427 Report: Using Climate Data

April 25, 2018 – 427 REPORT. Financial institutions, corporations, and governments  increasingly strive to identify and respond to risks driven by physical climate impacts. Understanding the risks posed by climate change for facilities or infrastructure assets starts with conducting a risk assessment, which requires an understanding of the physical impacts of climate change. However, climate data in its raw form is difficult to integrate into enterprise risk management, financial risk modelling processes, and capital planning. This primer provides a brief introduction to climate models and data from a business or government perspective.

The first of several reports explaining the data and climate hazards analyzed in Four Twenty Seven’s equity risk scores and portfolio analytics, Using Climate Data unpacks the process through which raw climate data is transformed into usable metrics, such as future temperature projections, to help financial, corporate and government users productively incorporate climate-based analytics into their workflows. Beginning by explaining what a global climate model is, the report explains climate data’s format, computational choices to hedge uncertainty and resources for aggregated climate projections tailored to specific audiences.

Key  Takeaways

  • Climate models are simulations of the Earth’s future conditions. Climate projections are based on a compilation of many models and are publicly available.
  • Regional climate models and statistical downscaling improve the resolution of data produced by global climate models and are thus valuable options when projections are only needed for one location or several in the same region.
  • Climate models can be used to project future trends in temperature and precipitation, but can not project discrete storms or local flooding from sea level rise, which require additional data and analysis.
  • Different time horizons of climate projections have different strengths and limitations so it is important to select the data product best suited to a specific project’s goal.
  • There are several drivers of uncertainty in climate models and strategies to hedge this uncertainty can help users correctly interpret and use climate projections.

Download the Report.

Fintech Meets Climate Data

We chat with our new Chief Development Officer, Frank Freitas, about his motivations to join Four Twenty Seven after almost 30 years in finance and fintech, and his vision for new products and markets in climate analytics.

Why did you decide to join Four Twenty Seven?

First and foremost, the fact that our firm provides data-driven analytics that quantify real issues facing our planet today is very attractive to me. I have spent my entire career in finance and, like others, have increasingly come to see the need for alignment of investment decisions with those that preserve the future of our planet. To me, Four Twenty Seven’s mission and vision exist at the center of this nexus.

When I encountered the Four Twenty Seven white paper on climate risk in equity markets, I was impressed by the level of thought-leadership embedded in the research, and by the high level of quantitative rigor applied to the development of its risk scores. The acceleration of climate’s influence on corporate performance are upon us, and investors are rapidly awakening to the risks that climate change brings to financial markets. Four Twenty Seven’s sophisticated climate data analytics are at the forefront of identifying the most exposed corporations and assets globally.

My career to date has been focused on the development of analytical solutions for institutional investors, ranging from multi-factor risk models at Barra (now MSCI) to the solutions we built in my previous company, Pluribus Labs, where we combined data science and natural language processing with quantitative modeling to distill a variety of unstructured data sources into investible signals.

In my subsequent conversations with Emilie and the Four Twenty Seven team, I quickly came to realize that Four Twenty Seven’s research methodology really resonated with me, and that the culture here is fabulous. It’s rare that you have an opportunity to do what you love and also provide solutions that impact the planet’s future — my role at Four Twenty Seven enables me to do just that!

How is technology spurring innovation in research around financial risk?

There are a number of drivers at play in this respect.  First and perhaps most obviously, the availability of computing power at our fingertips makes data analysis on large data sets more available and more affordable than ever before.  If you had told me when I started my career that I would be able to create an account on a cloud computing platform like Google’s GCP or Microsoft’s Azure and have massive amounts of compute power available within minutes, I wouldn’t have believed you!  Four Twenty Seven’s ability to distill terabytes of climate data from an ensemble of models into actionable insights at the asset level is a great way to leverage this computing power.

