January 15, 2019 – 427 REPORT. Building resilient communities and financial systems requires an understanding of climate risk exposure, but also of how prepared communities are to manage that risk. Understanding the adaptive capacity, or ability to prepare for change and leverage opportunities, of the surrounding area can help businesses and investors determine how exposure to climate risk is likely to impact their assets and what the most strategic responses may be. This report outlines Four Twenty Seven’s framework for creating location-specific actionable assessments of adaptive capacity to inform business and investment decisions and catalyze resilience-building.
Every investment, from real assets to corporate initiatives, is inextricably connected to its surrounding community. From flooded or damaged public infrastructure hindering employee and customer commutes to competition for water resources threatening business operations and urban heat reducing public health, the impacts of climate change on a community will impact the businesses and real estate investors based in that community. Thus, evaluating how acute and chronic physical climate hazards will affect local communities and communities’ responses enables investors and corporations to assess the full extent of the risks they face.
This report, Assessing Local Adaptive Capacity to Understand Corporate and Financial Climate Risks, outlines Four Twenty Seven’s framework for capturing a city’s adaptive capacity in a way that’s actionable for corporations seeking to understand the risk and resilience of their own facilities and for investors assessing risk in their portfolios or screening potential investments. The framework focuses on three main pillars: 1) awareness, 2) economic and financial characteristics, and 3) the quality of adaptation planning and implementation. It is informed by social sciences research, recent work by credit rating agencies, and our experience working directly with cities and investors.
While a city’s adaptive capacity plays a key role in determining whether or not exposure to climate hazards will lead to damage and loss, cities are also likely to find that their resilience to climate impacts is an increasingly important factor in attracting business and financing, as adaptive capacity is more frequently integrated into credit ratings and screening processes. It is valuable for both cities to understand how investors are interpreting adaptive capacity and for investors to understand which factors of local adaptive capacity translate into increased resilience and reduced financial loss for their assets.
NOVEMBER 27, 2018 – LONDON, UK – Four Twenty Seven Wins Risk Markets Technology Award for Alternative Data Vendor of the Year for 2019.
Four Twenty Seven was awarded the 2019 Risk Markets Technology Award for Alternative Data Vendor of the Year. The Risk Awards are the longest-running and most prestigious among industry commendations, recognizing leadership in the global derivatives markets and in risk management.
Investors who wish to develop a fully-informed view of their portfolios need forward-looking data on the impacts of climate change on corporations and public issuers that incorporate the most recent developments in climate science. Risk Magazine recognized Four Twenty Seven’s work to fill this void. “Rapid intensification of the effects of both acute climate events like hurricanes and wildfires and chronic effects like sea level rise and increases in temperatures present an increasingly meaningful type of exposure for investors,” said Emilie Mazzacurati, Four Twenty Seven Founder and CEO. “This risk is currently only priced into the market ex post – we see corrections in asset prices in the wake of events only to the extent that their exposure to these events is known.”
Four Twenty Seven helps firms price the risk ex ante by extracting data from global climate models and other scientific datasets to project asset-level risk exposure to a number of hazards, including hurricane-force winds, sea level rise, flooding, heat stress and water stress. Four Twenty Seven’s database of risk exposures, now scores over one million corporate facilities representing 2,000 of the worlds largest companies, combining exposure with detailed data on market and supply chain characteristics.
“Our data is catalyzing change across the financial sector,” said Mazzacurati. “Our analytics help leading investors and corporations understand climate change’s impact on their assets and take steps to reduce this risk by investing in resilience.” Four Twenty Seven’s clients include pension funds, asset managers, corporations, development banks and regulators, who use our analytics to understand risks in their existing portfolios, assess risks of potential asset acquisitions and engage with management teams to build resilience in supply chains and physical assets.
Download the 2019 Risk Markets Technology Awards Announcement.
This webinar on climate risk in real estate presents Four Twenty Seven and GeoPhy’s analysis of exposure to physical climate hazards in global real estate investment trusts (REITs). The presentations includes key findings from the white paper, Climate Risk, Real Estate, and the Bottom Line and a discussion of how physical climate data is leveraged in financial risk reporting for the real estate sector.
Download the slides, including links to resources discussed during the presentations and additional Q&A slides based on the webinar.
As California’s climate warms, residents increasingly endure extreme heat events that adversely impact public health. This exacerbates existing risks and will bring new challenges for different regions in the state, threatening the efficacy of traditional intervention strategies. Current thresholds for heat alerts are based on temperatures that exceed historical statistical thresholds, rather than temperatures that cause public health impacts. These ‘health-neutral’ thresholds may underestimate the health risks for the most sensitive populations. The new California Heat Assessment Tool (CHAT) is based on research that establishes local, health-based thresholds for extreme heat that help public officials, health professionals and residents understand what changing conditions mean for them. CHAT is part of California’s Fourth Climate Change Assessment, a state-mandated research program to assess climate change impacts in California, and was developed by Four Twenty Seven, Argos Analytics, the Public Health Institute and Habitat 7 with technical support from the California Department of Public Health.
Explore CHAT at cal-heat.org. This online tool advances the understanding of what types of heat waves pose public health risks and examines how the frequency and severity of local heat waves are expected to change over time due to climate change.
Read a brief report, The California Heat Assessment Tool: Planning for the Health Impacts of Extreme Heat, that shares key findings from the research and summarizes the data analysis visualized in the tool.
Access the technical report detailing technical methodology and view other projects funded by the California Fourth Climate Change Assessment.
