Newsletter: Black Lives Matter

Four Twenty Seven's monthly newsletter highlights recent developments in climate risk and resilience. This month we emphasize the need for racial justice, share new resources on climate risk for investors and regulators and highlight recent calls for climate risk disclosure.

Black Lives Matter

We at Four Twenty Seven are saddened and angered by the recent killings

of Rayshard Brooks, George Floyd, Breonna Taylor, Ahmaud Arbery along with so many others, and by the systemic injustice and continued brutality Black individuals experience every day. We stand in solidarity with the Black community against all forms of racial injustice and we state unequivocally that Black Lives Matter.

During this time of national reckoning, we are reflecting on our responsibility to use our platform to speak out against injustice and elevate the voices of Black people, other People of Color, and those who have dedicated themselves to racial justice.

While the issues we are facing today are not new, they have reached a boiling point, due to centuries of injustice, mistreatment and violence against Black individuals. This is a systemic problem, deeply rooted in our society, that calls for systemic change. We are committed to being a part of the change.

Together with Moody’s, our parent company, we believe “we all have a responsibility to do better and to build a more just society that serves everyone equally.”

As a company whose mission is to catalyze climate adaptation and resilience, we are committed to supporting equity and racial justice in our daily work. Black communities and communities of color are disproportionately affected by climate change and environmental degradation. They are on the frontlines of the impacts of pollution, extreme heat, storms, and disease. They have less means to mitigate detrimental climate and environmental effects, and often lack insurance and other means to recover when disaster strikes. Any investment in systemic resilience must be an investment in equitable adaptation.

As part of our commitment to change and owing to our expertise on environmental and climate-related issues, we commit to taking the following steps:

  • Use Four Twenty Seven’s platform to educate about environmental justice, equitable adaptation, and the interplay of race and climate change through webinars, publications and research;
  • Incorporate into our analytics a lens on equity and racial justice wherever possible; and
  • Connect students from underserved communities with education around opportunities in climate science through mentorship and internship opportunities.

As an organization and an employer, we also commit to fostering dialogue on racial justice among our team members and will strive to enhance the diversity of our team.

James Baldwin’s words ring true today more than ever: “Not everything that is faced can be changed, but nothing can be changed until it is faced.” We stand in solidarity with the Black community and are committed to doing our part to change the system and fight racism and injustice in our country.

Forthcoming Publications & Webinar on Racial Justice & Climate Action

As part of our commitment to using our platform to educate on these topics, we have planned the following pieces:
  • A blog outlining the issues of environmental justice in the U.S. and the disproportionate exposure and vulnerability of Black communities and other People of Color to the impacts of climate change.
  • A blog explaining the need for racial equity in climate adaptation and sharing approaches for integrating equity into adaptation planning and implementation.
  • A webinar on racial equity and climate action, scheduled for July 8th at 5pm CET / 11am EST / 8am PST.
Guidance for Addressing Climate Risk

Network for Greening the Financial System Guide for Supervisors

The NGFS Guide for Supervisors: Integrating climate-related and environmental risks into prudential supervision, outlines five recommendations for supervisors to address climate risks: determine how climate risks affect economies, develop a strategy, identify risk exposure in supervised firms, set transparent supervisory expectations and engage with financial institutions around effective risk management. The report highlights ways in which supervisors around the world are taking steps to address these risks, citing data from Four Twenty Seven.

The Institutional Investors Group on Climate Change Guidance for Asset Owners and Asset Managers

The new report, Understanding physical climate risks and opportunities, and its brief companion report, Addressing physical climate risks: key steps for asset owners and asset managers, provide an overview on the latest climate science, its implications for financial institutions and a process for addressing climate risks. It outlines five key steps, providing examples of how firms can understand physical climate risks, assess risks at the asset or fund level, review portfolio-level effects, identify risk management options, and monitor and report on these actions.
Continued Calls for Climate Risk Disclosure

The International Monetary Fund on Physical Risk and Equity Prices

The International Monetary Fund (IMF) dedicated a chapter of its Global Financial Stability Report to exploring the affects of physical climate risks on financial stability and found that equity investors may not be pricing these risks sufficiently. The IMF encourages mandating global physical climate risk disclosure and emphasizes the need for granular climate risk exposure data.

Ceres on Why U.S. Regulators Need to Address Climate Risk

Ceres' recent report, "Addressing Climate as a Systemic Risk: A call to action for U.S. financial regulators," encourages US. regulators to address climate risk as a systemic risk. Its recommendations include integrating climate change into prudential supervision, exploring how to address climate risks through monetary policy, considering climate risk in community reinvestment programs and joining the NGFS. 
Meanwhile, the Commodities Futures Trading Commission is preparing to release a report on addressing climate risks next month.
Rising Temperatures and Climate Science
The past seven Mays have been the seven hottest Mays on record, with this past spring being the second hottest on record. As the climate continues to change, we have record high temperatures more often, and parts of Africa, Asia, western European, South and Central America all experienced record warmth this spring. Meanwhile, new research suggests that the climate may be more sensitive to carbon emissions than previously expected, due to increased understanding of cloud microphysics. 
Four Twenty Seven Partners with Measurabl

Access Four Twenty Seven's Physical Climate Risk Data on Measurabl's ESG software for Commercial Real Estate

Twenty Seven’s physical risk data is now available in a new Physical Climate Risk Exposure tool on Measurabl’s investment grade ESG (environmental, social, governance) data hub. Through this integration Measurabl customers can now identify their physical climate risks to inform opportunities to build resilience across their real estate portfolios. “We’re thrilled to partner with the leading ESG data management platform to provide unprecedented levels of transparency to real estate owners and managers worldwide,” said Emilie Mazzacurati, Four Twenty Seven's Founder and CEO. “As climate change increasingly causes financial damage to real assets, this partnership helps fill the urgent demand for data to help the real estate industry prepare for the impacts of climate change.”

“The evolution of Measurabl’s software to include climate risk data was a natural development as we continue to build the best-in-class ESG –and now “R” – platform for commercial real estate,” said Matt Ellis, Measurabl's Founder and CEO. “The union of physical climate risks with ESG creates unparalleled transparency for climate-related financial decisions and disclosures.”
 

