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. 
Upcoming Events

An Update on Postponements and Cancellations:

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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.
 

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COVID-19 and Climate: Multifaceted Impacts

March 18, 2020 – 427 ANALYSIS.  The spread of the coronavirus (COVID-19) has created a global public health emergency and catalyzed an economic recession.  The crisis also has important implications for climate action and resilience-building. This analysis highlights several of these interacting factors.

The unprecedented global public health crisis from COVID-19 has led to a deteriorating global economic outlook, 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. This article will explore 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.

COVID-19 and Emissions

The rapid spread of COVID-19 has led some of the world’s largest economies to grind to a halt as social distancing measures prohibit non-essential business. The resulting emissions reductions provide a small silver lining to this unprecedented global crisis. In mid-February China’s emissions were 25% lower than a few weeks prior and Italy’s nitrogen dioxide emissions have dropped significantly. However, these may be short-term victories for the planet.

There is much more uncertainty on long term effects. On the one hand, this period of disruption will likely be followed by economic stimulus efforts, providing credits to industries with large emissions, such as steel, cement, and airlines, driving a rapid rebound in emissions. On the other hand, experts note that there is potential for the outbreak to shift travel patterns for the long-term, leading to more telecommuting as companies get acclimated to remote work. There is potential for permanently behavior changes that would have long term impact on oil demand and emissions. Whether or not governments focus on promoting a rebound in traditional energy or use this as an opportunity to catalyze a systemic shift to reduce emissions could be a key determinant in the impact on long-term greenhouse gas emissions.

Setbacks to Climate Action

It is evident that in the short-term ambitious climate policies are not a priority, as the attention of citizens and legislators turns to safeguarding communities and economies from the multifaceted impacts of COVID-19. Numerous climate-related events have been canceled, and in-person negotiations planned ahead of COP-26 have been delayed through at least April. The U.K. changed its generous environmental budget allocations and Spain stopped all legislative activity, with implications for climate action. While the European Union has announced a continued commitment to its Green Deal, meant to make the European Union climate neutral by 2050, the news has gotten limited attention due to the circumstances.

As increasingly severe travel and gathering restrictions begin to have rippling impacts, ongoing climate research is disrupted, including arctic research expeditions and several NASA projects. These studies include research on the ocean-atmosphere heat exchange, seasonal hydrology in the Mississippi River, and thunderstorms across the U.S. While NASA does not expect the delays to be detrimental to the projects, delays may range from several months to over a year. This may challenge efforts to ensure that the most current science underpins resilience-building efforts and climate progress.

Lessons Learned in Preparedness

A global pandemic is a well-rehearsed scenario in risk management, and institutions that had prepared and thought through implications of such an occurrence are faring better than those with less preemptive planning. For example, last October banks in Hong Kong underwent a stress test that simulated a pandemic, cyberattack and telecom breakdown happening concurrently. Now facing an actual pandemic, some banks are grateful for additional preparedness measures they had implemented due to the stress test. The COVID-19 crisis may in turn lead banks, other businesses and governments to identify opportunities for additional preparedness measures for future risk.

Reduced Resilience

As communities around the world face various levels of restrictions and concern for large gatherings grow, supply chains are threatened and manufacturing grinds to a halt, vulnerability to climate impacts increases. If a devastating storm or wildfire forced residents from their homes into crowded evacuation centers, the typical damage, loss and public health costs would compound upon the danger and challenges already being faced due to COVID-19. Likewise, the costs of recovery from a climate disaster would be dire on top of the increasing economic uncertainty.

Similarly, as companies face the impacts of the pandemic, including adapting to remote work if possible, an extreme weather event would complicate their efforts. While office buildings and key facilities may be prepared with generators in case of power outages and water proofing for floods, business’ operations are now particularly dependent on public power and communication infrastructure, as well as the resilience of each employee’s home. In addition to the disruption if employees are ill, many businesses are more vulnerable to disruptions from climate hazards during this time, which in turn increases macroeconomic vulnerability. Of course, the pandemic itself has many multifaceted economic and business impacts.

