Director of Analytics, Nik Steinberg, discusses wildfire risk, impacts and prevention efforts, on the Midday Briefing. Nik explains implications of increasingly frequent and severe wildfires for the insurance industry and homeowners and shares several ideas for adapting to these risks. While fires have always occurred, climate change is changing the landscape of the wildland-urban interface and residents and policy-makers must understand their wildfire risks and implement preventative strategies. The economic implications are huge for utilities, shareholders and communities, but with intentional planning businesses, governments and residents have the opportunity to mitigate loss.
June 5, 2018 – 427 REPORT. Shareholder engagement is a critical tool to build resilience in investment portfolios. Investors can help raise awareness of rising risks from climate change, and encourage companies to invest in responsible corporate adaptation measures. We identify top targets for shareholder engagement on physical climate risks and provide data-driven strategies for choosing companies and approaching engagement. Our report includes sample questions as an entry point for investors’ conversations about climate risk and resilience with corporations.
Shareholder engagement on climate change has grown tremendously in recent years. Over 270 investors, managing almost $30 trillion collectively, have committed to engage with the largest greenhouse gas emitters through the Climate Action 100+. In addition to their ongoing efforts to engage and encourage companies to reduce emissions, investors are becoming aware of the financial risks from extreme weather and climate change. Climate change increases downside risks: a negative repricing of assets is already being seen where climate impacts are most obvious, such as coastal areas of Miami. As climate change can negatively impact company valuations, investors must strive to bolster governance and adaptive capacity to help companies build resilience.
This Four Twenty Seven report, From Risk to Resilience – Engaging with Corporates to Build Adaptive Capacity, explains the value of engagement, for both corporations and investors and describes data and case studies to drive engagement strategies. While news coverage of extreme weather events can clue investors in to which corporations may be experiencing climate-driven financial damage, new data can empower investors to identify systemic climate risk factors and proactively engage companies likely to experience impacts in the future. Reactive engagement strategies based on news stories can also use data to more thoroughly explore corporations highlighted in the news, by examining other hazards that may pose harm to their operations.
The report also identifies the Top 10 companies with the highest exposure to physical climate risk in the Climate Action 100+ and calls for investors to leverage their engagement on emissions to also address urgent issues around climate impacts and building resilience.
Once they identify companies, shareholders can use a variety of questions to gain a deeper understanding of companies’ vulnerability to climate hazards and their governance and planning processes, or adaptive capacity, to build resilience to such impacts. The report provides sample questions for different components of climate risk, including Operations Risk, Market Risk and Supply Chain Risk, as well as Adaptive Capacity.
• The impacts of a changing climate pose significant downside risk for companies; a risk bound to increase as the climate continues to degrade.
• At present, investors are likely to become aware of exposure to financial damages from extreme weather events only after they have occurred. Disclosure is limited but gaining traction.
• Corporate engagement is a tool to encourage companies to deploy capital and technical assistance to build resilience in their operations and supply chains.
• Investors can select target companies reactively based on prior incidents or pro-actively identify firms that would benefit from resilience plans.
• Investors should question companies on their exposure to physical climate risks via their operations, supply chain and market, as well as how they are building resilience to these risks through risk management and responsible corporate adaptation strategies.
April 25, 2018 – 427 TECHNICAL BRIEF. Financial institutions, corporations, and governments increasingly strive to identify and respond to risks driven by physical climate impacts. Understanding the risks posed by climate change for facilities or infrastructure assets starts with conducting a risk assessment, which requires an understanding of the physical impacts of climate change. However, climate data in its raw form is difficult to integrate into enterprise risk management, financial risk modelling processes, and capital planning. This primer provides a brief introduction to climate models and data from a business or government perspective.
The first of several reports explaining the data and climate hazards analyzed in Four Twenty Seven’s equity risk scores and portfolio analytics, Using Climate Data unpacks the process through which raw climate data is transformed into usable metrics, such as future temperature projections, to help financial, corporate and government users productively incorporate climate-based analytics into their workflows. Beginning by explaining what a global climate model is, the report explains climate data’s format, computational choices to hedge uncertainty and resources for aggregated climate projections tailored to specific audiences.