Relatedly, the ubiquity of meaningful data, both unstructured and structured, also provides a much broader set of lenses through which to view the world.  Financial research has always focused on the development of insights from any and all available data sources on companies, industries and economies.  Today, an ever-increasing volume of data sources are accessible for analysis.  For example, features extracted from satellite images of our planet can be used to arrive at estimates on a wide variety of metrics, ranging from crop yields to consumer brand sales changes.  Similarly, observations gleaned from the ‘Internet of Things’ (IoT) can provide us with insights into weather trends and CO2 emissions at the sub-city level.  Moving forward, opportunities afforded by organizations’ self-reporting of their climate risks and mitigation plans specifically related to climate change will provide additional data points for firms like ours to incorporate into our ground truth analysis of companies, industries and economies.

Couple these two trends with increasingly sophisticated machine learning and feature extraction techniques and you wind up with tremendous opportunities to develop insights into both the physical risks of climate change and the steps that companies are taking to mitigate these risks.

What are the priorities during your first year at Four Twenty Seven?

Emilie and the team have translated their broad and deep base of intellectual property into purpose-built solutions for a number of key market segments in the financial sector. These solutions enable asset owners and investors alike to understand their holdings’ exposure to the physical reality of climate change.

Our goals for this year are to continue tuning our existing offerings through engagement with our clients and to position the firm for its next phase of growth.  Thanks to entities like the Task Force on Climate-related Financial Disclosures (TCFD), market participants are increasingly aware of the need to incorporate climate risk analytics into their investment process, and we will continue to evangelize this message in our own interactions with the investment community.  We are currently in fundraising mode and will use proceeds from our capital raise to support plans to leverage our proprietary facility database to quantify the relationship between weather and company performance.  In addition, we intend to on-board additional data sources to inform our analytics and add desktop visualization tools to our client offerings. This promises to be a busy year!

Can Investors Anticipate the Impacts of Climate Change on Equities?

427 ANALYSIS – The physical impacts of climate change drive millions of dollars of losses for corporations every year, as experienced by Honda and Toyota during the 2011 floods in Thailand. Investors equipped with data on corporate production facilities and climate projections can manage their risk exposure more effectively and reduce downside risk.

Risk is one of the most widely understood and discussed components of the investment management process today. Informed tradeoffs of risk and return are fundamental to modern investment practices across asset classes and investment styles.  And yet, an important dimension of risk – physical risk from companies’ exposure to climate volatility – has yet to find its way into the mainstream investment process.

Monsoons Damage Automobile Manufacturers

Climate change’s influence on economies, sectors and companies is an increasingly important factor in identifying and balancing the tradeoffs between risk and return.  For example, the heavy monsoon season that led to severe flooding across Thailand in late June 2011 through December, inundated 30,000 square kilometersand caused widespread economic damage. Automobile manufacturers such as Toyota and Honda were particularly affected by suspended operations and supply chain disruptions, which led to reduced production internationally and affected global sales and profitability long after the rains stopped.

Figure 1. Honda and Toyota facilities’ exposure to extreme rainfall. Orange dots represent facilities with higher risk.

As shown in Figure 1, both companies possess a diversified set of production facilities in the area affected by the flooding, including stamping facilities and sub-component manufacturers, which do not only service downstream processes in Thailand but in other production centers as well. These same facilities all score high for extreme rainfall in our global corporate facility database, signaling high vulnerability to flood risk for Honda and Toyota – a risk that will only worsen in the future.

Figure 2. Japanese Automobile & Components Manufacturers’ exposure to sea level rise by facility. Red indicates high sea level risk, while green represents lower risk.

Sea Level Rise in Japan

Investors must also anticipate forward-looking risks – what will climate change bring, and which companies are most affected? Understanding and preparing for volatility in returns requires an in-depth awareness of a company’s facilities and the climate risks which those facilities face.  Given their global footprint, many businesses are exposed to diverse hazards such as extreme heat, water stress, cyclones and sea level rise, in addition to extreme precipitation. Thus, the factors we include to model a company’s physical risk to climate change include the sector characteristics, operational needs and the regional conditions where facilities are located. While flood damage and manufacturing delays in Thailand damaged Honda and Toyota, Figure 2. shows these companies are also exposed to sea level rise at hundreds of facilities in their home market of Japan.