Conclusion: Underscoring the Need for Resilience

COVID-19 has understandably pushed climate action to the back burner as the public health crisis unfolds and fears of a long-term economic recession are pressing. However, the ways policy-makers, business 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. Likewise, the COVID-19 crisis may reinforce the value of preparedness for businesses and communities and help highlight opportunities to invest in adaptation and resilience.

 

Newsletter: The Economic Costs of Wildfires

Four Twenty Seven's monthly newsletter highlights recent developments on climate risk and resilience. This month we feature an analysis of the economic risks of wildfires, highlight a Moody's report on climate risk of US utilities and share recent action by central banks.

In Focus: Impacts of Australia's Bushfires

427 Analysis - What California's Wildfires May Foreshadow in Australia

As Australia’s bushfires rage on, questions arise on the long-term impacts on human health, biodiversity and the economy. Four Twenty Seven's newest analysis highlights lessons learned from the recovery from recent wildfires in California and how they may apply in Australia. While immediate economic impacts include emergency relief bills, business interruptions, costly loss of goods and reduction in tourism, the long-term impacts vary based on municipalities’ financial resources, economic make-up and preparedness.

The analysis discusses wide-ranging outcomes in real estate markets, ranging from Santa Rosa, CA's increasing housing costs and mini economic boom after the 2017 fires to Paradise, CA's transformation from a town of 26,000 to a town of 2,000 and nearby Chico's associated 20% population grown and real estate boom due to fire evacuees.

A municipality's ability to rebound after a fire is largely determined by insurance penetration, percent of housing stock lost and whether or not there was long-term emigration from the area. However, cities not themselves touched by flames are also affected, from evacuees to toxic smoke. Preparing for this new normal is challenging, with many considerations to balance. California's costly "Public Safety Power Shutoffs" in the Bay Area last fall highlight the progress that still needs to be made in developing effective preventative measures for wildfires. 
Read the Analysis
Utilities Exposed to Increasing Climate Risk

Moody's Investors Service Analysis - US Regulated Electric Utilities Face Varied Exposure to Climate Hazards

Moody's new analysis leverages Four Twenty Seven's physical climate risk data to explore the exposure of regulated electric utilities to climate hazards, finding that there is varying exposure to climate risk which may be mitigated by adaptation. Changing temperature and humidity trends can lead to drastic changes in energy demand, while higher temperatures can reduce production capacity. These hazards are particularly prevalent in the Midwest and in southern Florida. Water stress is typically credit-negative for electric utilities which depend on water for cooling. Utilities in California and the Colorado River region are particularly exposed to water stress. The report highlights the utilities most exposed to these and other hazards, discusses the implications for their credit and emphasizes the importance of resilience investments to mitigate these risks.
New Warnings on the Material Risks of Climate Change

Financial Actors and Corporate Leaders Urged to Take Climate Seriously

The World Economic Forum for the first time identified climate-related risks as the top five most likely business risks, and also cited these risks among the most impactful for 2020. Climate change was a key topic at the annual meeting of business leaders in Davos last week, underscoring the urgent need to prepare for its impacts. Meanwhile, the CEO of the world's largest asset manager, BlackRock, wrote to CEOs emphasizing the systemic threat posed by climate change and urging corporations to show they are prepared. Climate risk will be enormously disruptive to markets, with short-term price corrections and long-term reallocation of value. Better transparency will ensure risk is priced accurately, and will motivate investments in adaptation and resilience at the corporate and municipal level.

