.

Figure 2. Pharmaceutical facility exposure to coastal flooding in the greater Boston area. Red represents the most exposed facilities while green shows the least exposed. Source: Four Twenty Seven

Pharmaceutical companies are highly vulnerable to flooding in Boston, with medical research facilities and pharmaceutical preparation sites belonging to Eli Lilly and Pfizer showing the most risk. This industry exposure is particularly alarming given the thousands of lab animals (often kept in basements) and years’ worth of research that were lost by cancer and neuroscience research labs that were flooded during Hurricane Sandy. The recovery of these facilities required months and extensive funds, affecting this industry long after the storm.

Figure 3. Airline facility exposure to coastal flooding in the greater Boston area. Red represents the most exposed facilities while green shows the least exposed. Source: Four Twenty Seven

Airlines and other related airport services companies are also likely to be badly impacted by today’s storm. Storm damage of runways takes time and funds to repair, while impacting travelers and airlines in wide-reaching causal chains. While the location of Boston Logan International Airport makes it particularly vulnerable, the scheduling offices of airlines such as Delta and United are also largely exposed. Thus, in addition to costly delays and cancellations due to the local conditions, these airlines may experience more widespread scheduling difficulties if these buildings are inundated.

While understanding the long-term economic impacts of Winter Storm Riley will take many months, these findings highlight potential implications for the pharmaceutical and airline industries, their investors, and those who rely on their services.

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Four Twenty Seven’s ever-growing database now includes close to one million corporate sites and covers over 1800 publicly-traded companies. We offer subscription products and advisory services to access this unique dataset. Options include data feeds, an interactive analytics platform and company scorecards, as well as custom portfolio analysis and benchmarking.

Newsletter: Are we doing enough? The state of climate adaptation in the US

 

 

Four Twenty Seven’s monthly newsletter highlights recent developments in climate adaptation and resilience. This month, don’t miss a review of U.S. climate adaptation and a close look at opportunities to build resilience through collaboration.

In Focus: The State of Climate Adaptation


Are we doing enough? How is the field of adaptation developing in the United States? Rising to the Challenge, Together: A Review and Critical Assessment of the State of the US Climate Adaptation Field explores the field’s development, potential and challenges. Commissioned by the Kresge Foundation, the report was co-authored by Susanne C. Moser of Susanne Moser Research and Consulting, Joyce Coffee of Climate Resilience Consulting, and Aleka Seville in her capacity as Four Twenty Seven’s Director of Community Adaptation in 2017.

Based on a literature review and dozens of interviews with thought leaders and adaptation practitioners, this report finds that the emerging field of climate adaptation must continue to develop with increased urgency. Communities across the country are experimenting with adaptation, with the support of a growing knowledge base and suite of tools, and boosted by new actors including utility managers, private sector interests and philanthropy.

However, the field is largely crisis-driven and fails to adequately address the social equity aspects of adaptation choices, that should ensure all people benefit regardless of socio-economic status or race.  It also lacks a shared vision, consistent funding and agreed upon best practices among other shortcomings, the report found. The report recommends aggressive acceleration of adaptation planning, coordination across jurisdictions, and implementation among advocates, planners, and funders. Read more.

Read the Report

The United States of Climate Change


With examples from every state in the U.S. this United States of Climate Change” feature from The Weather Channel displays the vast, dire and varied implications of climate change. It also documents communities’ efforts to adapt to a rapidly changing world. From new species of pathogen-hosting mosquitoes flourishing in Mississippi to “flash droughts” threatening barley in small Montana towns that depend on selling the crop to beer brewers, there is a plethora of local stories highlighting cultural, social and economic impacts of climate change. The Washington Post reports on the thinking behind Weather.com’s framing of this feature.

For more examples of climate change’s local impacts, read about Four Twenty Seven’s work examining the impacts of climate change on Delaware’s workforce and our analysis of extreme heat and public health in Denver.

Working with businesses to build community resilience

As increasing numbers of climate disasters cause over $1 billion in damages, the economic impacts of these events are widespread and ongoing. California wine-growers will feel the financial effects for years as they work to rebuild their vineyards, while the communities that depend on this economy will also feel these consequences. Four Twenty Seven’s blog post “Working with Businesses to Build Community Resilience” outlines opportunities for local governments and businesses to support each other in adaptation efforts.

Businesses and communities depend on each other and have important roles to play in collaborative climate change preparation. While businesses rely on resilient infrastructure and city services, they can also support community recovery efforts and participate in planning. Likewise, local governments can create collaborative networks, share resources and engage businesses. Read more.

Read the Blog

Resources on Engaging Businesses in Adaptation

For more insight on corporate adaptation read the Caring for Climate report, The Business Case for Corporate Adaptation, which highlights the benefits for businesses to build their awareness of climate risk and opportunities for policymakers to encourage corporate adaptation.

Will Amazon HQ2 consider resilience?