Webinar on Physical Climate Risk: Identifying Your Exposure with Measurabl

How does physical climate risk manifest for real estate assets and how can investors identify and manage their risk exposure? Josh Turner, Director, Research, at Four Twenty Seven, joined Measurabl's Noelle Bohlen and Cameron Ravanbach to discuss the climate data driving Four Twenty Seven's analysis and share insights on how real estate investors can leverage this information. Watch the recording.
Public Consultations on Climate Risk

European Commission Consultation on Climate Adaptation

As part of its Green Deal the European Commission has launched a climate adaptation strategy to encourage eco-friendly investments and build resilience. It is refining the initiative and soliciting feedback through a public consultation. Respond by June 30.

European Central Bank Consultation on Climate Risk Disclosure Guidance

Last month the European Central Bank (ECB) published guidance asking banks to disclose their climate-related risks and integrate these risks into their risk management processes. Compliance will be expected when the guidelines are finalized at the end of the year. The ECB has solicited feedback through a public consultation open until September 25.
Inside the Office at Four Twenty Seven

Derani Brewis - Australia & New Zealand

Four Twenty Seven is delighted to partner with Derani Brewis, of DB Funds Advisory, who will lead Four Twenty Seven's business development and growth strategy in Australia and New Zealand.

Derani brings over 25 years of experience in the Australian asset management industry, with relationships across the Australian superannuation and investment management community.

Most recently, Derani was Head of Business Development and Asset Consultants at GMO Australia. Derani has also held senior roles with BT Financial Group, Rothschild Asset Management and Prudential Fund Managers. 

Join the team! Four Twenty Seven is Hiring

There are several opportunities to join Four Twenty Seven's dynamic team. See the open positions below and visit our Careers page for more information.
  • Project Manager with excellent leadership skills and proven experience coordinating activities across teams of different disciplines within research, content and technology
  • Regional Sales Director (North America) with extensive experience selling and supporting data products and services for large commercial, financial and government institutions
  • Climate Data Analyst with expertise translating applied climate science for a wide range of stakeholders.
Upcoming Events

Join the team online at these upcoming events and check our Events page for updates, including registration links to webinars not yet available:

  • Jun. 15 - 19 - Responsible Investor Digital Festival, Virtual: Four Twenty Seven joins Moody's and Vigeo Eiris at a virtual exhibit and Emilie Mazzacurati, Founder & CEO, will presented on climate scenario analysis today.
  • Jun. 30 Urban Land Institute Webinar, Living on the Edge: Sea Level Rise, 9:30am EST / 6:30am PST: Emilie Mazzacurati will present on climate risk for real estate.
  • Jul. 2 – Finance for Adaptation Solutions & Technologies Roundtable, 4pm BST/ 8am PST: Emilie Mazzacurati will speak.
  • Jul. 8 – Moody's Sustainable Finance Webinar on Racial Justice and Climate Change, 5pm CET / 11am EST / 8am PST: Members of the Four Twenty Seven team will speak.
  • Sept. 2-3 – Risk Americas Convention, New York, NY: Members of the Four Twenty Seven team will host a booth and present on climate risk.
  • Sept. 9 Environmental Finance - The Future of ESG Data 2020, Virtual: Léonie Chatain will speak.
  • Sept. 15 - 16 – Responsible Investor Tokyo 2020, Tokyo, Japan: Members of the Four Twenty Seven team will present on risk disclosure and host a booth. 
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Copyright © 2020 Four Twenty Seven, All rights reserved.
Four Twenty Seven sends a newsletter focused on bringing climate intelligence into economic and financial decision-making for investors, corporations and governments. Fill in the form below to join our mailing list. As data controller, we collect your email address with your consent in order to send you our newsletter. Four Twenty Seven will never share your mailing information with anyone and you may unsubscribe at any moment. Please read our Terms and Conditions.
 

Our mailing address is:
Four Twenty Seven
2000 Hearst Ave
Ste 304
Berkeley, CA 94709









Newsletter: Will There be a Green Recovery?

Four Twenty Seven's monthly newsletter highlights recent developments in climate risk and resilience. This month we discuss the potential for a green recovery, highlight ways in which asset owners can leverage Four Twenty Seven's Physical Climate Risk Application and share recent and upcoming webinars.

In Focus: Will There be a Green Recovery?

Governments Include Climate Measures in Recovery Efforts

As many EU leaders commit to pursuing Europe's Green deal alongside recovery efforts, already approved measures in European countries also mandate that corporations consider climate goals during their use of relief funds. As part of its green recovery programs Germany invited over 400 listed companies to participate in a research project on how these firms are aligned with the EU Taxonomy, currently focused on climate mitigation and adaptation activities.

Meanwhile, Canada requires that large corporations commit to filing TCFD-aligned climate risk disclosures to receive specific bailouts. China's Politburo Standing Committee has endorsed new infrastructure spending of $1.4 trillion over five years for several low-carbon technologies such as electric vehicle charging, high-speed rail and others. However, the details and implementation are still unclear, with provincial governments having significant control, and many still in favor of traditional energy.

Low interest rates do make this a particularly good time for governments to invest in resilience and green infrastructure, with substantial return on investment over time. Though in the U.S. there is less indication that stimulus efforts will include significant measures to support a green recovery, with any current action coming scattered from some states. However, if Biden is elected in November the situation may change in the U.S. Biden's appointment of Alexandria Ocasio-Cortez as co-chair of his climate task force could signal an intent to favor green jobs to help the economy recover.

Moody's Webinar: COVID-19 and Climate Change

During last week's webinar Founder & CEO, Emilie Mazzacurati, joined Rahul Gosh, SVP, Credit Research & Strategy at Moody's, to discuss what organizations can learn from the pandemic to help prevent and prepare for climate change. Emilie discussed the impact on emissions, government responses and how these events can help companies understand the implications of carbon transition risk. Register for the webinar to watch the replay.
How Can Asset Owners Manage
Climate Risk?

Use Case - Climate Data for Risk Management in Real Asset Portfolios

As regulatory pressure to assess and report climate risks picks up, and physical climate hazards increasingly result in financial damage, asset owners face the daunting challenge of leveraging climate data for financial decision-making. Real estate, infrastructure, agriculture, timber and other real assets have long been an integral component of an asset owner’s portfolio due to their returns and the diversification they offer to the overall fund. However, many real assets are highly vulnerable to physical climate risks. These risks manifest in direct and indirect ways, including increased costs, reduced revenues and decreased asset value.