Climate Risk as a Credit Risk

While physical climate risks are expected to occur on a longer time frame than many credit maturities, recent extreme weather events have made banks and other financial actors increasingly aware of the need to factor physical climate risks into decision-making. In their article, "The Changing Climate of Credit Risk Management,"  Four Twenty Seven's Chief Development Officer, Frank Freitas and Moody's Head of Portfolio and Balance Sheet Research, Amnon Levy, also highlight that "as a rule, more than half a firm’s value can be attributed to cash flows beyond 20 or 30 years." This underscores the materiality of climate risks that become increasingly prominent in the next several years.
Central Banks Move on Climate Risk Analysis

Climate Change - The Green Swan

"Traditional backward-looking risk assessments and existing climate-economic models cannot anticipate accurately enough the form that climate-related risks will take. These include what we call 'green swan' risks: potentially extremely financially disruptive events that could be behind the next systemic financial crisis." The Bank for International Settlements in collaboration with the Banque de France, released a new book on climate change, financial stability & the role of central banks.

Bank of England Consultation Paper on Climate Risk Scenarios

The Bank of England announced plans to integrate transition and physical climate risk into its Biennial Exploratory Scenario exercise in 2021. Building on the climate risk stress test for insurers released last year, this exercise will apply to both banks and insurers in 2021. The Bank welcomes feedback on its approach by March 18, 2020.

The French Central Bank's Climate Risk Stress Tests

Earlier this month the Banque de France announced that it will release scenarios for climate risk stress tests for its banks and insurers in March and aggregated results will be shared in December. Governor François Villeroy de Galhau emphasized the goal of the stress tests is to identify the resilience of France's financial sector while also improving climate risk assessments.
Webinar: Climate Risk in Real Estate

Moody's Analytics REIS Network Webinar: Feb. 4 at 2pm EST. 

Join this live webinar to learn about the Moody’s REIS Network and Four Twenty Seven’s physical climate risk data for real estate. The REIS Network is an ecosystem of connected applications joining extensive real estate data sets with investment and risk assessment workflows. 
During this webinar, FourTwenty Seven Senior Analyst, Lindsay Ross, will provide a demo of Four Twenty Seven’s on-demand physical climate risk application. Register here.
Inside the Office at Four Twenty Seven

Meet Controller, Yang Jing

Four Twenty Seven welcomes Yang as Controller. Yang implements efficient processes and policies in compliance with US and international accounting standards and Moody’s accounting policies. She is a Senior Vice President in Accounting for Moody’s, where she works with business leaders to ensure compliance with SEC and international accounting regulations while providing near real-time financial data to enable executive decision-making. 

Join the Team! Four Twenty Seven is Hiring

There are several opportunities to join Four Twenty Seven's dynamic team in offices across the U.S. and Europe. See the open positions below and visit our Careers page for more information.
  • Climate Risk Analyst with expertise in translating applied climate change science for a wide range of stakeholders
  • Regional Sales Directors (North America and United Kingdom), with extensive experience selling and supporting data products and services for large commercial, financial and government institutions
Upcoming 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
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Berkeley, CA 94709









Economic Impacts of Bushfires: What California’s Wildfires May Foreshadow in Australia

January 29, 2020 – 427 ANALYSIS. As Australia’s bushfires rage on, questions arise on the long-term impacts on human health, biodiversity and the economy. This analysis shares lessons learned from the recovery from recent wildfires in California to offer some pointers of what might happen when the bushfires finally subside. While immediate economic impacts include emergency relief bills, business interruptions, costly loss of goods and reduction in tourism, the long-term impacts vary based on municipalities’ financial resources, economic make-up and preparedness.

Real Estate Markets

Over the past three years wildfires have razed thousands of buildings across California, destroying multiple communities. The impacts on real estate markets varies depending on the share of properties destroyed in a local community, as well as insurance penetration. After five percent of Santa Rosa’s housing stock burned in 2017, the city experienced an increase in property prices and rents following the fire: displaced households needed new dwellings, construction workers and emergency relief officials needed housing and amenities, and local businesses found new clientele. Although an estimated 3,300 people left Sonoma County after the 2017 fires, in Santa Rosa, CA, rebuilding has occurred more rapidly than expected. The areas affected by the fires had relatively high insurance rates, and families were able to pay for the reconstruction of their houses. Irreplaceable personal items were lost, but the city experienced a mini-economic boom due to construction in the area.