Assessing Companies’ Exposure to Climate Risk

Our data interweaves climate analytics with financial markets data to provide a robust view of companies’ risks and identify those that are less likely to experience financial losses due to increasingly frequent extreme weather events. Facility-level assessment of these risks is an intensely data-driven exercise that requires the combination of terabytes of data from climate models with information on complex company structures. We translate this analysis into a clear result to inform financial strategy. Armed with this understanding, investors and corporations alike can achieve a new and more valuable balance of risk and return.

Figure 3. Global exposure to water stress of all facilities in Four Twenty Seven’s database.

————————

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.

 

  1. Emma L. Gale and Mark A. Saunders, “The 2011 Thailand Flood: Climate Causes and Return Periods,” Weather 68, no. 9 (2013): 233–37.

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.

Advancing TCFD Guidance on Physical Climate Risk & Opportunities: An EBRD & GCECA Initiative

The European Bank for Reconstruction and Development (EBRD) and the Global Centre of Excellence on Climate Adaptation (GCECA) have announced an initiative focused on building climate resilience in the financial sector. Throughout the project Four Twenty Seven and our partners, Acclimatise, are supporting the knowledge development on physical climate risk and resilience metrics for the financial sector. The project will culminate in an event in May in London: “Advancing TCFD guidance on physical climate risk & opportunities.”

————————————————

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 build on the recommendations of the Task Force on Climate-related Financial Disclosures (TCFD), which crystallised a growing concern of investors and business leaders over the physical impacts of climate change on the economy and financial markets.

The TCFD’s final recommendations, released for the G20 summit in June 2017, recommended the inclusion of metrics on physical climate risk and opportunities into financial disclosures and called for further research and concrete guidance over what the appropriate metrics should be. Corporations and financial institutions need to agree on common metrics to ensure transparency and data comparability. Since then, the recommendations of the European Union’s High Level Expert Group on sustainable finance, released in January 2018, have also highlighted the need for a common taxonomy on climate change adaptation and metrics for physical climate risk and opportunity disclosures.

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.

The conference is sponsored by the EBRD and GCECA, and 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, Acclimatise and 427 are providing the Secretariat function.

A detailed agenda will be circulated in due course. Please note that this is an invitation only event. Additional details are available on EBRD’s event page.

————————————————

Contact CEO Emilie Mazzacurati for more information and read about Four Twenty Seven’s solutions to help financial institutions, businesses and governments improve their climate resilience.

Newsletter: New Report on Climate Risk in Infrastructure Investments

 

 

Four Twenty Seven’s monthly newsletter highlights recent developments in climate adaptation and resilience. This month, don’t miss funding opportunities for local adaptation and a closer look at resilient infrastructure! 

In Focus: Infrastructure Resilience

Lenders’ Guide: Considering Climate Risk in Infrastructure Investments


Climate change poses multifaceted physical risks for infrastructure investors, including decreasing revenue due to operational capacity limits, increasing maintenance costs from physical damage, decreasing asset value, and increasing liability and debt. Four Twenty Seven, with our partners Acclimatise and Climate Finance Advisers, published today the Lenders’ Guide for Considering Climate Risk in Infrastructure Investments.” This new report provides banking institutions and infrastructure investors with a brief introduction to the ways that physical climate risks can affect infrastructure investment. The guide includes ten illustrative “snapshots” describing climate change considerations in example sub-industries such as commercial real estate, power plants, and hospitals.

Read Lender’s Guide

Built to Last

The Union of Concerned Scientists’ white paper, Built to Last: Challenges and Opportunities for Climate-Smart Infrastructure in California, responds to Executive Order B-30-15, which mandates that state agencies plan for climate change. The paper makes suggestions for policies that support resilient infrastructure with co-benefits for human and ecosystem health and mitigation. Recommendations cover tools and standards, financial assessments and institutional capacity building.