Evaluating an asset’s exposure to physical climate hazards is challenging, yet also an essential first step in managing climate risks. Four Twenty Seven’s Physical Climate Risk Application allows investors to assess exposure to floods, sea level rise, hurricanes & typhoons, heat stress and water stress at the asset and portfolio levels. Asset owners leverage hazard exposure scores to identify regional and sectoral trends as well as specific hotspots. Flexible viewing options and digestible data provide insight for portfolio risk assessments and due diligence processes. This new case study explores how, armed with climate risk data at decision-relevant scales, asset owners can begin to manage their risk. 
 
Read the Case Study
Regulatory Updates

Bank of England Postpones Climate Stress Tests

Earlier this month the Bank of England and the Prudential Regulatory Authority postponed its climate-related stress tests until at least mid-2021 to allow banks and insurers to focus on COVID-19 recovery efforts. The announcement emphasized the ambitious scope of the stress tests and the hope that the delay will allow firms to invest sufficient resources in the exercise when the time comes.

European Central Bank Publishes Guidance on Climate Risk Disclosure

Yesterday, the European Central Bank (ECB) published guidance asking banks to disclose their climate-related risks and integrate these risks into their risk management processes. Compliance will be expected when the guidelines are finalized at the end of the year. The ECB has solicited feedback through a public consultation open until September 25.

Update to the EU Non-financial Reporting Directive

The European Commission is soliciting feedback on its non-financial reporting directive as part of its efforts to improve oversight of non-financial reporting in alignment with its Green Deal and a global call for a new approach to regulating non-financial disclosure. Provide feedback by June 11.

European Commission Consultation on Climate Adaptation

As part of its Green Deal the European Commission has launched a climate adaptation strategy to encourage eco-friendly investments and build resilience. It is refining the initiative and soliciting feedback through a public consultation. Respond by June 30.
Four Twenty Seven Shortlisted in Waters Ranking 2020

Vote for Four Twenty Seven as Best Alternative Data Provider

Four Twenty Seven is honored to be short-listed in the Best Alternative Data Provider category in the 2020 Waters Rankings.
This readers' choice award recognizes the capital markets' leading technologies and providers. We'd be grateful for your vote! You can vote here before May 29. 
Webinars on Integrating Climate Risk into Financial Decision Making

IIF Webinar Recording: Quantifying the Impacts of Climate Change

This Institute of International Finance webinar (IIF) features Emilie Mazzacurati, Founder & CEO of Four Twenty Seven, and Jing Zhang, Managing Director, Global Head of Quantitative Research at Moody’s, as they provide an overview of Moody’s climate risk solutions on the financial impacts of climate change. Watch now.

AllianceBernstein Webinar: Incorporating Climate Change into Investment Research

Please join us for a discussion about how the investment value chain is incorporating climate change into decision-making. Sara Rosner and David Wheeler, of AllianceBernstein, will discuss their collaboration with Columbia University on climate change and highlight the climate theme in their sustainable portfolios. Martina Macpherson, of Moody’s, will provide an overview of the current market environment and Moody's ESG and climate efforts, and Emilie Mazzacurati will present a deep dive into climate risk analytics. This webinar is next Wednesday, May 27 at 2pm BST / 9am EST / 6am PST. Register here.
Inside the Office at Four Twenty Seven

UK Sales Director - Ben Boukhobza

Four Twenty Seven welcomes Ben as UK Sales Director. Ben leads Four Twenty Seven’s business development and growth strategy in the United Kingdom and Ireland.

Ben leverages ten years of experience across various roles within the Commercial Group at Moody’s Investors Service (MIS). Most recently Ben led the EMEA Sales Support team, having previously held roles ranging from sales and account management to operations and technology.

Join the team! Four Twenty Seven is Hiring

There are several opportunities to join Four Twenty Seven's dynamic team. See the open positions below and visit our Careers page for more information.
  • Project Manager with excellent leadership skills and proven experience coordinating activities across teams of different disciplines within research, content and technology
  • Regional Sales Director (North America) with extensive experience selling and supporting data products and services for large commercial, financial and government institutions
Upcoming Events

Join the team online at these upcoming events and check our Events page for updates, including registration links to webinars not yet available:

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Copyright © 2020 Four Twenty Seven, All rights reserved.
Four Twenty Seven sends a newsletter focused on bringing climate intelligence into economic and financial decision-making for investors, corporations and governments. Fill in the form below to join our mailing list. As data controller, we collect your email address with your consent in order to send you our newsletter. Four Twenty Seven will never share your mailing information with anyone and you may unsubscribe at any moment. Please read our Terms and Conditions.
 

Our mailing address is:
Four Twenty Seven
2000 Hearst Ave
Ste 304
Berkeley, CA 94709









How Can Asset Owners Manage Climate Risk?

Introduction: Why Climate Risk Matters for Asset Owners

In the world where quarterly corporate reporting makes it feel like financial markets are ruled by short-termism, asset owners stand out in contrast, managing their portfolios with horizons in the decades and even longer. With trillions in assets under management and the long-term well-being of their beneficiaries and other stakeholders as their goal, asset owners’ risk management practices must be robust.  This includes the consideration of factors beyond traditional financial metrics. While their long horizon allows asset owners to withstand short-term volatility, their portfolios may be exposed to higher levels of other risks, including those posed by a changing climate, which is not necessarily accounted for in asset prices.

Additionally, regulatory actions like the EU Action Plan on Sustainable Finance, growing global support of the Task Force on Climate-related Financial Disclosures (TCFD), and groups like the Network for Greening the Financial System, whose members include 42 central banks and supervisors, are pushing investors of all stripes to take physical climate risks into account, warning of dire systemic consequences if climate risks continue to go unpriced.

With climate risk moving from the fringes of finance to center stage, the challenge is to translate climate models and climate data into actionable intelligence for financial decision-making. Climate models are complex, incorporating information from many disciplines of earth science, and their outputs are unwieldy. However, when transformed into indicators at appropriate scales and timeframes, climate data provides essential forward-looking information for financial decision-makers.

Assessing Exposure to Inform Risk Management

Evaluating an asset’s exposure to physical climate hazards is challenging, yet also an essential first step in managing climate risks. Four Twenty Seven’s Physical Climate Risk Application (Application) allows investors to assess exposure to floods, sea level rise, hurricanes & typhoons, heat stress and water stress at the asset and portfolio levels. Asset owners leverage hazard exposure scores to identify regional and sectoral trends as well as specific hotspots. Flexible viewing options and digestible data provide insight for portfolio risk assessments and due diligence processes. Armed with climate risk data at decision-relevant scales, asset owners can begin to manage their risk.