In contrast, the city of Paradise went from 26,000 residents before the Camp Fire down to 2,000. More than one year later, only a handful of houses have been rebuilt, and many residents struggle with whether they should move back. Insurance penetration was much lower in Paradise, and many low-income households cannot afford to rebuild their lives there.

Aside from short-term shortages in housing stock, long-term impacts on real estate and local economies depend on two main factors: whether the area experienced a permanent or long-term population loss, and whether insurance companies continue to offer policies for the area. This phenomenon has also been at play after other climate-related events, such as when Hurricane Maria hit Puerto Rico. The storm led to a four percent decrease in the island’s population.

Impacts can also indirectly touch other communities near wildfires: the same Camp Fire that devastated Paradise narrowly missed the neighboring city of Chico, CA. While Paradise’s economy has yet to recover, within three months of the fire, Chico’s population grew by 20%, with the addition of about 20,000 people. While Chico became the nation’s hottest real estate market the month after the fire, it also missed relief funds offered to towns touched by flames. From a sewer system now tasked with transporting 600,000 more gallons per day, to the need for more police force and a higher hospital demand, a year after the event, the city struggled to accommodate a population the city planners hadn’t expected for a decade.

Business Impacts

In California, the biggest impact was on the utility sector. As power lines and electric equipment were found to have started the wildfires, the liability ultimately resulted in Pacific Gas & Electric’s (PG&E) bankruptcy, coined “the first climate-change bankruptcy.” In Australia fires are most often started by dry lightning so utilities are not so exposed to liability risk, but may still be exposed to significant costs from disruptions and repairs associated with wildfires.

The insurance sector is also very exposed. Merced Property and Casualty local insurance company went bankrupt after California’s Paradise fire. The company had USD23 million (AUD34 million) in assets and owed USD64 million (AUD94 million)  in liabilities after the fire, which the state of California took over after the company defaulted. Insurance claims for the bushfires have already reached around AU939 million (USD646 million). Australian insurance companies could face material losses, particularly those with concentrated portfolios of properties or companies in regions affected by the fires.

For example, insurer IAG is the primary insurer in New South Wales and is thus expected to face the most financial risk from the current fires. IAG and Suncorp have both temporarily stopped selling wildfire insurance in exposed areas of Australia, to prevent last-minute insurance purchases. The final bill may be absorbed by reinsurance companies, which also need to contend with multiple, costly events globally. Increased losses, even if they do not lead to a bankruptcy, can also open the door to liability. In 2019 insurance giant QBE saw a shareholder resolution regarding its lack of preparedness for climate impacts.

Beyond utilities and insurance, businesses across sectors face several short-term risks from wildfires, including business interruptions, labor shortages and reduced consumer activity due to evacuations or smoke which can affect urban centers not themselves touched by flames. Businesses may also face increased costs due to equipment and property damage or loss.  In the long term, recurring wildfires could decrease attractiveness of certain parts of Australia, which would reduce companies’ hiring pool and decrease tourism revenues.

Municipal Resources

Residents’ decisions to stay in a recovering area is largely affected by whether insurance companies choose to provide coverage or pull out after wildfires. This in turn, is a key factor in the viability of long-term development and the strength of cities’ tax bases. Faced with potential population loss, local governments may attempt to provide public insurance if private insurers leave a city or region, such as the National Flood Insurance Program (NFIP) in the U.S. However, as seen with the NFIP, this mechanism can lead to unsustainable development and a moral hazard, encouraging unwise economic decisions by shifting risks from the individual buying property, to the government and therefore the public.