Read the White Paper

How to Incorporate Climate in Local Planning

Local Adaptation Planning: Four Twenty Seven’s Process Guide

United States cities face increasing challenges from climate change impacts and increasing legislation requiring that they prepare for these impacts. Through our work assisting eight cities in Alameda County in responding to California’s Senate Bill No. 379 Land Use: General Plan: Safety Element (Jackson) (SB 379), Four Twenty Seven developed a streamlined process to support local governments’ efforts to integrate climate risks into key planning efforts, such as local hazard mitigation plans, general plans and climate action plans. SB 379 requires cities and counties in California to incorporate adaptation and resilience strategies into General Plan Safety Elements and Local Hazard Mitigation Plans starting in 2017.

Four Twenty Seven’s Process Guide for Local Adaptation Planning outlines two steps for effective climate adaptation planning: 1) a hazard assessment to determine vulnerability and 2) identification of appropriate adaptation options.

Read the Process Guide

“Planning and Investing for a Resilient California” – Guidance Document

As fires and floods rage up and down the coast and lives and livelihoods are lost and damaged, the call for resilience feels increasingly urgent each day. A resilient California is a state with strong infrastructure, communities and natural systems that can withstand increasingly volatile conditions.
To support the implementation of  Executive Order B-30-15, mandating that state agencies plan for climate change, the California Governor’s Office of Planning and Research released “Planning and Investing for a Resilient California,” a guidance document outlining strategies to include climate adaptation in decision-making. Four Twenty Seven CEO Emilie Mazzacurati served on the Technical Advisory Group that wrote the report.

The guide outlines four steps for integrating climate into decisions: characterizing climate risk, analyzing climate risk, making climate-informed decisions and monitoring progress. Ending with a closer look at investing in resilient infrastructure, the document provides actionable guidelines for building a resilient California.

Read the Guidance Document

Climate Change Threatens City Credit Ratings

“What we want people to realize is: If you’re exposed, we know that. We’re going to ask questions about what you’re doing to mitigate that exposure,” Lenny Jones, a managing director at Moody’s was quoted by Bloomberg. “That’s taken into your credit ratings.” Jones is explaining the thinking behind a recent Moody’s report that urged cities and states to act upon their climate risk or face potential credit downgrades. Moody’s is not the only credit agency in this conversation, as others including Standard & Poor’s are increasingly publicizing their inclusion of climate risk in credit ratings.These steps by rating agencies may provide the extra impetus that municipalities need to examine their climate risks and take action.

Four Twenty Seven conducts research on urban resilience to climate risks and offers real asset screening and portfolio analytics to help investors identify and respond to risks in their portfolios.

Funding Opportunities and Finance Guide

Resilient by Design Finance Guide

The recently published Finance Guide for Resilient by Design Bay Area Challenge Design Teams, for challenge participants, outlines traditional funding resources for infrastructure in California and describes other potential funding opportunities that have not traditionally been used for this purpose. It also highlights requirements particular to this state.

Funding Opportunities

The California Ocean Protection Council (OPC) is accepting grant proposals for funding from Proposition 1. Priorities for this funding include projects that address sea level rise, benefit marine managed areas, support fishery infrastructure that protects ecosystems, and reduce the risk of communities to hazardous sites threatened by flooding. Find all relevant information on OPC’s Prop 1 website.

The Governor’s Office of Emergency Services (Cal OES) has initiated a Hazard Mitigation Grant Program for federally recognized tribes, local governments, nonprofits and state agencies to implement FEMA approved Local Hazard Mitigation Plans.Deadline: January 30, 2018.

Inside the Office at Four Twenty Seven

Meet Andrew Tom, Business Data Analyst

Four Twenty Seven is proud to announce the addition of Andrew Tom to our team. Andrew supports the business data extraction process used in analyzing climate risk for companies and financial markets.

Previously, Andrew led development of various data science projects and prototypes involving machine learning techniques, natural language processing and graph networks. He has also worked in the California State Legislature and in nonprofit leadership capacities.

