Four Twenty Seven Announces Partnership with Measurabl

June 2, 2020 – BERKELEY, CA –  Four Twenty Seven’s data on climate-related risks is now available on Measurabl’s real estate data platform.

Measurabl is the world’s most widely adopted ESG software for commercial real estate, and Four 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.

As the effects of climate change worsen, real estate companies are feeling tangible impacts. Properties exposed to rising sea levels rise in the United States sell at about 7% less compared with similar, unexposed properties. Severe climate events such as hurricanes are occurring more frequently and costing billions of dollars in damage to assets. Additionally, companies face growing regulatory and investor pressures to disclose climate-related financial risks in line with frameworks like the Task Force on Climate-related Financial Disclosure (TCFD).

Yet today, real estate owners and lenders lack transparency into the forward-looking impacts of climate-related threats on their assets and find it difficult to collect and analyze physical climate risk data in a meaningful, comprehensive way.

For each building in a portfolio, Measurabl’s Physical Climate Risk Exposure tool provides Four Twenty Seven’s data for the five key climate hazards of floods, heat stress, hurricanes & typhoons, sea level rise and water stress, as well as earthquakes. The tool identifies the level of risk an asset faces for each hazard and allows users to sort, filter and export Four Twenty Seven’s physical risk data by property type, risk category, and risk level. Users can access this data from Measurabl’s centralized software alongside relevant ESG performance metrics and analytics. This new release improves transparency and enables lenders and investors to better assess and manage their risk.

“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, Founder and Chief Executive Officer of Four Twenty Seven. “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.”

Physical climate risk data analyzed in tandem with ESG performance provides real estate and capital markets new opportunities to assess their risks and build more resilient portfolios in a central hub. Through advanced understanding of these risks, the built environment and capital markets will be empowered to make data-driven decisions on risk mitigation and strategic investments.

“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, Founder and CEO of Measurabl. “The union of physical climate risks with ESG creates unparalleled transparency for climate-related financial decisions and disclosures.”

Read Measurabl’s announcement here and learn more about the new Physical Climate Risk Exposure tool incorporating Four Twenty Seven data.

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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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.
 

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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: Climate Resilience in the Age of COVID

Four Twenty Seven's monthly newsletter highlights recent developments in climate risk and resilience. This month we discuss the overlapping challenges of COVID-19 and climate hazards, share consultations on climate risk for financial stakeholders and highlight developments in climate risk at Moody's.

The Compounding Challenges of Climate Hazards and COVID-19

Climate Preparedness Takes on New Meaning - Four Twenty Seven Analysis 

Last week in the Southern U.S., residents and policy-makers weighed the risks of high winds and flooding alongside the risks of spreading COVID-19, as many evacuated to storm shelters, and 750,000 people lost power across ten states from Texas to West Virginia. Meanwhile that same week 50,000 people in Connecticut lost power because of a storm, with restoration efforts complicated by COVID-19. The devastating human health and economic impacts of the COVID-19 pandemic are exacerbated by climate hazards, which threaten communities around the world. Four Twenty Seven's new analysis explores exposure to floods, heat stress, hurricanes and wildfires in U.S. municipalities alongside the impacts of COVID-19 on the same regions.

Our analysis explores exposure to extreme rainfall in the Midwest and the particular vulnerability of essential services such as manufacturers of personal protective equipment and farmers, to disruptions due to floods. It discusses the human health implications of extreme heat and its particular threat to business continuity from power disruptions when business operations are dispersed across employees' homes. States like Louisiana and Florida are addressing COVID-19 while preparing for a busy hurricane season. Likewise, typical wildfire preparations have been delayed and canceled due to the pandemic, leaving states like California, Washington and Colorado particularly vulnerable to this year's wildfires.
Read the Analysis

Further reading on climate change and COVID-19:

Public Consultations on Climate Change in the Financial Sector
While the world is sheltering from COVID-19, regulators are moving forward with their goals to address climate change. There are currently several open consultations to gather industry feedback on new standards and reporting requirements. 
 

EU Draft Minimum Standards for Climate Benchmarks

The European Commission is seeking feedback on draft standards for its "EU Climate Transition" and "EU Paris-aligned" benchmarks. The goals of the benchmarks are to increase transparency, help direct capital toward climate-friendly investments and prevent green-washing. Provide feedback by May 6.
 