Climate Data for Portfolio Management

Real estate, infrastructure, agriculture, timber and other real assets have long been an integral component of an asset owner’s portfolio due to their returns and the diversification they offer to the overall fund. However, many real assets are highly vulnerable to physical climate risks. These risks manifest in direct and indirect ways, including increased costs, reduced revenues, and decreased asset value.

Asset owners use Four Twenty Seven’s Application to evaluate forward-looking physical climate risk exposure. For example, the portfolio-specific summary table in Figure 1 provides a snapshot of exposure and serves as the starting point for the analysis of physical climate risks.  In this portfolio, hurricanes & typhoons, earthquakes, heat stress and water stress are the most prevalent hazards.

While asset owners frequently emphasize the hazards they view as most financially material—for instance floods, hurricanes, and sea level rise—heat stress and water stress can also have material financial impacts. For instance, a major heat wave across Europe in the summer of 2019 demonstrated how increasing temperatures can cause business disruptions and raise operating costs. Absent retrofits to address climate risks in European real estate, the total increase in energy bills for commercial buildings could potentially cost $300 billion (£457 billion) by 2050. Water stress, another potentially overlooked risk, can threaten the long-term operations of assets like thermal power plants that rely on large amounts of water for cooling. For example, Moody’s found that 11 major U.S. utilities representing over $31 billion in rate base have extreme risk to water stress, which has already caused some power utilities to retire capital-intensive generation facilities early.

In addition to providing an entry point for further analysis, metrics in the summary table are useful for risk reporting. As reporting requirements develop, outputs from the Physical Climate Risk Application will empower asset owners to effectively describe asset exposure, communicate how risks are being managed, and characterize their portfolios’ overall climate risk and resilience strategies.

Asset owners can also identify exposure hotspots, explore sectoral trends, and dive deeper into the exposure of individual assets. Figure 2 shows the same portfolio ranked by highest flood risk score. Floods can raise costs, cause business disruption, and decrease asset values.

Using the data in Figure 2, asset owners can consider shortening their holding periods for assets with the highest levels of exposure, ensure that they have appropriate insurance coverage, and evaluate if coverage or premium prices may rise in the future. As the climate changes, insurers’ risk tolerances may also reach their limits and they may seek to exit markets. It is thus essential for asset owners to monitor the evolving landscape. Beyond evaluating potential changes to insurance, asset owners can also use this data as an entry point for engagement with a building manager, to better understand the site’s flood history and investigate if the asset has flood defenses.

Institutional investors understand that, over the typical commercial real estate hold period of seven to ten years, the next buyer of their building is likely to be concerned by climate risk as well. The Application equips asset owners with the exposure data they need to make sure their portfolios are resilient to climate risks and continue to provide the returns they need and expect from the asset class.

Climate Data for Due Diligence

Beyond analyzing portfolios of existing holdings, the application’s real-time scoring allows asset owners to quickly incorporate physical climate analysis into their due diligence processes for new acquisitions. In addition to providing easily digestible, high-level screening results, granular climate data allows clients to continue to invest, for example, in valuable coastal markets with known exposure. Figure 3 shows exposure of nine facilities in Tokyo, where the combination of storm surge and sea level rise could cause $1 trillion (100 trillion yen) in damages in a 1-in-100 year storm. Because the sea level rise (and flood) data featured in the Application is at a scale of 90 x 90 meters, investors do not need to eliminate entire markets from their investment strategies. Rather than exiting a profitable market, asset owners can use the Four Twenty Seven Physical Climate Risk Application to selectively invest in assets with lower exposure.

Asset owners often use Four Twenty Seven data to set their own internal thresholds for further due diligence. Using the detailed site information, as shown in Figure 4, as well as the downloadable scorecard, analysts can quickly understand which hazards to investigate further.

Some investors require further due diligence for any assets that receive “High” or “Red Flag” scores. Deal teams may be tasked to investigate asset-specific features that would make it more resilient to specific climate hazards, such as freeboard above base flood elevation, onsite power generators, or water efficiency measures.

Conclusion

Real assets, whose time horizon of returns aligns well with the investment goals of asset owners, are exposed to physical hazards, which will continue to become more frequent and severe. Exploring asset-level climate hazard exposure is the first step to analyzing and ultimately managing physical climate risk. As regulation around climate risk rapidly evolves, mandates to monitor and report these risks will also expand. Equipped with a detailed understanding of their portfolio holdings’ exposure, asset owners are empowered to make better-informed investment and risk management decisions, ultimately enhancing the resilience of their portfolios to physical climate risk.

Download this case study.

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Four Twenty Seven offers on-demand physical climate risk scoring for real assets and other climate risk datasets for investors to assess their risk across asset classes. Learn more about Four Twenty Seven’s data or reach out to schedule a demo.

IIF Webinar: Quantifying the Impacts of Climate Change

This Institute of International Finance webinar (IIF) features a discussion on quantifying the impacts of climate change into balance sheets and cash flows and provides an overview of Moody’s growing climate risk offering. This webinar is part of the IIF ESG Webinar series.

Speakers

  • Emilie Mazzacurati, Founder & CEO of Four Twenty Seven, discusses Four Twenty Seven’s process for quantifying the exposure of economic and financial assets to physical climate hazards and highlights collaborations with Moody’s.
  • Jing Zhang, Managing Director, Global Head of Quantitative Research at Moody’s, presents on translating physical risk metrics into financial metrics.
  • Sonja Gibbs, Managing Director and Head of Sustainable Finance, Global Policy Initiatives at IIF moderates the conversation.

Newsletter: New On-Demand Climate Risk App

 

Four Twenty Seven's monthly newsletter highlights recent developments on climate risk and resilience. This month we announce our new on-demand climate risk scoring application, discuss RCP 8.5 and highlight developments in climate risk disclosure.

In Focus: Four Twenty Seven Announces its On-demand Climate Risk Application

Score thousands of assets in minutes with Four Twenty Seven’s new on-demand physical climate risk application.