Upcoming Events

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

Twitter
Twitter

LinkedIn
LinkedIn

YouTube
YouTube

Facebook
Facebook

Website
Website

Email
Email

Copyright © 2017 Four Twenty Seven, All rights reserved.
Four Twenty Seven sends a newsletter focused on bringing climate intelligence into economic and financial decision-making for Fortune 500 companies, investors, and government institutions.Our mailing address is:
Four Twenty Seven
2000 Hearst Ave
Ste 304
Berkeley, CA 94709Add us to your address bookWant to change how you receive these emails?
You can update your preferences or unsubscribe from this list

 

 

 

This email was sent to

 

 

Newsletter: Commitments.

 

 

Four Twenty Seven’s monthly newsletter highlights recent developments in climate adaptation and resilience. This month don’t miss a recap on critical developments from events on climate finance in France and the climate risk report by French pension fund FRR!

From the desk of Emilie

The One Planet Summit organized by President Macron on December 12 to mark the second anniversary of the Paris Agreement offered a stark reminder of how little progress has been made towards altering the course of runaway emissions globally. In Macron’s words: we’re losing the battle. Every day, new scientific research demonstrates that sea level rise and ice melt will reshape the planet in ways humans have never experienced before. Every day, news breaks of storms, floods, or wildfires that break historical records and devastate lives and livelihoods globally. And global emissions are on the rise again.

Yet the One Planet Summit, and the preceding Climate Finance Day, was also an inspiring display of commitments and signaled a shift in how global financial institutions apprehend climate change. Over the course of the past few years, climate change has gone from a marginal topic to a boardroom concern. The reality is just starting to settle in that a 2-degree world will bring massive disruption to the earth’s meteorological system, and that economic actors need to understand the implications of these massive changes on the global economy, on assets and corporate value chains, and on financial markets.Some of the most striking commitments announced on December 12 include:

  1. Funding for climate adaptation: $3 billion of public-private partnership money to rebuild the Carribean, $650 million from the Gates foundation and other philanthropic institutions to support small-holder farmer adaptation, $300 million into the Land Degradation Neutrality Fund to restore deserted land, and more. While these amounts fall well short of the hundreds of billions of dollars needed for adaptation, they send a signal that adaptation is starting to rise on the agenda.
  2. Integration of climate change into business and financial decisions: Over two hundred companies publicly announced their support for the TCFD recommendations. France and Sweden committed to implementing regulation to support TCFD reporting. The TCFD also announced a Knowledge Hub, hosted by the Climate Disclosure Standard Board (CDSB) in London, to help disseminate best practices and guidance on climate risk disclosures. Last but not least, eight of the largest sovereign wealth funds in the world, worth $15 trillions in assets, committed to working together to integrate climate considerations into investment decisions.
  3. Taking the full measure of risk: French Central Bank Governor François Villeroy de Galhau announced a new network of eight central banks committed to reinforcing green finance and understanding the risk from climate change on the financial system, emphasizing that “climate stability is, in the long run, part of the determinants of financial stability.”

These commitments, and the more quiet effort of many companies and investors to start mapping risk in their portfolio, point to a larger change in how the market views climate change risk, and signals that adaptation and resilience are going to rise on the agenda for both the public and private sector over the coming years. In this context, Four Twenty Seven’s mission becomes even more critical. Our work enables investors and corporations to integrate climate analytics into business and policy decisions – a critical step to catalyze climate adaptation and resilience investments.

Our commitment for 2018 is to work tirelessly to improve the transparency and quantification of climate risk in financial markets, and to support responsible corporate adaptation and opportunities for public and private institutions to work together to build resilience in the global economy and for the most vulnerable communities.

Wishing you a very happy holiday season,

Emilie and the Four Twenty Seven team

In Focus: French pension fund FRR’s climate risk disclosures under Art. 173

France has been heralded as a global leader on climate risk disclosure with the passage of the Energy Transition Law, in which Article 173 mandates financial institutions to disclose their exposure to both transition and physical climate risk. Pension fund Fonds de Réserve pour les Retraites (FRR) responded to this legislation with an extensive report on the risks that climate change poses for its portfolios. Four Twenty Seven contributed the analysis of physical risk, conducting a sector analysis of FRR’s portfolios to identify exposure to physical climate risk by sector.