The year 2017 will stay on the record as one of the most expensive years to date for climate and weather disaster events. The U.S. experienced 16 weather and climate disasters that caused over $1 billion in damages, tying the record year of 2011 for the most billion-dollar disasters. From summer through the fall, wildfires in various parts of California led to fatalities, destruction of entire communities, and damage costs of $18 billion, with economic consequences that will continue to impact the region. These events have highlighted that climate change has already begun to and will continue to impact local communities and businesses, and that local economies will benefit from more coordinated resilience planning.
Communities across the U.S. are taking steps to identify their climate change risks and enhance their resilience to changing climate conditions. Many local governments have assessed their vulnerabilities and are developing resilience plans with support from local stakeholders. However, a key set of stakeholders are often not at the table: businesses. Collaboration between local governments and the business community on climate change resilience remains limited. As local and regional climate change planning continues, it becomes increasingly important for local governments to engage with businesses, both large and small, on these issues.
The success of businesses and communities is intertwined
Many larger companies recognize the impacts of climate change on their operations, including risks to physical assets, disruptions to supply chains, and impacts on their workforce. In fact, some businesses, like Google, are examining how to develop company resilience strategies that address changing climate conditions. Businesses are also dependent on public infrastructure and local government services, and climate risks on these “outside the fence” components are much harder for businesses to evaluate. In fact, a number of companies have highlighted these uncertainties as a major barrier in addressing adaptation.
Local governments are dependent on the private sector in many ways. Businesses are essential to the economic health and growth of communities. Business interruptions can affect the quality of life for residents, disrupt the local economy, and reduce tax revenues. The costs of Hurricane Harvey are still being evaluated, but preliminary estimates suggest that lost economic output from this storm was in the range of $9 billion to $11 billion, including $540 million for goods-producing industries and $141 million for oil and gas industries. The October 2017 wildfires in California’s wine country are estimated to have caused economic losses between $6 and $8 billion dollars due to property damage and business interruptions alone, with $789 million in commercial property claims. These costs do not include the potential losses to the wine industry for many years to come.
Local governments have a strong interest in ensuring that businesses are resilient and remain operational as the climate continues to change. Companies will also benefit from engaging with the public sector on community resilience to enhance their business continuity plans and support their employees. In addition to better protecting their employees and operations, this type of collaboration will help businesses better understand community needs.
Businesses can assist local governments with expertise and solutions
Larger businesses often already understand local risks because of internal risk management processes. Risk management and emergency management plans, along with drills and training exercises with employees, help businesses prepare for extreme events. Local governments can coordinate with businesses on risk management, including participating in drills and trainings, to build and maintain community resilience.
Local governments can also use larger companies’ expertise and data on risk. Businesses may be monitoring information that could be relevant to local resilience planning. For example, utilities often track potential risks to their assets, such as those related to storms (e.g., wind, precipitation, flooding), wildfire, and temperature impacts on energy demand. This information can be helpful to local decision-makers in both emergency management and long-term resilience planning.
The private sector also offers opportunities in services and solutions. Businesses are often interested in developing and improving technologies, engineering approaches, technical assistance, and opportunities to connect with their communities. For example, Airbnb offered disaster relief to people impacted by the California wildfires, connecting displaced residents to available housing. The company also worked with the City of San Francisco’s Department of Emergency Management to share their lessons learned from Superstorm Sandy. Airbnb is also partnering with various local governments to help communities prepare for and recover from disasters. Local governments’ suggestions for climate change solutions and services can help businesses tailor their products to best serve the community.
In addition, financing for implementing community resilience can often be a challenge for local governments. The private sector can offer financing solutions to help fund climate change resilience. For example, Pacific Gas and Electric Company (PG&E) is investing $1 million over five years through their Better Together Resilient Communities grant program to support local climate resilience initiatives in California.