Eager for an opportunity for up to 50,000 jobs and a potential $5 billion in investment, twenty cities received the anticipated advancement to the list of finalists for Amazon’s HQ2 last month. Among this short list is the Southeast Florida bid, a collaboration between Broward, Miami-Dade and Palm Beach Counties.

These counties have experience working together through the Southeast Florida Regional Climate Change Compact, which also includes Monroe County. The compact’s Regional Climate Action Plan emphasizes the importance of regional strategies to build resilient economies and communities. Now the benefits of this collaboration are becoming increasingly clear, as many of the regional compact’s priorities, such as addressing sea level rise and improving infrastructure, are also important for bolstering economic success by helping to attract Amazon and other businesses to the region.

Inside the Office at Four Twenty Seven

Meet the Team: Lindsay Ross

Four Twenty Seven is delighted to welcome Lindsay Ross, who joins the team as a Senior Analyst, Macroeconomic Risks. Lindsay analyzes the economic impacts of climate change on corporations and financial markets. She studies at the Johns Hopkins School of Advanced International Studies (SAIS), focusing on Energy, Resources, and the Environment as well as International Finance and Economics. Previously she worked for the U.S. International Trade Commission, assisting with research on the impacts of international trade on the U.S. economy.

Upcoming Events

Join the Four Twenty Seven team in the field at these upcoming events:

  • February 13: Climate Risk: From Assessment to Action, Washington, DC: CEO, Emilie Mazzacurati, will speak on a panel at this workshop hosted by the Inter-American Development Bank
  • February 28 – March 2: Climate Leadership Conference, Denver, CO: Climate Adaptation Senior Analyst, Kendall Starkman, will attend this gathering of climate, sustainability and energy professionals.
  • March 6: Inaugural Conference: Northern European Partnership for Sustainable Finance (NEPSF), London, UK. Emilie Mazzacurati will join the launch of this new Partnership to support sustainable finance.
  • June 18-21: Adaptation Futures 2018, Cape Town, South Africa: Director of Advisory Services, Yoon Kim, will facilitate a session at this conference, 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.

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Working with Businesses to Build Community Resilience

The year 2017 will stay on the record as one of the most expensive years to date for climate and weather disaster events. The U.S. experienced 16 weather and climate disasters that caused over $1 billion in damages, tying the record year of 2011 for the most billion-dollar disasters. From summer through the fall, wildfires in various parts of California led to fatalities, destruction of entire communities, and damage costs of $18 billion, with economic consequences that will continue to impact the region. These events have highlighted that climate change has already begun to and will continue to impact local communities and businesses, and that local economies will benefit from more coordinated resilience planning.

Communities across the U.S. are taking steps to identify their climate change risks and enhance their resilience to changing climate conditions. Many local governments have assessed their vulnerabilities and are developing resilience plans with support from local stakeholders. However, a key set of stakeholders are often not at the table: businesses. Collaboration between local governments and the business community on climate change resilience remains limited. As local and regional climate change planning continues, it becomes increasingly important for local governments to engage with businesses, both large and small, on these issues.

The success of businesses and communities is intertwined

Many larger companies recognize the impacts of climate change on their operations, including risks to physical assets, disruptions to supply chains, and impacts on their workforce. In fact, some businesses, like Google, are examining how to develop company resilience strategies that address changing climate conditions. Businesses are also dependent on public infrastructure and local government services, and climate risks on these “outside the fence” components are much harder for businesses to evaluate. In fact, a number of companies have highlighted these uncertainties as a major barrier in addressing adaptation.

Local governments are dependent on the private sector in many ways. Businesses are essential to the economic health and growth of communities. Business interruptions can affect the quality of life for residents, disrupt the local economy, and reduce tax revenues. The costs of Hurricane Harvey are still being evaluated, but preliminary estimates suggest that lost economic output from this storm was in the range of $9 billion to $11 billion, including $540 million for goods-producing industries and $141 million for oil and gas industries. The October 2017 wildfires in California’s wine country are estimated to have caused economic losses between $6 and $8 billion dollars due to property damage and business interruptions alone, with $789 million in commercial property claims. These costs do not include the potential losses to the wine industry for many years to come.

Local governments have a strong interest in ensuring that businesses are resilient and remain operational as the climate continues to change. Companies will also benefit from engaging with the public sector on community resilience to enhance their business continuity plans and support their employees. In addition to better protecting their employees and operations, this type of collaboration will help businesses better understand community needs.

Businesses can assist local governments with expertise and solutions

Larger businesses often already understand local risks because of internal risk management processes. Risk management and emergency management plans, along with drills and training exercises with employees, help businesses prepare for extreme events. Local governments can coordinate with businesses on risk management, including participating in drills and trainings, to build and maintain community resilience.

Local governments can also use larger companies’ expertise and data on risk. Businesses may be monitoring information that could be relevant to local resilience planning. For example, utilities often track potential risks to their assets, such as those related to storms (e.g., wind, precipitation, flooding), wildfire, and temperature impacts on energy demand. This information can be helpful to local decision-makers in both emergency management and long-term resilience planning.