The desire to help an area rebuild needs to be balanced against a forward-looking perspective on the new realities of climate change. As temperatures increase, droughts become more common and wildfire conditions become more frequent, climate change will make some areas no longer suitable for human settlement. In California some insurers have stopped offering wildfire insurance to certain fire-prone counties. After careful deliberation the state recommended the creation of a Wildfire Victims Fund to help pay claims to wildfire victims, while also supporting wildfire mitigation. However, this comes alongside recommendations to require home and community fire risk reduction standards, establish a development fee for new construction in the wildland-urban interface, and mandate that new development must be reachable by firefighters within a maximum amount of time.

The impact of wildfires on a city’s credit rating may also affect its economic prospects after an event. Issuers in Sonoma County were not downgraded after the 2017 fires, because of their strong credit quality, insurance coverage, commitment to rebuilding and long-term economic viability. The County has an emergency reserve fund, which helped make up the shortfall in property taxes for destroyed properties, assuaging any concern from rating agencies on their balance sheet post-disaster.

However, a Moody’s credit analyst noted that smaller, less well-resourced communities like those burned during the 2018 fires in rural Shasta County, will face less rapid rebuilding, which means less revenue and more difficulty repaying their debt. This highlights the need for proactive preparedness efforts, particularly as those municipalities in particular need of financing may see credit declines if they experience wildfire loss.

Hidden Costs: Health Impacts

Image Credit: NASA Earth Observatory/Aqua/MODIS

Wildfires’ impacts on human health can be long-lasting and widespread. While Paradise, CA burned down in 2018 San Francisco, about 200 miles away, had the worst air quality in the world. This led to school closures and business disruptions during the event, but its impacts are still being felt. Three to five months after Sonoma County’s 2017 fires there was a 20% increase in emergency room visits for breathing challenges, as well as a 20% increase in visits for cardiac problems three months after those fires. While populations are advised to stay inside to shelter from smoke, many evacuation victims do not have that option.

Suburban wildfire smoke is particularly dangerous because burning gas stations, buildings, cars and other man-made materials releases many toxins, along with tiny PM 2.5 particles. The long-term impacts of inhaling countless chemicals are not yet fully understood but will likely exacerbate the well-documented damage to lungs and hearts caused by PM 2.5 particles. As public health costs increase, municipalities’ expenses may rise and human productivity may decline, posing additional risk to economies and communities made fragile by wildfire.

Preparing for a New Normal

Recent attempts at risk mitigation highlight the challenges to improve prevention. In October and November 2019 over a million Californian’s lost power during multiple PG&E “Public Safety Power Shutoffs,” meant to reduce the risk of wildfire during “red flag” conditions, with high winds and warm temperatures. With less than a day’s notice in some cases, residents, businesses and schools around San Francisco’s Bay Area spent days without power. Elderly and those relying on medical equipment faced life threatening hardship, local businesses experienced significant loss, long-term, high-profile research was disrupted, and costs of the event were expected to be around USD2 billion (AUD3 billion).

Australia and California used to share firefighting resources since they didn’t need them at the same time, and firefighting contractors built their businesses around staggered fire seasons. Now, Australia and California fight fires concurrently, business models must shift and municipalities must reallocate resources.

As climate change increases the occurrences of wildfires across the globe, policymakers and communities will need to balance these considerations and invest in adaptation and resilience to limit the impact of future fires.

This article was also published on The Fifth Estate and Which-50.

Natalie Ambrosio contributed to this analysis.

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Four Twenty Seven works with investors and businesses to provide portfolio hotpot screenings and real time due diligence with site-specific data on heat stress, water stress and other climate risks. Wildfire analytics are forthcoming. Contact us for more detailed analysis and site-specific data on climate risk exposure and its economic impacts.

Newsletter: How does climate risk threaten financial stability?

Four Twenty Seven's monthly newsletter highlights recent developments on climate risk and resilience. This month we feature analyses on climate change from the Federal Reserve, highlight insights on climate risk across sectors and announce the opening of Four Twenty Seven's Tokyo Office.