We're delighted to announce that our new on-demand climate risk scoring tool is now live! This application responds to the financial sector’s growing call for the integration of granular, forward-looking climate data into investment decisions and risk management practices. Users enter addresses and facility types to receive information on their assets’ exposure to floods, sea level rise, hurricanes & typhoons, heat stress and water stress to mid-century. Detailed facility scorecards include data on the underlying risk drivers for each hazard and users can toggle between maps and tables to identify regional trends and multi-hazard exposure. This tool informs due diligence, risk management, enhanced portfolio construction, resilience investment and pre-loan evaluations to support the integration of climate risk into financial decision-making across use cases. “We are excited to bring our on-demand physical climate risk application to the market. Our app provides access to sophisticated climate model outputs in easily understandable metrics with just a few clicks,” says Founder & CEO Emilie Mazzacurati. “Real-time access to forward-looking, location-specific data on climate risk enables investors, banks and corporations to manage their risk and invest in resilience.”
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Moody's ESG and Climate Risk Businesses

Moody's Announces Global Head of ESG and Climate Risk Businesses

Moody's Corporation announced yesterday that Andrea Blackman has been appointed Moody's Global Head of ESG and Climate Risk Businesses. Andrea comes from a leadership position in Moody's Analytics CreditView. In her new position Andrea will lead Moody's strategy and vision for long-term growth in line with market demands for ESG and climate risk services. Moody's ESG and climate risk affiliates, including Four Twenty Seven and Vigeo Eiris will be part of this new business unit. Learn more about Moody's broad ESG and Climate Risk offering here.
RCP 8.5 - Still a Valid Possibility

Extracting the Scientific Uncertainties from the Policy Uncertainties

An article published in Nature last month sparked confusion about the legitimacy of Representative Concentration Pathway (RCP) 8.5, but there are compelling reasons RCP 8.5 remains an important part of scenario analysis. The study's authors explain that the initial design of RCP 8.5 was to capture growing rates of coal production in China. They assert that since the rate of coal production has actually slowed, it's not appropriate to continue using this scenario as the "business-usual" scenario and rather it should be considered a highly unlikely extreme scenario. However, the article focuses on the policy drivers, rather than the scientific drivers, of warming. The authors do not explore the physical phenomenon, such as sudden release of methane (a powerful greenhouse gas) due to thawing of permafrost. This is one of several tipping points that could lead to RCP 8.5 outcomes by 2100, independent of how coal production evolves.

While the initial design of RCP 8.5 was intended to capture growing rates of coal production, it doesn’t mean the scenario can’t be a stand-in for other sources of emissions that could quickly accelerate due to tipping points. Bob Kopp, a climate scientist at Rutgers University, has previously pointed out on Twitter that "from a climate science perspective, RCP 8.5 is very useful, since we would like to know how models simulate a 5C world.”

It's important to note that under any scenario, we are committed to a certain amount of physical climate impacts to mid-century, regardless of RCP scenario. Temperature outcomes don't differ significantly under different RCP scenarios until after mid-century. For longer-term projections it is valuable to model impacts under several scenarios, such as RCP 4.5, RCP 7 (forthcoming in the latest generation of climate models) and RCP 8.5.
New Survey on the Quality of Climate Risk Reporting

Climate Risk Disclosures Lack Transparency

Companies tend to disclose more details on their exposure to transition risk than physical risk and disclosures still lack transparency on which models and assumptions companies use to assess risk, according to the recent European Financial Reporting Advisory Group report on How to Improve Climate-related Reporting. The report highlights that when firms approach disclosures solely from a compliance perspective, they miss an opportunity to genuinely identify their risk and improve their resilience. It also identifies best practices and current maturity of disclosures in line with the Task Force on Climate-related Financial Disclosures (TCFD) and the EU Non-financial Reporting Directive's non-binding guidelines on climate risk. The Climate Disclosure Standards Board also released an EU Environmental Reporting Handbook sharing examples of environmental and climate disclosures under the EU Non-Financial Reporting Directive.
Regulatory Action & Oversight on Climate Risk Disclosure

Australia and UK Each Announce Plans for New Disclosure Regulation

The Australian Prudential Regulation Authority joins regulators calling for climate stress tests, announcing that its banks will be required to conduct stress tests for climate risks under several scenarios. After a devastating bushfire season followed by damaging floods, regulators are increasing the urgency around implementing stress tests and plan to release more details within the next few weeks. Earlier this month the UK's Department for Work and Pensions announced its consideration of an amendment to the Pension Schemes Bill that would mandate that pensions disclose their approaches to climate change in line with the TCFD.

European Union Opens Public Consultation on Non-Financial Reporting Directive

Meanwhile the European Commission opened a public consultation on updates to its Non-Financial Reporting Directive. This is part of the EU's commitment to increasing sustainable investment in Europe under the European Green New Deal and the review will explore how adjusting disclosure guidelines can support these goals. Feedback is due by April 28.

UK's Financial Reporting Council to Review Climate Disclosures & Audits

Amid concerns that firms are not complying with increased regulations around climate risk disclosure, the UK's financial watch dog, the Financial Reporting Council, will review corporate disclosures and audits to ensure that they address reporting requirements. “Auditors have a responsibility to properly challenge management to assess and report the impact of climate change on their business,” FRC Chief Executive Jon Thompson said in a statement.
Financial Risks of Climate Change are Underpriced
Australia's bushfires are expected to reduce national GDP by 0.1-0.4 percentage points through this March. Meanwhile the UK confronts damaging floods, Europe had its warmest January on record and sea level rise threatens to inundate airports around the world. These are just a few of the many multifaceted impacts that climate change has on global economies. Recent commentaries published in Nature Energy discuss the global implications of climate change's potential impact on the energy sector, which drives much of the interconnected global economy. One commentary by UC Davis Professor Paul Griffin, highlights the particular exposure of this sector to physical climate risks, with fossil fuel infrastructure in the Gulf Coast and the exposure of California's utilities to wildfires, as noteworthy examples. Authors assert that if these risks continue to be underpriced, we risk a recession on par with the 2008 housing crisis.
Inside the Office at Four Twenty Seven

Meet Director, Financial Data Systems - Oren Israeli

Four Twenty Seven welcomes Oren as Director, Financial Data Systems. Oren leverages his 20 years of experience in the fintech industry to guide Four Twenty Seven’s product development agenda for financial and business data.

Oren is a strategic data and content expert, adept at launching and overseeing products and solutions to serve the top investment firms globally.