Four Twenty Seven opens Paris office, joins flagship initiative Finance for Tomorrow

Four Twenty Seven is proud to announce its new office in Paris and to join  Finance for Tomorrow, the flagship initiative from Paris Europlace to promote France as a world leader in green finance. Four Twenty Seven is one of the first 50 members of this new French initiative, which promoted 50 ClimActs from its members during Climate Finance Day. Finance for Tomorrow’s scope of work includes promoting financial risk disclosures, continuing France’s momentum on climate risk reporting.

Our European office is now opened in Paris, France:

427 France SAS
2, rue du Helder
75009 Paris, France
Tel: (+33).09.75.18.97.12

GARI releases Investor Guide

The Global Adaptation & Resilience Investment Working Group (GARI) released its Investor Guide to Physical Climate Risk and Resilience yesterday. Serving as a simple introduction to physical climate risk, the guide emphasizes ways that investors can face risks and seize opportunities posed by climate change. It highlights three ways to do so: investigate the physical impacts of climate change on asset values, require asset managers and advisors to consider climate risk and allocate capital to climate-resilient investment. Four Twenty Seven CEO, Emilie Mazzacurati was a lead author on the Investor Guide.

Upcoming Events

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

  • January 7-11: AMS Annual Meeting, Austin, TX: Climate Data Analyst Josh Turner will attend this yearly meeting of the weather, water and climate community.
  • January 23-25: NCSE 18th National Conference and Global Forum on Science, Policy and the Environment, Washington, DC: Director of Advisory Services, Yoon Kim, will attend this conference on The Science, Business, and Education of Sustainable Infrastructure, to facilitate a session exploring how infrastructure banks and other investors can integrate climate risks in investment decision-making.
  • February 28-March 2: 2018 Climate Leadership Conference, Denver, CO: Meet with Senior Analyst Kendall Starkman at this annual milestone on climate leadership for U.S. corporations and cities.

Twitter
Twitter

LinkedIn
LinkedIn

YouTube
YouTube

Facebook
Facebook

Website
Website

Email
Email

Copyright © 2017 Four Twenty Seven, All rights reserved.
Four Twenty Seven sends a newsletter focused on bringing climate intelligence into economic and financial decision-making for Fortune 500 companies, investors, and government institutions.Our mailing address is:
Four Twenty Seven
2000 Hearst Ave
Ste 304
Berkeley, CA 94709Add us to your address bookWant to change how you receive these emails?
You can update your preferences or unsubscribe from this list

 

 

 

This email was sent to

 

 

GARI Investor Guide to Physical Climate Risk and Resilience

The impacts of climate change remain a new topic for many investors. How to think about the many implications of droughts, floods, storms and sea level rise on complex financial portfolio and assets?

The Investor Guide to Physical Climate Risk and Resilience, published by the Global Adaptation and Resilience Investor (GARI) working group, provides a  “plain language” introduction for investors to physical climate risk and resilience. It describes physical climate risk and resilience, explains why it matters to investors, and suggests practical actions investors can take.

Specifically, the guide suggests investors can manage the physical effects of climate change on investments, and seize climate-resilience investment opportunities in three ways: investigating the physical impacts of climate change on asset values, requiring asset managers and advisors to consider climate risk, and allocating capital to climate-resilient investment.

As evidence of climate change’s impact on all asset classes mounts, investors should consider starting to understand, assess, and mitigate their climate risk exposure. The time has come to address climate risk.

Download the GARI 2017 Investor Guide

Read the press release:

‘TIME HAS COME’ TO ADDRESS CLIMATE RISK, SAY GLOBAL INVESTORS AT PARIS SUMMIT

PRACTICAL INVESTOR GUIDE TO PHYSICAL CLIMATE RISK AND RESILIENCE PUBLISHED BY GLOBAL ADAPTATION & RESILIENCE INVESTMENT WORKING GROUP AT ONE PLANET SUMMIT IN PARIS

Paris, France – December 12, 2017: The “time has come” for investors to address climate risk, concludes the Investor Guide to Physical Climate Risk and Resilience released today by the Global Adaptation & Resilience Investment Working Group (GARI) at the One Planet Summit in Paris, France, where nations of the world are meeting to advance the aims and ambitions of the Paris Agreement. The summit is being hosted by the President of the French Republic, Emmanuel Macron, the President of the World Bank Group, Jim Yong Kim, and the Secretary-General of the United Nations, António Guterres.