The private sector also offers opportunities in services and solutions. Businesses are often interested in developing and improving technologies, engineering approaches, technical assistance, and opportunities to connect with their communities. For example, Airbnb offered disaster relief to people impacted by the California wildfires, connecting displaced residents to available housing. The company also worked with the City of San Francisco’s Department of Emergency Management to share their lessons learned from Superstorm Sandy. Airbnb is also partnering with various local governments to help communities prepare for and recover from disasters. Local governments’ suggestions for climate change solutions and services can help businesses tailor their products to best serve the community.

In addition, financing for implementing community resilience can often be a challenge for local governments. The private sector can offer financing solutions to help fund climate change resilience. For example, Pacific Gas and Electric Company (PG&E) is investing $1 million over five years through their Better Together Resilient Communities grant program to support local climate resilience initiatives in California.

Local governments can share data and information with businesses

Some local governments have undertaken vulnerability assessments and climate change scenario planning for their regions. The data and results from these studies can be shared with businesses to help them understand what assumptions are being used by local governments, and whether their scenarios align, which will be increasingly important to ensure regional coordination as conditions change.

While larger companies may undertake scenario planning and vulnerability assessments, most small businesses do not. However, small businesses can also benefit from data and information sharing. Small companies do not often have the expertise or resources to adequately assess climate change risks and undertake resilience planning. Local governments can share information with small businesses to help them better understand their potential risks and prepare for extreme events. In California, Valley Vision has developed the Capital Region Business Resiliency Initiative to help engage the small business community in resilience planning. This effort helps small businesses engage with local stakeholders to understand potential risks and provides resources to help these businesses plan for disaster resilience.

Local governments can engage with businesses through existing networks or by creating new processes to assist with engagement

Local governments can engage with both small and large businesses through networks and organizations for the private sector, like local chambers of commerce, trade associations, and other business networking groups. For example, the City of Annapolis has engaged the Anne Arundel County Chamber of Commerce and the Downtown Annapolis Partnership in its Weather It Together initiative, which is focused on adapting the historic community to minimize the risks associated with flooding. Through this effort, local businesses are part of the planning process to help the community become more resilient. The City of Cambridge, Massachusetts has also engaged businesses in long-term planning efforts like the Cambridge Compact and the city’s Climate Change Preparedness & Resilience Plan. Establishing public-private partnerships focused on climate resilience will also help to facilitate conversations and collaboration between these two sectors.

Local governments may already engage with businesses individually, but it can be helpful to set up an ongoing process for involving the private sector in resilience planning. For example, business representatives can participate in local planning and advisory committees, contributing their perspectives and identifying any key issues for the business community. Effectively engaging the business community will often require targeted outreach and potentially different strategies, as businesses may not be aware of ongoing stakeholder processes or may not realize their relevance to company needs. Some communities have incorporated businesses into resilience planning through regional climate collaboratives. Several regional climate collaboratives in California focus on engaging different stakeholder groups, including businesses, to further climate change planning. For example, the Sierra Climate Adaptation and Mitigation Partnership was founded by the Sierra Business Council and has various business members, including ski resorts and forestry companies.

Effectively preparing for climate change’s impacts requires that cities coordinate with many different stakeholders. Businesses, public agencies, community groups, and citizens are all important to the discussion on community resilience, as they will all be impacted by climate change and have important ideas to contribute. Engaging the private sector is an important way for local governments to improve community resilience, and will benefit both the public and private sector through information sharing, aligning needs and goals, and developing multi-sector networks.

Newsletter: Climate Risk in Financial Portfolios, COP23 and Workforce Adaptation

Four Twenty Seven’s monthly newsletter highlights recent developments in climate adaptation and resilience. This month, don’t miss our white paper on physical climate risk in equity portfolios, French President Macron’s op-ed on climate finance, and our policy recommendations on protecting workers from climate health impacts. Also, be sure to check out our new website!

In Focus: Physical Risk in Financial Portfolios

Figure 4. Extreme Precipitation Risk for Facilities from France’s Benchmark Index CAC40

Four Twenty Seven and Deutsche Asset Management jointly released today at COP23 a white paper featuring a new approach to climate risk management in equity portfolios. The white paper, Measuring Physical Climate Risk in Equity Portfolios, showcases Four Twenty Seven’s Equity Risk Scoring methodology, which identifies hotspots in investment portfolios by assessing the geographic exposure of publicly-traded companies to climate change. Our methodology tackles physical risk head on by identifying the locations of corporate sites around the world and then the vulnerability of these corporate production and retail sites to climate change, such as sea level rise, droughts, flooding and tropical storms, which pose an immediate threat to investment portfolios.

Deutsche Asset Management is leveraging Four Twenty Seven’s Equity Risk Scores to satisfy institutional investors’ growing desire for more climate resilient portfolios and design new investment strategies. “This report is a major step forward to addressing a serious and growing risk that investors face. To keep advancing our efforts, we believe the investment industry needs to champion the disclosure of once-in-a-lifetime climate risks by companies so we can assess these risks even more accurately going forward,” said Nicolas Moreau, Head of Deutsche Asset Management.