FCA Proposal for Updated Climate Risk Disclosure

The UK Financial Conduct Authority is seeking feedback on its proposals to mandate climate risk disclosure for all commercial companies with premium listings. This requirement would build upon the Task Force on Climate-related Financial Disclosures recommendations and use a comply or explain approach. Respond by June 5.
 

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.
 

Consultation on Renewed EU Sustainable Finance Strategy

The European Commission is soliciting public feedback on its updated sustainable finance strategy, building upon its 2018 Action Plan for Sustainable Finance. This strategy aims to integrate climate change and other environmental considerations into the financial system, supporting the European Green Deal. The deadline to respond was extended to July 15.
ESG and Climate at Moody's

Moody's Launches New ESG & Climate Risk Website

Moody's new ESG and Climate Risk Hub collates resources on climate risk and ESG from Moody's and its affiliates, including Four Twenty Seven. The platform includes solutions and insights to help investors, lenders and other stakeholders integrate climate risk into decision-making.

ESG Factors Frequently Cited as Material Credit Considerations

Out of almost 8,000 Moody's private sector ratings actions in 2019, about a third referenced material ESG considerations. Moody's Investor Service's new report shares findings on how ESG considerations are factored into ratings actions.
Climate Risk News

New High Temperature Records Set

Last month was the hottest month on record for the world's oceans and the oceans' five hottest years have been within the last ten years. Warm oceans are connected to many climate hazards, ranging from hurricanes to wildfires. If the Atlantic remains warm during hurricane season, it's expected to contribute to stronger storms this year. Meanwhile, warm seas can pull rain from inland, contributing to drought associated with wildfire conditions. This occurred last year in Australia when the Indian Ocean was particularly warm off of Africa's coast.

Meanwhile, this year's first quarter had the second warmest air temperatures on record globally. NOAA projects there is a high chance that 2020 will become the warmest year on record.

Climate Resources for the Financial Sector

These ongoing scientific findings on the dire rate of climate change, including new temperature records and updated sea level rise projections, have significant financial implications. The Global Association of Risk Professionals (GARP) launched a new Global
Sustainability and Climate Risk Resource Center to help communicate these risks. This platform introduces climate change for financial stakeholders and provides resources to help risk managers understand climate risks.
Inside the Office at Four Twenty Seven

Senior Climate Data Analyst - John Naviaux

Four Twenty Seven welcomes John as Senior Climate Data Analyst. John performs stochastic modeling of climate and weather data to advance Four Twenty Seven’s climate risk analytics. Previously, John worked on topics ranging from transportation economics in Los Angeles to particle physics at the Large Hadron Collider in Geneva, Switzerland. John monitored arctic mercury pollution in Norway as part of a Fulbright Fellowship, and received his Ph.D. at Caltech for his research on the ocean’s response to climate change.

Four Twenty Seven is Here to Serve our Clients

As COVID-19 has led to widespread disruption in businesses and personal lives, Four Twenty Seven remains committed to ensuring the safety of our staff and clients while also continuing to provide the same data, analysis and client support that we are known for. Our business remains open globally, with teams in the U.S., Paris, London and Tokyo working remotely. Please do not hesitate to reach out to us via email or on our cell phones. 
Upcoming Events

An Update on Postponements and Cancellations:

  • Apr 28 – Afire Rising Leaders Summit, New York, NY: Chief Revenue Officer, Lisa Stanton, will speak - CANCELED
  • May 12 at 10am EDT – IIF ESG Webinar Series: Quantifying the Impact of Climate Change: Founder & CEO, Emilie Mazzacurati will speak.
  • May 18 – Sciences Po Award Dinner, New York, NY: Founder and CEO, Emilie Mazzacurati, will speak. - POSTPONED
  • Jun 8 - 12 – University of Notre Dame CARE Conference, Heron Island, AU: Director of Communications, Natalie Ambrosio, will speak. - CANCELED
  • Jun 9 - 10 – Responsible Investor London 2020, London, UK: Members of the Four Twenty Seven team will attend and host a booth. - PENDING
  • 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 The Future of ESG Data 2020, London, UK: Senior Analyst, 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









The Compounding Challenges of Climate Hazards and COVID-19

April 22, 2020 – Four Twenty Seven Analysis.  The devastating human health and economic impacts of the COVID-19 pandemic are exacerbated by climate hazards, which threaten communities around the world. This analysis explores exposure to floods, heat stress, hurricanes and wildfires in U.S. municipalities alongside the impacts of COVID-19 on the same regions. It discusses the compounding challenges for economies, infrastructure and human health and the importance of preparing for these overlapping disasters.