Upcoming Events

Join the Four Twenty Seven team at these events:

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Copyright © 2020 Four Twenty Seven, All rights reserved. Four Twenty Seven sends a newsletter focused on bringing climate intelligence into economic and financial decision-making for investors, corporations and governments. Fill in the form below to join our mailing list. As data controller, we collect your email address with your consent in order to send you our newsletter. Four Twenty Seven will never share your mailing information with anyone and you may unsubscribe at any moment. Please read our Terms and Conditions.Our mailing address is: Four Twenty Seven 2000 Hearst Ave Ste 304 Berkeley, CA 94709
   
 

Four Twenty Seven Announces its Physical Climate Risk Application

February 27, 2020 – BERKELEY, CA – Four Twenty Seven, an affiliate of Moody’s and the leading publisher of climate data for financial markets, today announces the release of a new on-demand climate risk scoring tool. This application responds to the financial sector’s growing call for the seamless integration of granular, forward-looking climate data into investment decisions and risk management practices.

Users are able to enter location and other data via an intuitive interface and immediately receive information on their assets’ exposure for floods, sea level rise, hurricanes & typhoons, heat stress and water stress to mid-century. The application allows users to browse and download detailed facility scorecards that include data on the underlying risk drivers for each hazard. The application also enables users to toggle between maps and tables to identify regional trends and multi-hazard exposure. Users can perform analyses for large volumes of locations via an API and integrate the outputs into downstream risk management and portfolio analysis applications.

As the material financial impacts of climate change become increasingly evident, understanding and preparing for climate risks is essential.  Real estate investors can use Four Twenty Seven’s physical climate risk app for due diligence and proactive risk management across their portfolio of properties. Portfolio managers can leverage the application to report climate risk exposure and enhance portfolio decision-making. Asset owners can evaluate long-term risk exposure and engage with corporations and managers to improve resilience. Banks can score thousands of locations at once to identify risk in commercial and residential lending portfolios. Corporations can identify risk hotspots and opportunities to build resilience in their global operations.

“We are excited to bring our on-demand physical climate risk application to the market.  Our app provides access to sophisticated climate model outputs in easily understandable metrics with just a few clicks,” says Four Twenty Seven’s  Founder & CEO, Emilie Mazzacurati. “Real-time access to forward-looking, location-specific data on climate risk enables investors, banks and corporations to manage their risk and invest in resilience.”

Learn more about the app or request a demo.

Download the Press Release.

Demystifying Climate Scenario Analysis for Financial Stakeholders

December 4, 2019 – 427 REPORT. Scenario analysis is an essential yet challenging component of understanding and preparing for the impacts of climate change on assets, markets and economies. When focusing on the short term, the warming and related impacts we have already committed to calls for scenarios that are decoupled from economic and policy activities and instead focus on the impacts that are already locked in. This report explores which impacts are already locked in, identifies how Representative Concentration Pathway (RCP) scenarios fit into the conversation, and describes an approach to setting up scenario analysis for near-term physical climate risks.

Download the report.

As the effects of climate change increasingly threaten financial stability, investors and regulators are seeking to understand what impacts lie ahead, and calling for an increase in physical climate risk assessment and disclosure in line with the Task Force on Climate-related Financial Disclosures (TCFD). To assess the scale of financial risk posed by physical climate change it is important to quantify risks under different climate scenarios. How will changes in extreme weather patterns, longer droughts and rising seas differ under various scenarios? Answering these questions through scenario analysis helps uncover the range of risks, allowing investors to identify assets and markets that are more likely to become stranded over time and to begin developing forward-looking resilience strategies. However, science-driven, decision-useful scenario analysis poses many challenges for businesses and financial stakeholders today, due to complex feedback loops, varying timescales, and multiple interacting factors that ultimately determine how global climate change manifests.

 

Figure 2. Distribution of daily extreme temperature changes in 2030-2040, expressed as a percent change, relative to a baseline of 1975-2005 under RCP 8.5. This map shows statistically downscaled global climate models averaged together, for this time frame and scenario. NASA Earth Exchange Global Daily Downscaled Projections statistically downscales climate model outputs to a ~25 kilometer resolution (see full details here) White areas are excluded because they lack potential for significant economic activity.

This new report, Demystifying Climate Scenario Analysis for Financial Stakeholders, explores which physical impacts are already locked in, identifies how Representative Concentration Pathway (RCP) scenarios apply, and describes an approach to setting up scenario analysis for near-term physical climate risks. Scenario analysis is often approached from the perspective of transition risk, where policy developments and greenhouse gas (GHG) emission targets are the key drivers of risk pathways over the near-term, in the next 10 to 30 years. Physical risk, however, requires a different approach.  Impacts over the coming decades are largely locked in, making the emissions scenarios less relevant. Unlike transition risk, GHG emission pathways play a minimal role in the behavior of the near-term climate and GHG emission pathways only begin to meaningfully influence global temperatures near mid-century. The uncertainty in physical climate risks in the near-term is driven by uncertainty in physical processes, rather than in policy decisions.

For organizations looking to construct physical climate risk scenarios for risk management and strategy purposes, it is critical to understand the scientific phenomena driving our plausible climate futures. This report outlines an approach called percentile-based analysis, which allows users to explore the range of potential outcomes based on climate model outputs within a single RCP. This offers a flexible, data-driven approach, suitable for portfolio-level screenings, reporting, and in some cases, direct engagement with asset managers.

Key Takeaways:

  • Quantifying climate risks under different scenarios is a key element in understanding how physical climate risks pose financial risks.
  • Scenario analysis is often approached from the perspective of transition risk, where policy developments and greenhouse gas emission targets are the key drivers of risk pathways in the next 10 to 30 years. However, physical climate impacts over the coming decades are largely locked in, so physical risk requires a different approach.
  • Even if we stopped emitting carbon dioxide tomorrow, many physical climate impacts, such as increasing temperatures, more severe droughts, and rising sea levels, would already be locked in because of the time carbon dioxide stays in the atmosphere and the time it takes the atmosphere to respond.
  • The uncertainty in how physical climate risks may manifest in the next few decades is driven by model uncertainty, which should therefore be the focus of scenario analysis for physical climate risks in the near-term.
  • Percentile-based analysis offers a flexible, data-driven approach, suitable for portfolio-level screenings, reporting, and in some cases, direct engagement with asset managers.

Download the report.