Read the white paper

France on the Forefront of Climate Finance

French President Emmanuel Macron emphasizes his support for the Taskforce on Climate Related Financial Disclosure’s (TCFD) recommendations in an op-ed published on Global Markets. Macron also highlighted the importance of climate finance mechanisms, such as green bonds, and the need for private participation in financing climate action.

 

France has been heralded as a global leader on climate risk disclosure with the passage of the Energy Transition Law, including Article 173, which includes a requirement for financial institutions to disclose their exposure to physical climate risk. Four Twenty Seven is working with French public pension funds and screening equity portfolios to support reporting efforts in compliance with Art. 173.

Adaptation: Safeguarding Worker Health & Safety

Four Twenty Seven co-authored an article titled “Safeguarding Worker Health and Safety from a Changing Climate: Delaware’s Climate-Ready Workforce Pilot Project,” with the Delaware Department of Natural Resources and Environmental Control. Through interviews, surveys, and policy analysis assessing the climate resilience of existing worker health and safety policies, the authors examine the preparedness of five state agencies for climate impacts. The article highlights particular risks faced by vulnerable workers and offers policy recommendations for enhancing resilience to ensure the safety and well-being of agency staff.

Visit our website for a detailed presentation on the Delaware Climate-Ready Workforce Pilot Project, the summary report, and more information about our adaptation planning and policy consulting.

International Climate Policy in the Spotlight

Four Twenty Seven’s Director of Analytics, Nik Steinberg’s panels at COP23

Measuring Progress on Climate Adaptation and Resilience: From Concepts to Practical Applications
Nov. 7, 3:00 – 4:30pm, Meeting Room 7 (150)Director of Analytics, Nik Steinberg will join a panel of experts discussing adaptation measurement, focusing on indicators and metrics to inform and assess resilience efforts. This side event will be hosted by the International Development Research Centre (IDRC), Asian Institute of Technology (AIT), McGill University and the University of Notre Dame.

Resilience as a Business: How the Private Sector Can Turn Climate Risk into Business and Investment  Nov. 10, 5:30 – 8:00pm, Hilton Bonn

Bringing together corporate stakeholders and private investors, this event will explore the private sector’s pivotal role in mainstreaming adaptation and driving the resilience agenda.

Speakers include: Representative from Ministry of Economy, Trade, and Industry of Japan; Mari Yoshitaka from Mitsubishi UFJ Morgan Stanley Securities Co. Ltd.; Jay Koh from Lightsmith Group and GARI;  Nik Steinberg from Four Twenty Seven; and Amal-Lee Amin from Inter-American Development Bank. For more information contact proadapt@fomin.org.

Tool: Monitoring Progress on the Paris Agreement


This interactive new platform developed by the The World Resources Institute combines climate policy data with interactive graphics to help analysts and policy makers stay up to date on nationally determined contributions (NDCs), greenhouse gas emissions by sector and more. Climate Watch allows users to sort data based on various indicators, examine connections between NDCs and Sustainable Development Goals, and dive into data on specific nations.

Inside the Office: What’s New at Four Twenty Seven

We Have a New Website!

With streamlined navigation and updated visuals, our new website brings our story alive and allows for a more engaging user experience.
Visit the Solutions page to explore our advisory services and subscription products, including Equity Risk Scores, Portfolio Analytics and Real Asset Screening.
Check out the Insights section for our perspectives on climate resilience, climate risk reporting, adaptation finance, climate science and recent events.

Meet Pete Dickson, Director of Business Development

Four Twenty Seven is proud to announce the addition of Pete Dickson to our team. As the Director of Business Development, Pete is responsible for driving growth for our subscription products, with a focus on financial institutions.
Pete brings more than 20 years of experience in institutional sales, trading, and business development. He’s worked with both the buy-side and sell-side to develop and execute business plans and build revenue, products, and services. Pete has worked with some of the largest financial services and asset management firms in the US and abroad.

Upcoming Events

Join the Four Twenty Seven team in the field at these upcoming events:

  • November 7-17  COP23, Bonn, Germany: Join Director of Analytics Nik Steinberg at side events at the UNFCCC’s 23rd Conference of Parties (See above for details).
  • November 12-15  Airports Going Green, Dallas, TX: Director of Advisory Services Yoon Hui Kim will present on corporate climate resilience planning for airports and transportation infrastructure.
  • November 16-17 Berkeley Sustainable Business and Investment Forum, Berkeley, CA: COO Colin Shaw will attend this event sponsored by the Berkeley-Haas Center for Responsible Business and the Berkeley Law School
  • November 30 Roundtable: Investing with Impact, San Francisco, CA: CEO Emilie Mazzacurati will speak at a roundtable organized by Deutsche Asset Management about the use of ESG data in portfolio investing (by invitation).
  • December 6-7  RI Americas 2017, New York, NY: CEO Emilie Mazzacurati will present on Physical Climate Risk in Equity Portfolios (Wednesday Dec 6 at 2pm) and meet with Colin Shaw, Pete Dickson and Katy Maher at the Four Twenty Seven booth.
  • December 11  Climate Finance Day, Paris, France: CEO Emilie Mazzacurati will join this high profile event sponsored by the French Ministry for the Economy and Finance.
  • December 11-15  AGU Fall Meeting, New Orleans, LA: Climate Data Analyst Colin Gannon will join the Earth and Space Science community to present a poster on climate modeling.