Introduction: Climate Preparedness Takes on New Meaning

Last week in the Southern U.S., residents and policy-makers weighed the risks of high winds and flooding alongside the risks of spreading COVID-19, as many evacuated to storm shelters, and 750,000 people lost power across ten states from Texas to West Virginia. Meanwhile that same week 50,000 people in Connecticut lose power because of a storm, with restoration efforts complicated by COVID-19 precautions. The threat of climate-driven extreme weather events takes on new meaning when standard responses such as evacuating to shelters conflict with guidelines for preventing the spread of the disease. The pandemic’s impacts have been compared to Hurricane Katrina hitting all 50 states. FEMA, which is leading the nation’s response, typically only battles disasters in a few states at once.

To ensure the safety of residents, many are typically urged to evacuate ahead of hurricanes and wildfires. However, crowded evacuation centers are prime conditions for diseases to spread. Authorities in several states are actively exploring the best responses to this challenge, considering options for increasing the capacity of evacuation centers, taking temperatures before admitting evacuees and booking blocks of hotel rooms as a last resort.

Hazards such as heat waves and wildfires pose human health risks that will contribute to already overwhelmed healthcare systems. Further, many communities rely on cooling centers and visit public spaces such as shopping malls to seek relief during summer months. Measures to reduce the spread of COVID-19 include the closure of facilities such as libraries and malls that typically serve as cooling centers. During a time when residents are encouraged to stay in or near their own homes, a heat wave would pose new danger. However, measures to improve preparedness, such as ensuring that hospitals have back-up power generators, improving availability of virtual healthcare and seeking alternative sources of personal protective equipment, will help communities prepare for the impacts of climate hazards as well as the pandemic.

The economic consequences of the pandemic also exacerbate the challenges presented by climate hazards for cities and residents. For those individuals who have lost their jobs due to COVID-19-related closures, decreased income may make it difficult to acquire needed emergency supplies or pay to relocate to a safe haven. Local governments already reaching deep into their coffers and straining existing resources, may have trouble allocating emergency personnel and resources to evacuate residents and to rebuild after a disaster.

This analysis explores the regions of the U.S. that are particularly exposed to the climate hazards of floods, heat stress, hurricanes and wildfires and how this exposure may exacerbate existing challenges due to COVID-19.

Extreme Rainfall and Flooding

Devastating flooding last year disrupted lives, threatened livelihoods and contributed to 19 million acres of cropland going unplanted. Seventy percent of those acres were in the Midwest, which was sodden for months. Communities are bracing for new floods this year which are expected to be severe, though not as devastating as last year’s floods. Counties in the Midwest are among the most exposed to increasing extreme precipitation due to climate change in the next several decades (Figure 1), where these floods are likely to become a regular occurrence.

Figure 1. Exposure to extreme rainfall by county, with red representing the most exposed counties and dark green representing the least exposed. Source: Four Twenty Seven.

This year, inundation would exacerbate the existing challenges of containing COVID-19, while COVID-19 containment precautions would, in turn, make flood response more challenging. Midwestern states such as Michigan, Illinois and Indiana are among states with the highest number of COVID-19 cases relative to their populations. While less densely populated communities have fewer cases to date, many Midwestern counties such as Cook County in Illinois and Franklin and Hamilton Counties, in Ohio already have a significant number of COVID-19 cases. Likewise, smaller towns typically have fewer financial resources and fewer staff dedicated to emergency relief.

The economies of many Midwestern communities depend upon agricultural and manufacturing industries, which require manual labor and the physical presence of the employees. Some manufacturing facilities reopened to produce personal protective equipment, and farms and grocery stores are both considered essential. However, these industries are at heightened risk of disruption from employees falling ill, as seen at several meatpacking facilities across the country. Floods can exacerbate these challenges, inundating roadways, manufacturing facilities, farms, and even grocery stores, preventing healthy staff from getting to and from their place of employment and disrupting the movement of goods. These impacts can also threaten food security if they disrupt food supply chains.

Heat Waves

Figure 2. Exposure to heat stress by county, with red representing the most exposed counties and dark green representing the least exposed. Source: Four Twenty Seven.

NOAA predicts above-average temperatures for much of the country through July, with no regions expecting below-average temperatures. Exposure to extreme heat is concentrated in Missouri and western Illinois, fanning out across the Midwest and South and including several areas that have had high numbers of COVID-19 cases to date (Figure 2). For example, the metropolitan areas surrounding Chicago and Detroit have both been hard hit by COVID-19 and face moderate exposure to heat stress. The Southeast corner of Florida faces high numbers of COVID-19 impacts as well as high heat stress and a looming hurricane season.