In Focus: Regulators Speak Up on the Financial Impacts of Climate Change

Federal Reserve Publishes Research on Climate Resilience

Last week, the Federal Reserve Bank of San Francisco released a set of articles on the impacts of climate change on communities and the economic and financial implications of these risks. The articles cover a range of topics including the impacts of sea level rise on real estate assets and lending, the need for innovation in insurance markets and the implications of climate-induced migration for the private sector. Four Twenty Seven contributed a piece on the connection between community resilience and asset-level resilience, describing a methodology for investors to understand and promote community adaptive capacity.

"The collection of 18 papers by outside experts amounts to one of the most specific and dire accountings of the dangers posed to businesses and communities in the United States — a threat so significant that the nation’s central bank seems increasingly compelled to address it." - The New York Times' Christopher Flavelle wrote.
Read the Publication

International Monetary Fund to Assess Financial Risk of Climate Change

“'We are doing work on the pricing of climate risks and to what extent it is priced into stock and bond markets,' Tobias Adrian, financial counselor and director of the IMF’s monetary and capital markets department, told Reuters." Adrian cited the costly impact of Hurricane Dorian in the Bahamas and growing investor concern around the mispricing of climate risk in mortgage-backed securities as examples of the widespread financial impacts of climate change. This was one of many climate change conversations at the IMF's annual meeting last week.
Resources for Resilience Across Sectors  

Optimizing Community Infrastructure

Optimizing Community Infrastructure: Resilience in the Face of Shocks and Stresses examines the multiple dimensions of infrastructure that underpin resilient societies. The book discusses transportation infrastructure as well as utilities, land use and buildings and includes case studies and guidance on financing resilient infrastructure. Four Twenty Seven co-wrote a chapter with Climate Finance Advisors that examines how physical climate risks can impact infrastructure assets throughout their life cycle and ways in which investors and lending institutions can identify and manage physical climate risks in infrastructure assets. 

Resilient Cities - Transforming Over Time

This set of editorials discusses innovative opportunities to adapt communities and infrastructure to climate risks. The pieces cover the economic and social elements of climate risk and resilience, and Four Twenty Seven contributed an article, Addressing Shared Climate Risks to Build Community-Corporate Resilience. 

Podcast: Climate Change is Here. Are We Ready?

Founder & CEO, Emilie Mazzacurati, joins a new podcast, The Last Environmentalist, to discuss the evolving views of climate risk in the financial sector. Emilie describes near-term impacts of climate change on real estate markets, adaptation actions taken by corporations and the linkages between climate risk and resilience across private and public sectors.
 Climate Change Exacerbated the Impacts of Typhoon Hagibis
Within 24 hours Typhoon Hagibis sent over three feet of rain into areas surrounding Tokyo, as fierce winds exacerbated flooding from storm surge. At least 74 people died, 34,000 homes lost power and 110,000 lost running water. Meanwhile, disrupted ground transportation and damaged facilities had rippling effects. Subaru stopped operations at three facilities in the area due to disruptions at their suppliers, other automobile manufacturers halted production at damaged facilities and logistics firms incurred the costs of doubling their distance with alternate routes. 

While many areas of Japan have robust building standards to account for already frequent typhoons, the frequency and distribution of storms in Japan is shifting. Three of Japan's most costly typhoons since 1950 have happened in the past two years, with Typhoon Hagibis expected to be the fourth. The storm was unique partly because it is rare for storms to hit Tokyo with so much force. Research shows that tropical cyclones in the Northwest Pacific Ocean Basin are reaching maximum intensities further north than they used to, partly influenced by climate change, which means areas less accustomed to these extreme storms may experience them more often. 
Inside the Office at Four Twenty Seven

Four Twenty Seven Opens Toyko Office and Announces Country Director

Yesterday, Four Twenty Seven announced the opening of its Tokyo Office. This 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.

Four Twenty Seven welcomes Toshi Matsumae as Director of Japan. Toshi leverages his 30 years of experience in sales and development 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,” said 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.”