Download the press release.

 

Four Twenty Seven Opens a Tokyo Office |フォー・トゥエンティー・セブンが東京オフィスを開設

OCTOBER 23, 2019 – BERKELEY, CA – Four Twenty Seven announces opening of Tokyo office and hires senior country representative.

Four Twenty Seven, an affiliate of Moody’s and the leading publisher of climate data for financial markets, is pleased to announce the opening of its office in Tokyo, Japan. Four Twenty Seven’s Tokyo office opens as investors and businesses in Japan and across the Asia-Pacific region face increasing market pressure to assess and disclose the risks physical climate hazards pose to their investments.

In conjunction with the opening of its office in Tokyo, Four Twenty Seven is also pleased to announce that Toshi Matsumae will serve as its Director of Japan. Toshi brings 30 years of experience leading financial services organizations in Japan. He leverages this expertise to lead Four Twenty Seven’s effort to provide climate risk screening to investors, asset managers, banks and corporations striving to understand their risk to physical climate hazards throughout Japan.

“We’ve seen growing demand from Japanese markets over the past year for transparency around exposure to physical climate risks in corporate assets, investment portfolios and in credit portfolios,” says Emilie Mazzacurati, Four Twenty Seven’s Founder and CEO.  “Four Twenty Seven’s on-the-ground presence in Japan will allow us to bring asset-level risk data to support this demand and inform global resilience-building.”

“The opening of Four Twenty Seven’s Tokyo office comes at a time when the financial sector is calling for better integration of forward-looking climate data into decision-making,” says Toshi Matsumae, Four Twenty Seven’s Director of Japan. “I look forward to working with investors and businesses throughout Asia to better understand and serve the needs of this evolving market.”

Download the Press Release.


2019年10月23日 –カルフォルニア、バークレー拠点の フォー・トゥエンティー・セブンが東京オフィスを開設

ムーディーズの関連会社で、気候変動に関するデータを金融業界に提供する業界のリーダー的存在のフォー・トゥエンティー・セブンは、この度東京オフィスの開設を発表した。これは日本及びアジア太平洋地域の投資家及び事業主が、彼らの投資物件と運用資産に対して日増しに増大する気候変動に伴う災害リスクと、それに対処するためのリスク評価及びディスクロージャーへの市場の要望に対応したものだ。

東京オフィスの開設に伴い、フォー・トゥエンティー・セブンは、この度、松前俊顕を日本事業の代表として起用することになった。松前は金融情報サービス業界での30年余りの経験を活かし、日本の投資家、資産運用会社、銀行、あるいは一般企業が今日抱える気候変動からの物理的リスクに対する科学的な理解と対応が可能となる気候リスクスクリーニングを提供していくことになる。

フォー・トゥエンティー・セブンの創業者で社長のエミリー・マザキュラティは「この一年日本の市場からは、企業資産、運用ポートフォリオ、債券ポートフォリオの気候変動の物理的リスクへの感応度に関する透明性を求める声が日増しに拡大してきた。」とコメントしている。さらに、「日本の市場でのフォー・トゥエンティー・セブンの存在で、銘柄レベルで提供される予想リスクデータにより、こうした要望に答え、他の主要地域での事例を伝えることができる。」と語っている。

さらに松前は「この度のフォー・トゥエンティー・セブンの東京オフィス開設は、まさに今日の金融業界からの要望のタイミングにマッチしている。日本及びアジア地域にて、気候変動インパクトに対するアプローチが確立されていなかった従来の状況から、気候データと科学的な対応が統合した意思決定に導かれる一助にフォー・トゥエンティー・セブンがなれることを希望する。」と付け加えている。

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Newsletter: Keeping Up with Regulatory Developments on Climate Risk

Four Twenty Seven's monthly newsletter highlights recent developments on climate risk and resilience. This month we feature factsheets on regulatory action for financial climate risk, news from Four Twenty Seven and an update on the latest extreme heat.

In Focus: Financial Regulators Take on Climate Risk

Factsheets: Financial Climate Risk Regulation - What You Need To Know

Our new series, Financial Climate Risk Regulation, provides a summary of key recent and upcoming regulatory actions related to climate risk. From the European Union's directive on disclosure and the Bank of England's insurance stress tests, to France's surveys of its insurance and banking markets and the consultations of the European Supervisory Authorities around integrating sustainability into oversight requirements, regulators are moving quickly on climate risk with global implications for financial actors.

Staying up-to-date on these developments will provide early indications of regulatory action to come and give insight into potential rippling market impacts. Four Twenty Seven's factsheets on regulatory developments in the European Union, France and the United Kingdom, summarize each nation's stance on the financial risk of climate change, outline key actions and highlight upcoming dates to remember.
Read the Factsheets

NGFS Releases Technical Supplement on Climate Risk Assessments

Last week, the Network for Greening the Financial System published an overview of current approaches to assessing climate change's macroeconomic impacts and summarized key topics for further research. The supplement outlines ways for central banks and supervisors to assess climate-related risks through macroeconomic modeling, scenario analysis, stress testing, risk indicators and financial stability assessments.
"This is a Big Deal" - Media Coverage of Four Twenty Seven's Acquisition by Moody's
“This means the old paradigm of discussing climate change as part of so-called ESG (Environmental, Social and Governance) risks is inappropriate. The risks are increasingly physical and specific – the heat waves, the tsunamis, phenomena like the effect on Germany’s economy of two consecutive years’ low water in the Rhine. Models need to be adapted to them, new hedging opportunities created and ratings adjusted. It’s not a matter of fashion or reputation management but of basics like sales, cash flow and profit. Moody’s acquisition is a sign that the financial industry is beginning to take this on board," Leonid Bershidsky writes in a Bloomberg op-ed.

"Moody’s Corporation has purchased a controlling stake in a firm that measures the physical risks of climate change, the latest indication that global warming can threaten the creditworthiness of governments and companies around the world." The New York Times' Christopher Flavelle writes. 

Read more stories below and in our In the News page:
Heat Records Broken...Again

Extremely Hot Days are Expected to Continue

Last week, Belgium, Germany and the Netherlands all experienced their highest temperature ever recorded. Paris also hit a record high of 109°F (43°C), after France had its highest ever temperature 45.9°C (114.6°F) during a June heatwave made at least five times more likely due to climate change. Meanwhile, Anchorage, Alaska's 90°F temperatures surpassed previous records by five degrees. The city had at least 34 consecutive days of above average temperatures, with ice melt negatively impacting fishing and hunting and wildfires threatening human health. The eastern and midwest U.S. endured their first heat wave of the season this month, as thunderstorms and record heat disrupted power and took lives.