It is currently unclear how warmer temperatures will affect the spread of the virus. However, heat waves hinder worker productivity and can lead to safety concerns for outdoor workers, such as farmers. In addition to their human health impacts, heat waves also lead to higher peak energy demand as use of air conditioning surges. If governments and businesses alike continue to require or encourage their employees to work from home, reliance on air conditioning and power will likely be higher this year than in typical summer months. Resulting power outages can disrupt business continuity, particularly with operations dispersed across employees’ homes.

Hurricanes

Figure 3. Exposure to hurricanes by county, with red representing the most exposed counties and dark green representing the least exposed. Source: Four Twenty Seven.

Climate change is contributing to more frequent intense hurricanes and more severe storms are expected this season compared to the average season. States along the Gulf Coast and Atlantic Ocean are highly exposed to hurricanes (Figure 3), and several of these states, such as Louisiana and Florida, also have among the highest numbers of COVID-19 cases to date.

Local governments that depend upon sales tax are likely to feel the most immediate fiscal impacts from COVID-19, while those that rely more on property tax may feel longer term impacts influenced by foreclosures. In Florida, sales tax was responsible for 77% of the state’s general revenue in the 2018-2019 fiscal year, which suggests that it will face the fiscal impacts of COVID-19 over the next several months, corresponding with the hurricane season, when funds may be most needed. Other states, such as Louisiana, have extended their tax filing date indefinitely, which will delay tax income. Regions that depend on tourism, such as the Florida Keys, will be going into hurricane season with fewer fiscal resources than usual this year. A lack of fiscal resources will challenge preparedness efforts and emergency response to hurricanes.

Wildfires

As climate change contributes to more severe droughts and extreme heat events, wildfire season in the western U.S. has worsened over the past several years. California, Washington and Colorado are among those states most exposed to wildfires, and they are also among those states with the highest numbers of COVID-19 cases to date.

While the spring is usually spent preparing for wildfire season, these preparations have been hindered this year. Annual efforts to remove brush have been postponed, while hiring has been delayed and annual trainings have been canceled. Fire agencies are going into this year’s season understaffed, with many firefighters already sick or quarantined. They are also wary of the dangerous conditions of base camps, where firefighters sleep in close quarters on the front lines.

The economic impacts of COVID-19 on employment and incomes will exacerbate the losses caused by wildfires and will likely lead to higher numbers of residents facing tough questions around whether or not to leave an area if they lose their homes. The resulting emigration or delayed rebuilding will in turn reduce local government revenues.

Residents in fire-prone areas increasingly wear N95 masks to protect themselves from wildfire smoke. However, these masks are in short supply and authorities have directed that masks should be saved for medical personnel. If shortages persist into this year’s wildfire season, communities could face greater long-term respiratory health impacts due to wildfire smoke.

Conclusion

As COVID-19 continues to spread and its timeline remains unknown, each region of the country faces exposure to climate hazards which will complicate containment efforts. However, in a time when local jurisdictions and individuals are paying increased attention to disaster preparedness there is an opportunity to strategically prepare for climate hazards and invest in resilience that supports responses to any disaster. Hurricanes, wildfires, floods and heat waves are inevitable in our changing world, and the more proactive resilience-building that occurs, the better positioned communities will be to minimize the loss of lives and livelihoods.

Newsletter: Coronavirus and Climate Change

Four Twenty Seven's monthly newsletter highlights recent developments on climate risk and resilience. This month we discuss the implications of the COVID-19 crisis for climate change and share a new Moody's report on scenario analysis.

COVID-19 and Climate: Multifaceted Impacts

427 Analysis - A Public Health Emergency with Dire Economic Consequences and Several Implications for Climate

The unprecedented global public health crisis from COVID-19 has led to fears of a global recession, but also presents a range of implications for climate change. While COVID-19’s immediate impacts include emissions reductions, the longer-term impacts on climate action and resilience-building are more complex. Likewise, COVID-19 may provide insight into how prepared communities are for the increasing frequency of disasters and how financial institutions can prepare for sudden disruptions. Four Twenty Seven's new analysis explores several of these impacts, outlining topics to watch as we strive to understand the long-term implications and ensure the safety of communities and businesses.