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Physical Climate Risk in Equity Portfolios

November 8, 2017 – 427 REPORT.  Four Twenty Seven’s Equity Risk Scores help investors identify climate risk exposure in their portfolios and design new investment strategies.  Our methodology tackles physical risk head on by identifying the locations of corporate production and retail sites around the world and their vulnerability to climate change hazards, such as sea level rise, droughts, floods and tropical storms, which pose an immediate threat to investment portfolios. This jointly published report explains our equity risk scoring methodology, features a relative risk ranking of CAC40 companies and discusses particular vulnerabilities in Asia. 

At COP23 Four Twenty Seven and Deutsche Asset Management jointly released a report featuring a new approach to climate risk management in equity portfolios. Measuring Physical Climate Risk in Equity Portfolios showcases Four Twenty Seven’s Equity Risk Scoring methodology, which identifies hotspots in investment portfolios by assessing the geographic exposure of publicly-traded companies to climate change.

This comprehensive, data-driven scoring effort culminates in a composite physical risk score that allows for comparison and benchmarking of equities and indices.  This integrated measure provides a point of entry to understand and address climate risk, engage with corporations and identify risk mitigation strategies. “This report is a major step forward to addressing a serious and growing risk that investors face. To keep advancing our efforts, we believe the investment industry needs to champion the disclosure of once-in-a-lifetime climate risks by companies so we can assess these risks even more accurately going forward,” said Nicolas Moreau, Head of Deutsche Asset Management.

Key Takeways

  • Four Twenty Seven’s equity scoring methodology includes Operations Risk, Supply Chain Risk and Market Risk, accounting for differential vulnerability to climate hazards between industries, asset types and locations.
  • Four Twenty Seven screens each corporate site for its exposure and sensitivity to a set of climate hazards including extreme precipitation, sea level rise, hurricanes, heat stress, water stress and wildfires.
  • To calculate Supply Chain Risk and  Market Risk, Four Twenty Seven uses companies’ financial data, such as revenues and production.
  • China leads the world in terms of coastal risk, with 145 million people and economic assets located on land threatened by rising seas, and countries throughout Asia are particularly vulnerable to climate risk.
  • The Thailand floods of 2011 led to vast repercussions across industries, including car manufacturers, Thailand’s rice industry and even tourism.

Read the report and contact us for more information about our products for financial institutions and corporations.

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Four Twenty Seven’s ever-growing database now includes close to one million corporate sites and covers over 1800 publicly-traded companies. We offer subscription products and advisory services to access this unique dataset. Options include data feeds, an interactive analytics platform and company scorecards, as well as custom portfolio analysis and benchmarking.

Newsletter: COP23 Preview – Climate Risk Disclosure and Adaptation Finance

Four Twenty Seven’s monthly newsletter highlights recent developments in climate adaptation and resilience. This month, don’t miss the highlights from the UN Principles for Responsible Investment conference and our preview of COP 23 in Bonn next month!

In Focus: A New Way to Fund Resilience


Re:focus Partners’ new report, A Guide to Public-Sector Resilience Bond Sponsorship, highlights the potential of resilience bonds to decrease both financial and physical disaster risks. By partnering with insurance agencies and issuing bonds to fund projects that are targeted at reducing specific vulnerabilities, such as flooding, city and state governments can make their communities more resilient while saving money. The report explains hazard-specific projects applicable for resilience bonds and outlines potential strategies for partnerships. Watch Four Twenty Seven CEO Emilie Mazzacurati speak on resilience finance at a Proadapt Symposium on Climate Risk and Investment.

Mainstreaming Climate Risk Disclosures

 

Climate risk reporting was at the heart of the Principles for Responsible Investment (PRI) in Person conference in Berlin. Nicolas Moreau, head of Deutsche Asset Management, encouraged investors to emphasize physical risk assessment in their portfolios in a keynote presentation featured above. Four Twenty Seven is proud to partner with Deutsche Asset Management to power new investment strategies focused on physical risk mitigation. Read about Four Twenty Seven’s work evaluating physical risk and supporting resilience in the financial sector. At the conference, PRI also announced the Climate Action 100+ initiative in collaboration with Asia Investor Group on Climate Change (AIGCC), Ceres, Investor Group on Climate Change and Institutional Investors Group on Climate Change (IIGCC).The five-year initiative will engage investors to urge top greenhouse gas emitters to decrease emissions, commit to climate risk disclosure and improve corporate governance related to climate change.