Local governments can share data and information with businesses
Some local governments have undertaken vulnerability assessments and climate change scenario planning for their regions. The data and results from these studies can be shared with businesses to help them understand what assumptions are being used by local governments, and whether their scenarios align, which will be increasingly important to ensure regional coordination as conditions change.
While larger companies may undertake scenario planning and vulnerability assessments, most small businesses do not. However, small businesses can also benefit from data and information sharing. Small companies do not often have the expertise or resources to adequately assess climate change risks and undertake resilience planning. Local governments can share information with small businesses to help them better understand their potential risks and prepare for extreme events. In California, Valley Vision has developed the Capital Region Business Resiliency Initiative to help engage the small business community in resilience planning. This effort helps small businesses engage with local stakeholders to understand potential risks and provides resources to help these businesses plan for disaster resilience.
Local governments can engage with businesses through existing networks or by creating new processes to assist with engagement
Local governments can engage with both small and large businesses through networks and organizations for the private sector, like local chambers of commerce, trade associations, and other business networking groups. For example, the City of Annapolis has engaged the Anne Arundel County Chamber of Commerce and the Downtown Annapolis Partnership in its Weather It Together initiative, which is focused on adapting the historic community to minimize the risks associated with flooding. Through this effort, local businesses are part of the planning process to help the community become more resilient. The City of Cambridge, Massachusetts has also engaged businesses in long-term planning efforts like the Cambridge Compact and the city’s Climate Change Preparedness & Resilience Plan. Establishing public-private partnerships focused on climate resilience will also help to facilitate conversations and collaboration between these two sectors.
Local governments may already engage with businesses individually, but it can be helpful to set up an ongoing process for involving the private sector in resilience planning. For example, business representatives can participate in local planning and advisory committees, contributing their perspectives and identifying any key issues for the business community. Effectively engaging the business community will often require targeted outreach and potentially different strategies, as businesses may not be aware of ongoing stakeholder processes or may not realize their relevance to company needs. Some communities have incorporated businesses into resilience planning through regional climate collaboratives. Several regional climate collaboratives in California focus on engaging different stakeholder groups, including businesses, to further climate change planning. For example, the Sierra Climate Adaptation and Mitigation Partnership was founded by the Sierra Business Council and has various business members, including ski resorts and forestry companies.
Effectively preparing for climate change’s impacts requires that cities coordinate with many different stakeholders. Businesses, public agencies, community groups, and citizens are all important to the discussion on community resilience, as they will all be impacted by climate change and have important ideas to contribute. Engaging the private sector is an important way for local governments to improve community resilience, and will benefit both the public and private sector through information sharing, aligning needs and goals, and developing multi-sector networks.
Climate change impacts are already being felt in California and will continue to affect populations, infrastructure and businesses in the coming years. A resilient California is a state with strong infrastructure, communities and natural systems that can withstand increasingly volatile conditions. Executive Order B-30-15, signed by Gov. Brown in April 2015, mandates that all state agencies must consider climate change and that they must receive guidance on how to effectively do so.
To support the implementation of this Executive Order, the California Governor’s Office of Planning and Research released last week “Planning and Investing for a Resilient California,” a guidance document outlining strategies to include climate adaptation in decision-making. Four Twenty Seven CEO Emilie Mazzacurati served on the Technical Advisory Group that wrote the report, which aims to provide guidance for state agencies to both plan for future climate conditions and also conduct planning itself in a new way.
The guide outlines four steps for integrating climate into decisions and then looks specifically at investing in resilient infrastructure, providing actionable guidelines for building a resilient California.
1. Characterize climate risk
2. Analyze climate risk
3. Make climate-informed decisions, by using resilient design guidelines
4. Track and Monitor Progress
Several state agencies are already integrating climate change into their planning. The Department of Water Resources used a scenarios approach to capture uncertainty in climate, but also in demographics, economic change and land use. Examining 22 different climate scenarios, analyzing different temperature and precipitation possibilities and accounting for growth uncertainty, the agency looked at 198 possible futures. This allowed them to examine different possible management approaches and how they may reduce certain vulnerabilities. This quantitative estimate provided a range of future conditions and possible strategies for the agency to consider in its planning.