“There is likely the DNA of climate change in the record-breaking heat that Europe and other parts of the world are experiencing. And it is unfortunately going to continue to worsen,” Marshall Shepherd, professor of meteorology at University of Georgia told the AP. Earlier this month, the Union of Concerned Scientists released data projecting the number of days that will surpass extreme heat indices by mid-century and late century for every U.S. County. Under a 2.4°C (4.3°F) scenario, Los Angeles County may experience an average of 55 days annually with a heat index above 90°F, Dallas County would average 133 days and Broward County, FL 179 days. 

Extreme Heat Has Extreme Impacts on Economies and Human Health

The total cost of lost output due to extreme temperatures is projected to be $2.4 trillion annually according to the International Labor Organization's recent report. Agriculture and construction are expected to lose 60% and 19% of global working hours by 2030, with southern Asia and western Africa expected to experience the greatest losses.

Increasing average temperatures are already affecting industries around the world, as the alpine tourism sector takes a hard look at its climate risks and opportunitiesFrance declares a water shortage and water restrictions affect agriculture and industry across Europe.
Inside the Office at Four Twenty Seven

Meet Chief Revenue Officer, Lisa Stanton


Four Twenty Seven welcomes Lisa Stanton as our Chief Revenue Officer. Lisa oversees sales, client support, marketing and professional services globally. She brings over 25 years of experience in sales and client services for data analytics and investment products in the financial sector. 
Previously, Lisa spent twelve years with Barra, Inc. leading their client service, sales, consulting and partner relationships globally.  She has also led investment strategy and client relationship teams for Blackrock, AXA Rosenberg and, most recently, Grantham, Mayo, Van Otterloo, Inc., working with many of the world's leading institutional investors.

Four Twenty Seven Wins Wealth & Finance Award

Wealth & Finance Magazine recognized Four Twenty Seven with a Best in Climate-Related Economic Risk Reporting award. For six years the Alternative Investment Awards have acknowledged firms and individuals that positively shape the industry’s growth. “Historically considered an undervalued industry, the alternative investment has grown over the past few years. Behind this prominent growth and success, are the leading lights whose innovation, dedication and inventive ways has delivered some award-worthy results,” Wealth & Finance writes.

The award highlights Four Twenty Seven’s climate risk scores for listed instruments and on-demand scoring of real assets, that assess financial firm’s exposure to physical climate risk and inform risk reporting.

Upcoming Events

Join the Four Twenty Seven team at these events:

  • Aug 5 Climate Risk and Sovereign Risk in Southeast Asia, Singapore: Editor, Natalie Ambrosio, will present on sovereign climate risk. Invite-only.
  • Sept 10 - 12 – PRI in Person 2019, Paris, France: Stop by the Four Twenty Seven booth to meet with Chief Development Officer, Frank Freitas, Chief Revenue Officer, Lisa Stanton, Director Europe, Nathalie Borgeaud and other members of the team. 
  • Sept 16 – Insurance & Climate Risk Americas 2019, New York, NY: Lisa Stanton will attend.
  • Sept 23 - 29 – Climate Week NYC, New York, NY: Lisa Stanton and Senior Analyst, Lindsay Ross, will attend.
  • Nov 7-8 – Building Resilience 2019, Cleveland, OH: Director of Advisory Services, Yoon Kim, will speak on a panel about public-private partnerships.
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Copyright © 2019 Four Twenty Seven, All rights reserved.
Four Twenty Seven sends a newsletter focused on bringing climate intelligence into economic and financial decision-making for investors, corporations and governments. Fill in the form below to join our mailing list. As data controller, we collect your email address with your consent in order to send you our newsletter. Four Twenty Seven will never share your mailing information with anyone and you may unsubscribe at any moment. Please read our Terms and Conditions.
 

Our mailing address is:
Four Twenty Seven
2000 Hearst Ave
Ste 304
Berkeley, CA 94709








Factsheet — Financial Climate Risk Regulation in the European Union

July 29, 2019 – 427 FACTSHEET. Regulation on climate risk in Europe is likely to have a rippling effect across markets globally. There has been key legislation in the past few months, with more action on the agenda. Staying up-to-date on these developments will provide early indications of regulatory action to come. This factsheet on regulatory developments in the EU provides key background to the EU’s sustainable finance agenda, outlines key actions and highlights upcoming dates to remember.

Since establishing the High-Level Expert Group on Sustainable Finance (HLEG) in 2016, the European Union (EU) has positioned itself as a leader in sustainable finance. It has made rapid progress on integrating climate change into its financial sector, simultaneously addressing it from several angles, including risk disclosure, green bond labels, a taxonomy for adaptation and mitigation, and risk management oversight directives. As global financial actors operate, and are regulated, in Europe, EU regulations are likely to propel a development in best practices for addressing climate risk that reaches beyond the EU. Likewise, regulators and financial actors across the world are watching carefully as EU regulation may influence their own action. This factsheet, Financial Climate Risk Regulation in the European Union, summarizes the EU’s stance on the financial risk of climate change, notes key regulatory players and highlights recent and upcoming regulatory action applicable to financial markets.

Key Takeaways

  • The EC completed several milestones from its Action Plan in June 2019, including publishing updated nonbinding guidelines for incorporating climate risk into the non-financial reporting directive and releasing the Technical Expert Group report on a taxonomy for activities that contribute to climate adaptation and mitigation.
  • In April 2019, the European Parliament and Council agreed on text for regulation on disclosures relating to sustainability risks and investments, explicitly stating that climate change demands urgent action.
  • The European Insurance and Occupational Pensions Authority and the European Securities and Markets Authority have provided technical advice on proposed changes to oversight requirements, suggesting that sustainability be explicitly integrated into risk management, operations, investment strategies and governance.
  • The European Banking Authority will spend two years assessing environmental, social and governance risks and their management in the banking sector. The assessment will be used to develop a draft amendment requiring “large institutions” to disclose their risk and the disclosures will be required three years after the regulation is implemented.

Read the Factsheet.

Read Four Twenty Seven’s other Factsheets on Financial Climate Risk Regulation.