Looking Over the Horizon


The new C2ES report, Beyond the Horizon: Corporate Reporting on Climate Change, offers insight into the Task Force on Climate-related Financial Disclosure’s (TCFD) final recommendations. The report praises the recommendations’ balance, noting their appeal to investors needing more information and to companies needing flexibility. Read our analysis of the TCFD Recommendations and applicable regulation in Europe.

Early Movers


The Climate Disclosure Standards Board’s announced ten companies committed to implementing the TCFD’s recommendations within three years. This emphasis on climate risk disclosure allows for the best use of capital and supports the transition to a resilient, low-carbon world. This commitment also sets companies apart in the eyes of investors, improves their own resilience and guarantees them support from CDSB.

The Costs of Climate Change

Billion-dollar Weather Events


Recent storms join a landscape that’s increasingly dotted with widespread costly disasters. National Geographic’s Billion-dollar Weather Chart displays these events as semi-circles, color-coded by event type and sized according to the economic damage caused, and serves as a comprehensive calendar of decades of extreme weather events.

Thought Leadership: Economic Impacts of Extreme Weather Events

Four Twenty Seven advisor, Kate Gordon urges leaders to plan for climate change and build for resilience in her commentary on CNBC: Evacuating millions is not an ‘effective or sustainable’ response to hurricane threats.

Solomon Hsiang from UC Berkeley and Trevor Houser from Rhodium Group emphasize the importance of giving financial support to Puerto Rico in their New York Times op-ed, Don’t Let Puerto Rico Fall Into an Economic Abyss.

In his opinion piece in the Washington Post, What’s behind today’s job report? Hurricanes, low unemployment, wage growth and climate change, Jared Bernstein discusses the connections between storms and a low job report.

Four Twenty Seven at COP 23

Join Nik Steinberg, Four Twenty Seven’s Director of Analytics, at these events in Bonn, Germany for COP23.

Resilience as a Business: How the Private Sector Can Turn Climate Risk into Business and Investment  Nov. 10, 5:30 – 8:00pm, Hilton Bonn

Bringing together corporate stakeholders and private investors this event will explore the private sector’s pivotal role in mainstreaming adaptation and driving the resilience agenda.

Speakers include: Representative from Ministry of Economy, Trade, and Industry of Japan; Mari Yoshitaka from Mitsubishi UFJ Morgan Stanley Securities Co. Ltd.; Jay Koh from Lightsmith Group and GARI;  Nik Steinberg from Four Twenty Seven; and Amal-Lee Amin from Inter-American Development Bank. For more information contact proadapt@fomin.org

Measuring Progress on Climate Adaptation and Resilience: From Concepts to Practical Applications Nov. 7, 3:00-4:30pm, Meeting Room 7 (150)

Director of Analytics, Nik Steinberg will join a panel of experts discussing adaptation measurement, focusing on indicators and metrics to inform and assess resilience efforts.  This side event will be hosted by the International Development Research Centre (IDRC), Asian Institute of Technology (AIT), McGill University and the University of Notre Dame.

The costs of extreme climatic events for the financial sector: how to manage exposure? November 10, French Pavilion

Director of Analytics, Nik Steinberg will speak on a panel hosted by the Institute for Climate Economics (I4CE), discussing the financial impacts of extreme weather events and strategies to build resilience.

Finance and Resilience Side Events

Climate Action in Financial Institutions: Mainstreaming the Paris Agreement in the Financial Sector Thursday Nov 9, 3:00-4:30pm, Meeting Room 7 (150)
Hosted by the Institute for Climate Economics (I4CE), Corporacion Andina de Fomenta (CAF) and European Investment Bank (EIB).

Excellence in Climate Adaptation Nov 9, 3:00-4:30pm, Meeting Room 10 (200)
United by their vision to unite global adaptation projects, the Netherlands, Japan and UN Environment created The Global Center of Excellence on Climate Adaptation (GCECA), which will co-host this event with the Red Cross Red Crescent Climate Centre.

Innovative Climate Finance Strategies and Instruments by and for Climate-Vulnerable Countries Monday Nov 13, 4:45-6:15pm, Meeting Room 9 (100)
Hosted by the Institute for Climate and Sustainable Cities (ICSC), Bangladesh Centre for Advanced Studies (BCAS) and the Philippines.

Role of Standards and Accreditation to Support Non-state Actors in Light of Paris Agreement and SDGs Friday Nov 17, 1:15-2:45pm, Meeting Room 1 (150)
Hosted by the International Organization for Standardization (ISO) and International Accreditation Forum Inc. (IAF).

Four Twenty Seven: Meet the Team!

Katy Maher, Manager

Four Twenty Seven is proud to announce the addition of Katy Maher to the team. From our new location in Washington, D.C., Katy works closely with Four Twenty Seven’s public and private sector clients to conduct vulnerability assessments, develop resilience strategies and facilitate stakeholder workshops.