The analysis highlights that short-term emissions reductions may be followed by economic stimulus packages favoring polluting industries. Yet, as companies adapt to remote work, there is the potential for longer-term behavior shifts that help reduce emissions. Meanwhile, communities around the world face various levels of restrictions, with impacts on climate negotiations and research. The COVID-19 pandemic increases the risk of business disruptions and compounds the public health risks of extreme weather events, making businesses and communities more vulnerable to climate impacts. The crisis also underscores the need for preparedness. The ways policy-makers, businesses and individuals respond to today’s public health emergency and the resulting successes and failures may provide lessons for responding to other multifaceted disasters, applicable to extreme weather events and natural disasters. 
Read the Analysis
Moody's on Climate Scenario Analysis

Using Scenario Analysis to Assess Credit Impact of Climate Risks

Climate-driven extreme weather events and the transition to a low-carbon economy are expected to have material impacts on companies, with increasing significance for credit analysis. However, both physical and transition risks have a wide range of potential outcomes. In its new report, Climate scenarios vital to assess credit impact of carbon transition, physical risks, Moody’s Investors Service describes a conceptual approach to scenario analysis, leveraging Four Twenty Seven’s methodology for physical risks.

The transition risk approach is to explore sector-specific credit implications for two IEA emissions scenarios. For physical risk scenarios Moody’s will use data from Four Twenty Seven to provide a uniform starting point from which to explore the range of credit implications of different climate hazards across sectors. Since the climate takes years to fully respond to greenhouse gases in the atmosphere, in the near-term the uncertainty in physical outcomes is not driven by policy changes, but rather by scientific uncertainty within the climate models. By grouping the outcomes of climate models within a single RCP into low, medium and high tiers one can explore the range of potential severity in climate hazards such as extreme temperature and precipitation. Register for free to read the analysis:

Read the Report
Inside the Office at Four Twenty Seven

Meet Frontend Developer - Akiyo Marukawa

Four Twenty Seven welcomes Akiyo as Frontend Developer. Akiyo works on the climate risk application’s user interface, building out the platform and systems to serve a diverse client base. Previously, Akiyo developed web applications at the Lawrence Berkeley National Laboratory and has worked with Python and Flask on the backend. Her diverse background also includes process automation and systems engineering.

Four Twenty Seven is Here to Serve our Clients

As COVID-19 has led to widespread disruption in businesses and personal lives, Four Twenty Seven remains committed to ensuring the safety of our staff and clients while also continuing to provide the same data, analysis and client support that we are known for. Our business remains open globally, with teams in the U.S., Paris and Tokyo working remotely. Please do not hesitate to reach out to us via email or on our cell phones. 
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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.
 

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Moody’s: Using Scenario Analysis to Assess Credit Impact of Climate Risks

Climate-driven extreme weather events and the transition to a low-carbon economy are expected to have material impacts on companies, with increasing significance for credit analysis. However, both physical and transition risks have a wide range of potential outcomes. To better understand the credit implications and prepare for climate risks it is important to assess the rage of possible outcomes for a given sector or company.

In its report, Climate scenarios vital to assess credit impact of carbon transition, physical risks, Moody’s Investors Service describes a conceptual approach to scenario analysis, leveraging Four Twenty Seven’s methodology for physical risks. The transition risk approach begins by assessing the sector-specific credit implications of national commitments to the Paris Agreement based on the IEA Stated Policies Scenario (STEPS). The second step is to assess the implications of a more ambitious transition scenario to see how firms may be affected by more rapid decarbonization.  This step leverages the IEA’s Sustainable Development Scenario.

For physical climate risk, Moody’s leverages Four Twenty Seven’s approach for exploring the range of potential outcomes in the next 30 years. It’s important to note that in the near-term the uncertainty in physical outcomes is not driven by policy changes, but rather by scientific uncertainty within the climate models. The climate takes a long time to fully respond to greenhouse gases in the atmosphere, so physical climate events in the next few decades will be driven by carbon dioxide that’s already been released. By grouping the outcomes of climate models within a single RCP into low, medium and high tiers one can explore the range of potential severity in climate hazards such as extreme temperature and precipitation. Moody’s will use data from Four Twenty Seven that follows this approach to provide a uniform starting point from which to explore the range of credit implications of different climate hazards across sectors.

Register for free to read the full report.

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To learn more about scenario analysis for physical climate risks read Four Twenty Seven’s paper, Demystifying Climate Scenario Analysis for Financial Stakeholders and check out solutions for investors, banks and corporations to manage their climate risk.

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.

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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.