Join the Team! Four Twenty Seven is Hiring

There are several opportunities to join Four Twenty Seven's dynamic team in offices across the U.S. and Europe. See the open positions below and visit our Careers page for more information.
  • Regional Sales Directors (North America and United Kingdom), with extensive experience selling and supporting data products and services for large commercial, financial and government institutions
  • Controller experienced in financial reporting, planning and analysis
  • Director of Financial Data Systems with significant experience in the development and management of financial data processing, storage and retrieval
Upcoming Events

Join the Four Twenty Seven team at these events:

  • Oct 25 – Yale Alumni Real Estate Annual Conference, New Haven, CT: Senior Analyst, Lindsay Ross, will speak about resilience planning in real estate.
  • Nov 5 – Moody's ESG Conference, London, UK: Director of Analytics, Nik Steinberg, will discuss climate change's financial implications and Chief Revenue Officer, Lisa Stanton, will also join. 
  • Nov 7 –  Moody's U.S. Public Finance Conference, New York, NY: Lindsay Ross will participate. 
  • Nov 7 - 8 – Building Resilience 2019, Cleveland, OH: Global Director of Client Services, Yoon Kim, will speak on a panel about public-private partnerships.
  • Nov 8 – Yale Initiative on Sustainable Finance Symposium, New Haven, CT: Editor, Natalie Ambrosio, will speak about physical climate risk disclosure. Invite-only.
  • Nov 13 - 15 – SRI Conference, Colorado Springs, CO: Natalie Ambrosio will speak about physical climate risk in investments.
  • Nov 21 - 22 – IACPM 2019 Annual Fall Conference, Miami, FL: Lisa Stanton will speak at this International Association of Credit Portfolio Managers conference.
  • Nov 29 – Climate Finance Day, Paris, France: Lisa Stanton, Director, Europe, Nathalie Borgeaud, and Senior Analyst, Léonie Chatain, will attend.
  • Dec 4 – 2019 HIVE Conference, Austin, TX: Strategic Advisor, Josh Sawislak, will present about how to use data to build resilience. 
  • Dec 4 - RI New York 2019, New York City, NY: Yoon Kim, will speak on the panel “Banks, insurers and climate risk stress-testing,” and Lindsay Ross and Natalie Ambrosio will host Four Twenty Seven's booth.
  • Jan 6 - Jan 9NCSE 2020 Annual Conference, Washington, DC: Yoon Kim and Lindsay Ross will speak about cross-sector resilience-building and resilient infrastructure, respectively.
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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
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The Last Environmentalist Podcast: Climate Change Is Here. Are We Ready?

How does the private sector view climate change, why is this important for global climate adaptation and how does someone in this field remain motivated?  Founder & CEO, Emilie Mazzacurati, joins Josh Dorfman’s new podcast, The Last Environmentalist, to discuss these topics and much more. The conversation covers the evolving views of climate risk in the financial sector and how this awareness can translate into resilience-building.  Emilie describes near-term impacts of climate change on real estate markets, adaptation actions taken by corporations and the interacting nature of climate risk and resilience across private and public sectors.

For more detail on climate risk in real estate, read our recent analysis, Real Estate Climate Risks: How Will Europe be Impacted? For more insight on shareholder engagement, read our report, Engaging with Corporates to Build Adaptive Capacity.

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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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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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.

Factsheet — Financial Climate Risk Regulation in France

July 29, 2019 – 427 FACTSHEET. In 2015 France laid the groundwork for legislating climate risk disclosure with Article 173 of its Energy Transition Law, mandating that publicly traded companies and asset managers report on their physical and transition risks from climate change. Building on its track record as an early mover, France’s financial regulators are now actively involved in national and international endeavors to frame climate risk as a financial risk and determine the most effective response.  Staying up-to-date on these developments will provide early indications of regulatory action to come. This factsheet on regulatory developments in France provides background on France’s sustainable finance agenda, outlines key actions and highlights upcoming dates to remember.