Katy brings more than ten years of experience supporting climate change impacts and resilience projects at international, federal, state and local levels. Her expertise also includes convening public and private sector organizations to facilitate discussion and planning on climate resilience. Prior to joining Four Twenty Seven, Katy coordinated resilience projects at the Center for Climate and Energy Solutions (C2ES) and ICF International.

Read more of Katy’s experience

Career Opportunities

Four Twenty Seven continues to grow! We are hiring for the following positions:

* Senior Analyst, Financial Climate Risk
* Business Development Manager (Paris)
* Business Data Analyst

See the position descriptions.

Upcoming Events

Join the Four Twenty Seven team in the field at these upcoming events:

  • October 10-13  SOCAP 2017, San Francisco, California: Meet with Senior Analyst Kendall Starkmann and Director of Advisory Yoon Kim to discuss impact investments and adaptation finance.
  • November 4-8  APHA 2017, Atlanta, Georgia: Director of Analytics Nik Steinberg will discuss how climate change affects health and how climate science can support decision-making in the public health sector at the APHA’s annual meeting and expo.
  • November 7-17  COP23, Bonn, Germany: Join Director of Analytics Nik Steinberg at side events at the UNFCCC’s 23rd Conference of Parties (See above for details).
  • December 6-7  RI Americas 2017, New York, New York: CEO Emilie Mazzacurati and COO Colin Shaw will attend the annual conference where Four Twenty Seven will have a booth and Emilie will present on Physical Climate Risk in Equity Portfolios.
  • December 11-15  AGU Fall Meeting, New Orleans, Louisiana: Director of Analytics Nik Steinberg will be joining the Earth and Space Science community to discuss recent research trends and participate in a mix of presentations, lectures and networking opportunities.

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Newsletter: How to disclose climate risk and opportunities?

 

 


Four Twenty Seven Climate Solutions

TCFD Releases Final Recommendations

The Financial Stability Board’s Task Force on Climate-related Financial Disclosures (TCFD) released their final recommendations in late July. The changes to the recommendations reflect the extensive feedback the Tasforce received from the stakeholder engagement process in the past six months. Key changes include:

  • Simplifying the recommended disclosure related to Strategy and scenarios to focus on the resiliency of an organization’s strategy to climate risk and opportunities
  • Establishing a threshold for organizations that should consider conducting more robust scenario analysis to assess the resilience of their strategies.
  • Clarifying that the recommended disclosures related to the strategy and metrics and targets recommendations depend on an assessment of materiality, whereas disclosures on governance and risk management are relevant for all organizations.
  • Updated conceptual map of climate-related risks and opportunities and associated financial impacts.


The recommendations were presented at the G20 summit in Hamburg, Germany last week, with hopes that the world leaders would formally endorse the guidelines. Climate change was high on the agenda for the summit, where all but the United States voiced a strong re-commitment to the goals of the Paris Agreement, and the G20 included by reference the TCFD recommendations in the Climate and Energy Action Plan for Growth.

CEOs Endorse TCFD recommendations

The TCFD final recommendations were endorsed by over 100 CEO’s from a wide range of companies, including large financial institutions like Barclays and Morgan Stanley as well as energy and manufacturing companies like Suez, DuPont, and Unilever. Reactions from a broad range of financial analysts was also positive, noting the need for improvements and wider adoption of climate risk disclosure practices.

A number of initiatives are already under way to think through and plan the implementation of the TCFD recommendations, such as the UNEP FI’s effort with major banks from around the world who have pledged to work towards adopting these recommendations, and put forth actions they see as needed for broader adoption of climate risk reporting.

Further readings:

  • The Economist Intelligence Unit’s  “The Road to Action” report finds that investors, asset managers, and banks are in urgent need of a way to identify and measure how the industry is responding to climate-related risks. It notes that their interviewees widely regard these recommendations as having the clearest mandate to providing possible solutions.
  • Aon’s white paper Financial Regulators Awaken: Prepare to Disclose Climate Risk notes that risk management and analytics is what differentiates the TCFD’s recommendations from many existing standards. “Risk management, including insurance and risk analytics, is given a key role in helping businesses understand and quantify climate risks. The recommendations provide a framework that can enhance risk management, empower corporate strategy, and improve resilience in a fast-changing world.”
  • The 2-Degree Investing Initiative takes a deep dive into corporate disclosures in its forthcoming report “Limited Visibility”, part of their Tragedy of the Horizon program. The report presents the current state of corporate disclosure on long-term risks and long-term forward looking data using analysis of MSCI World companies’ financial disclosures.

Climate Change in the Boardroom: Towards Climate-Competent Boards


What is a climate-competent board, and why does having one matter? Four Twenty Seven CEO Emilie Mazzacurati was invited to speak on exactly that during the Investing in the Age of Climate Change symposium at the University of Oregon. The symposium tackled issues around climate risk, their connection to investment decisions, and the need to understand how these risks can affect an organization’s business in the long-term. Emilie delved into the climate-competent board and presented on the opportunities they provide, and steps to implement climate-competency on a board. Watch the presentation, delivered via webcam.