The GARI Investor Guide provides a “plain language” introduction for investors to physical climate risk and resilience. It describes physical climate risk and resilience, explains why it matters to investors, and suggests practical actions investors can take.  Specifically, it suggests investors can manage the physical effects of climate change on investments, and seize climate-resilience investment opportunities in three ways: investigating the physical impacts of climate change on asset values, requiring asset managers and advisors to consider climate risk, and allocating capital to climate-resilient investment.

“We believe the time is now for investors to consider both physical climate risk as well as the opportunity to invest in climate resilience,” said Jay Koh, Managing Director of The Lightsmith Group, Chair of GARI, and a lead author of the GARI Investor Guide. “The investment risks and opportunities created by climate change are immediate and increasing.”

“Leading investors have started using practical tools today to screen and assess their equity, credit, and real asset portfolios for physical climate risk,” stated Emilie Mazzacurati, CEO of Four Twenty Seven and another lead author of the GARI Investor Guide. “There’s no need to wait to understand the impacts of climate change on financial markets.”

“Understanding physical climate risk can guide investors’ decisions today, both to reduce exposure to risk and seize climate resilience investment opportunities,” concluded Chiara Trabacchi, Climate Finance Specialist at IDB Invest, and the third lead author of the GARI Investor Guide. “The Investor Guide is a tool for investors that want to anticipate the risk – rather than experience it – and to deliver long-term value.”

============

ABOUT THE GLOBAL ADAPTATION & RESILIENCE INVESTMENT WORKING GROUP (GARI)

The Global Adaptation & Resilience Investment Working Group (GARI) is a private investor-led initiative announced at COP21, the global climate summit in Paris in 2015. GARI is a partner of the UN Secretary General’s A2R Climate Resilience Initiative. GARI has brought together over 150 private and public investors, bankers, leaders and other stakeholders to discuss critical issues at the intersection of climate adaptation and resilience and investment with the objective of helping to assess, mobilize and catalyze action and investment. It released a first discussion paper, “Bridging the Adaptation Gap,” at the COP22 Marrakesh global climate summit in 2016. For more information on GARI, please see: www.garigroup.com.

GARI Releases Draft Investor Guide

The Global Adaptation & Resilience Investment Working Group (GARI), of which Four Twenty Seven is a founding member, developed an Investor Guide to Physical Climate Risk and Resilience and a discussion paper highlighting innovations in adaptation, investment and climate resilience. Four Twenty Seven CEO Emilie Mazzacurati is a  lead author on the draft investor guide, which was released this week at COP23. The final 2017 Investor Guide will be released in Paris this December.

This paper is  an introduction to physical climate risk and how it applies to investors. Serving as a concise conversation starter, the five-page paper outlines three steps for investors to begin addressing physical climate risk: know what physical climate risk is, know why physical climate risk and resilience matter to investors and begin to assess, disclose and act. The report emphasizes how important it is for investors to get started and take the first steps to understand and manage risk.

GARI was launched at COP21 in conjunction with the UN Secretary General’s A2R Climate Resilience Initiative, with the goal of bringing together private investors, climate experts and other stakeholders around the challenges and opportunities that climate change presents to investors. In 2016 the group’s discussions culminated in a paper, “Bridging the Adaptation Gap,” describing measurement of physical climate risk and highlighting examples of  current investments in climate adaptation.

Download the draft Investor Guide.

GARI welcomes feedback on this public draft. Please contact Emilie Mazzacurati with comments or for more information.

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.

Twitter
Twitter

LinkedIn
LinkedIn

YouTube
YouTube

Facebook
Facebook

Website
Website

Email
Email

Copyright © , All rights reserved.

Our mailing address is:

Want to change how you receive these emails?
You can