France’s Art. 173 helped build support for the Taskforce on Climate-related Financial Disclosures recommendations, prompted firms to begin disclosing climate-related risks early and set an example for other nations considering regulation on climate risk disclosure. Since this landmark legislation, French financial regulators have become engaged on addressing financial risks from climate change and the Banque de France was a co-founder and provides the Secretariat for the Network of Central Banks and Supervisors for Greening the Financial System (NGFS), which is focused on propelling the transition to a low-carbon and sustainable economy. By providing the Secretariat for the NGSF, the Banque de France identifies itself as a key player in international efforts to address climate risk. This factsheet, Financial Climate Risk Regulation in France, summarizes France’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

  • Banque de France was the first central bank to release an assessment of its climate risks in line with the TCFD and Art. 173, aiming to set an example of best practice for the French financial sector.
  • ACPR’s fall 2018 survey of the French insurance sector found that disclosures in Art. 173 reports varied between firms and lacked reporting on long-term climate strategies and yearly progress. ACPR made suggestions for insurers to improve their climate risk management based on this review.
  • In summer 2018, ACPR surveyed its banking sector on banks’ climate risk management, identifying “advanced institutions,” larger banks with ample resources that have integrated climate into risk management, and “wait-and-see” institutions, which are largely domestic, retail-oriented banks still focused on a corporate responsibility approach to climate change.
  • France’s stock market regulator, AMF, released a report asserting that climate change has been identified as a financial risk, it is still not sufficiently assessed by the market, and the regulator’s role is to inform and raise awareness on the topic.

Read the Factsheet.

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

 

Factsheet — Financial Climate Risk Regulation in the United Kingdom

July 29, 2019 – 427 FACTSHEET. The Bank of England’s views on climate risk provide an indication of how the broader financial sector will likely approach the issue. The Bank propels this conversation by framing issues and convening stakeholders around the challenges and uncertainties of climate risk. With the integration of climate change into its insurance stress tests, the Prudential Regulatory Authority (PRA) has shown that the Bank’s declarations are starting to influence regulatory requirements. Staying up-to-date on these developments will provide early indications of regulatory action to come. This factsheet on regulatory developments in the United Kingdom (UK) provides background on the Bank of England’s approach to climate risk, outlines key actions and highlights upcoming dates to remember.

The Bank of England has been on the forefront of acknowledging climate change as a material financial risk since before it was commonly discussed in the financial sector. Its Governor Mark Carney coined the term the “tragedy of the horizon” in 2015 referring to the economic risks of climate change. Since then, the Bank has become known for emphasizing climate change as an urgent threat to financial stability and financial regulation in the UK is beginning to reflect this stance. Paying close attention to developing perspectives at the Bank will help prepare financial actors for future regulatory changes to come. This factsheet, Financial Climate Risk Regulation in the United Kingdom, summarizes the UK’s stance on the financial risk of climate change, notes key declarations and highlights recent and upcoming action applicable to financial markets.

Key Takeaways

  • The PRA included scenarios for physical and transition climate risks in its “Scenario Specification, Guidelines and Instructions” for life insurance and general insurance stress tests released in June 2019.
  • In April 2019, Carney announced that banks and insurers will be “expected to embed fully the consideration of climate risks into governance frameworks, including at board level.” This was followed by a supervisory statement outlining these expectations and asking firms to have preliminary plans by Oct. 15 2019.
  • In May 2019, the PRA’s working group of insurance industry experts released a framework for assessing the impacts of physical climate change in the insurance sector and is seeking feedback by Nov. 22 2019.
  • The PRA and Financial Conduct Authority (FCA) developed a Climate Financial Risk Forum, including banks, insurers, asset managers and other financial stakeholders, that will promote capacity building and knowledge sharing for responding to financial climate risks.

Read the Factsheet.

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