How Much Will Climate Change Cost in the United States?

A new research article in Science magazine reveals that in the decades ahead, climate change will affect parts of the United States differently. The study found that areas in the Midwest and Southeast will likely suffer more economic harm from climate change with some areas possibly benefiting from the wild winters. The researchers hope to continue working on this study to further provide more specifics in individual areas to help local policymakers prepare for the incoming risks.

Join the Team!

Four Twenty Seven is hiring! We are looking for Business Development Managers (Europe and US), as well as talented analysts with a background in economics, econometrics, and data analysis. See the position descriptions.

Upcoming Events

Join the Four Twenty Seven team in the field at these upcoming events:

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TCFD Releases Final Recommendations

Conceptual map of climate-related risks, opportunities, and financial impacts, from the final TCFD recommendations report

The Financial Stability Board’s Task Force on Climate-related Financial Disclosures (TCFD) released their final recommendations in late June. The changes to the recommendations reflect the extensive feedback the Taskforce received from the stakeholder engagement process in the past six months. Some key changes include:

  • Simplifying the recommended disclosure related to Strategy and scenarios to focus on the resiliency of an organization’s strategy to climate risk and opportunities
  • Establishing a threshold for organizations that should consider conducting more robust scenario analysis to assess the resilience of their strategies.
  • Clarifying that the recommended disclosures related to the strategy and metrics and targets recommendations depend on an assessment of materiality, whereas disclosures on governance and risk management are relevant for all organizations.
  • Updated conceptual map of climate-related risks and opportunities and associated financial impacts.

TCFD Recommendations at G20

The recommendations were presented at the G20 summit in Hamburg, Germany, with hopes that the world leaders would formally endorse the guidelines. Climate change was high on the agenda for the summit, where all but the United States voiced a strong recommitment to the goals of the Paris Agreement, and the G20 included by reference, the TCFD recommendations in their Climate and Energy Action Plan for Growth.

CEOs Endorse the Recommendations

The TCFD final recommendations were endorsed by over 100 CEO’s from a wide range of companies, including large financial institutions like Barclays and Morgan Stanley as well as energy and manufacturing companies like Suez, DuPont, and Unilever. Reactions from a broad range of financial analysts were also positive, noting the need for improvements and wider adoption of climate risk disclosure practices.

A number of initiatives are already under way to think through and plan the implementation of the TCFD recommendations, such as the UNEP FI’s effort with major banks from around the world who have pledged to work towards adopting these recommendations, and put forth actions they see as needed for broader adoption of climate risk reporting.

Further Readings

  • The Economist Intelligence Unit’s  “The Road to Action” report finds that investors, asset managers, and banks are in urgent need of a way to identify and measure how the industry is responding to climate-related risks. It notes that their interviewees widely regard the TCFD’s recommendations as having the clearest mandate to providing possible solutions.
  • Aon’s white paper Financial Regulators Awaken: Prepare to Disclose Climate Risk notes that risk management and analytics is what differentiates the TCFD’s recommendations from many existing standards. “Risk management, including insurance and risk analytics, is given a key role in helping businesses understand and quantify climate risks. The recommendations provide a framework that can enhance risk management, empower corporate strategy, and improve resilience in a fast-changing world.”
  • The 2-Degree Investing Initiative takes a deep dive into corporate disclosures in its forthcoming report “Limited Visibility”, part of their Tragedy of the Horizon program. The report presents the current state of corporate disclosure on long-term risks and long-term forward looking data using analysis of MSCI World companies’ financial disclosures.

Four Twenty Seven helps investors, Fortune 500 companies, and government institutions understand how to quantify and monetize climate change impacts on operations and asset portfolios. Our clients rely on Four Twenty Seven’s tools and models to factor into financial and operational planning processes. Learn more about how we are helping our clients assess and adapt to climate risks.

Developing Climate-Competent Boards: Climate Risk and Opportunities

Four Twenty Seven’s founder and CEO Emilie Mazzacurati was invited to speak during the Investing in the Age of Climate Change symposium on April 28, 2017, at the University of Oregon. Emilie presented through a video call and talked about Four Twenty Seven’s work, but mainly discussed climate-competent boards. She delved into what a climate-competent board is, the opportunities they provide, and steps to implement climate-competency on a board. She also discussed economic impacts from climate change, the TCFD climate risk disclosure recommendations, the Paris Agreement, and how these topics relate to climate-competent boards.

Investing in the Age of Climate Change was sponsored by the University of Oregon’s Office of the President and the Office of Sustainability. The symposium tackled issues around climate risk, their connection to investment decisions, and the need to understand how these risks can affect an organization’s business in the long-term.

Video: Emilie Mazzacurati speaking at Investing in the Age of Climate Change