Access the users needs assessment for a detailed explanation of the literature review and interview process that defines the data gap the research team addressed.
Director of Analytics, Nik Steinberg, discusses wildfire risk, impacts and prevention efforts, on the Midday Briefing. Nik explains implications of increasingly frequent and severe wildfires for the insurance industry and homeowners and shares several ideas for adapting to these risks. While fires have always occurred, climate change is changing the landscape of the wildland-urban interface and residents and policy-makers must understand their wildfire risks and implement preventative strategies. The economic implications are huge for utilities, shareholders and communities, but with intentional planning businesses, governments and residents have the opportunity to mitigate loss.
Climate change will continue to adversely affect public health by threatening sanitation, altering the distribution of vector-borne disease, increasing the need for effective heat wave responses, introducing new mental health challenges and more. To help cities understand their vulnerability to these impacts and build resilience, the United Nations Office for Disaster Risk Reduction (UNISDR) developed a Public Health System Resilience Addendum for its Disaster Resilience Scorecard for cities.
The addendum includes 24 questions, defining a 0-5 scale for practitioners to quantify their responses (see example below). The questions cover the integration of public health with each of UNISDR’s Ten Essentials for Making Cities Resilient: disaster governance, disaster scenarios, finances, land use and building codes, ecosystem services, institutional capacity, societal capacity, infrastructure resilience, disaster response, and disaster recovery.
By capturing all of the possible weak spots in the broader health system, the addendum is meant to be a tool for mainstreaming public health considerations into disaster risk reduction plans, rather than just serving as a one-time assessment. Using this integrated approach can help city officials build resilience over time. Recent events like the power outage that led to eight deaths in a Florida nursing home after Hurricane Irma demonstrate the preventable nature of many public health disasters. Ensuring that critical facilities have backup power supplies and that potential hazards are effectively communicated are ways in which effective planning can mitigate loss. By understanding existing vulnerabilities and how these will worsen with climate change, officials can implement essential adaptation measures that will save lives.
Four Twenty Seven contributed to this addendum and has developed a methodology to assess climate risk exposure in U.S. cities and counties. We are continuing research on quantifying local resilience to climate impacts and supporting public health responses to climate change. The forthcoming California Heat Assessment Tool will provide public health officials with an interactive platform to understand the projected increase in extreme heat events in each California census tract, based on the sensitivity of the local populations. It will also show the distribution of frontline individuals, such as the elderly, to inform effective local heat responses. This free, user-friendly tool will be live in mid-August.
July 15, 2018 – 427 ANALYSIS: Record-setting rains in Japan led to floods and landslides that disrupted business operations of automobile manufacturers, electronic companies and others. Understanding the ownership and operations of facilities located in the damaged areas provides insight into what companies and industries may exhibit downturns in performance over the near term and be vulnerable to similar storms in the future.
Japan was the inundated by over 70 inches of rain in early July, an event that resulted in significant loss of life and business disruptions. The clouds have since receded, leaving economic damage with long-term implications yet to be understood. However, estimates expect industry losses to be in the billions USD. Destruction was centered in Okayama and Hiroshima, driven by flooding and landslides.
Typhoons Prapiroon and Maria contributed to this rainfall and climate scientists expect a warmer climate to increase the severity of these storms. Japan has fewer preparations in place for floods than it does for other extreme events, and understanding the various manifestations of risk caused by extreme rainfall is essential to mitigating damage in the future.
Much of Okayama sits immediately below mountains, which makes it particularly exposed to devastating landslides following significant rainfall events. Bursting pipes and power outages led over 250,000 homes in the Okayama and Hiroshima Prefectures to go without water for several days after the floods. Landslides destroyed homes and exacerbated infrastructure damage caused by flooding.
Many business operations were severely impacted by these events as well, and some facilities remain closed. Companies such as Panasonic experienced physical damage due to flooded facilities, and others were impacted by damaged infrastructure and communities, impacting their supply chains and workforce.
Okayama and Hiroshima are centers of economic activity for a number of key sectors in Japan, hosting production facilities for auto manufacturing, consumer electronics, retail trade and others. The figure below highlights the concentration of facilities of companies in the auto manufacturing industry by the sector of their operations. Companies that rely heavily on manufacturing operations are particularly vulnerable to flooding due in part to their utilization of expensive equipment that can easily incur water damage.
The heavy rainfalls showed no favorites in their disruption of manufacturing facilities across industries. For example, Mitsubishi and Mazda halted operations at some factories during the storms, due in part to supply chain disruptions. Many companies were also forced to pause operations because employees couldn’t get to work. While Mazda’s headquarters in Hiroshima Prefecture and a production facility in Yamaguchi Prefecture weren’t damaged themselves, they remained closed after the storms until employees could return to work safely. Likewise IHI Corp. closed its No. 2 Kure factory in Hiroshima because of water shortages and employees’ commute challenges.
The extent of long-term economic impacts that these companies will bear in the aftermath of last week’s storms is not yet known, but merits ongoing examination as the region recovers. Understanding the location of a corporation’s facilities and their exposure to extreme weather events is a key starting point for gauging exposure, and therefore can be instrumental in understanding company’s future performance.
Four Twenty Seven’s extensive facility level database can help investors proactively identify their portfolio companies’ exposures both to chronic climate effects and to individual extreme weather events such as the extreme rainfall that beset Okayama and Hiroshima. This deeper understanding can drive better risk-return tradeoffs, and importantly, shareholder engagement strategies that foster investments in resilience.