The state of California invests in infrastructure through funding of onsite renewable energy and telecommunications, providing financial assistance to projects not owned by the state and providing capital for all steps of infrastructure development owned by the state. Regardless of the type of investment, climate change impacts must be considered. It’s important to first determine if there is a way to accomplish a goal by using natural infrastructure. Assessing the potential for natural infrastructure can be done by examining the landscape, exploring Cal-Adapt’s projections for the area, analyzing potential co-benefits such as improved ecological services or water health and consulting with other groups. It’s important to compare the risk reduction and complete costs and benefits of the natural infrastructure approach with the non-natural alternative. Using full life-cycle accounting, that considers all of the costs from a project including building, operating, maintaining and also deconstructing, is essential for evaluating proposed projects. Prioritizing infrastructure with climate benefits and integrating the resilient decision making principles will ensure that investments are resilient and climate-conscious.
This guidance document is a continuation of California’s ongoing leadership in climate adaptation, which includes Senate Bill No. 379 Land Use: General Plan: Safety Element, passed in 2015. This bill mandates that every city must include adaptation and resilience strategies in General Plan Safety Elements and Local Hazard Mitigation Plans by 2017. Read about Four Twenty Seven’s work helping cities in Alameda County implement these requirements and learn about our advisory services for adaptation planning, policy consulting and vulnerability assessments.
Integrating climate change considerations into local planning processes can be a daunting task. Climate data is complex, fragmented, and comes in a format and at a scale that does not necessarily speak to planners and GIS analysts. More importantly, interpreting climate projections and integrating it into planning and policy processes requires a nuanced understanding of climate models as well as local governments’ inner workings.
Four Twenty Seven has developed a streamlined process to support local governments in their efforts to integrate climate risk into key planning efforts: local hazard mitigation plans, general plans, climate action plans, etc. Our services blend modeling and data integration with policy analysis to help cities and counties develop adaptation strategies that address their most critical risks and leverage local strengths and community needs.
This case study presents Four Twenty Seven’s work for six cities in Alameda County, funded by the Alameda County waste authority StopWaste, to respond to California’s Senate Bill No. 379 Land Use: General Plan: Safety Element (Jackson) (SB 379). SB 379 requires cities in California to incorporate adaptation and resilience strategies into General Plan Safety Elements and Local Hazard Mitigation Plans starting in 2017. For each city, Four Twenty Seven developed a chapter that responds to these requirements by providing a climate hazard exposure analysis and proposing a set of adaptation options to help each city plan for future conditions.
Alameda County is located in the east San Francisco Bay, stretching from the shoreline of the Bay east across the Berkeley and Oakland hills. Due to its location, the county is exposed to a variety of climate hazards including sea level rise, inland flooding, temperature and precipitation changes, wildfire, and rainfall-induced landslides. While some cities in the County have robust plans for climate adaptation, others lack the targeted information to consider climate in a tangible, actionable way in their City planning.
For the hazard exposure assessments, Four Twenty Seven leveraged our partner Vizonomy’s platform to overlay regional climate hazard data with asset location data from public sources and the cities themselves. The overlay of hazard layers and asset location informed an identification of how sea level rise, flooding, fire and landslide might affect specific assets and/or the city overall. Four Twenty Seven also modeled city-specific projections of future temperature and precipitation changes using downscaled climate data, and our partner, Cadmus, conducted a review for compliance with FEMA requirements.
Four Twenty Seven used the results of these assessments, together with a review of existing city plans and the draft SB 379 guidelines from the California Governor’s Office of Planning and Research, to develop a set of adaptation actions that cities may use to inform relevant plans addressing these hazards.
The actions identify adaptive policies and projects and provide information on potential implementation partners, potential funding sources, timeframe, ease of implementation, co-benefits, and equity considerations.
Our process supports cities and counties in integrating climate change risks and adaptation into current planning processes to align goals, promote efficiency, and leverage resources. Understanding that each city or county operates in a unique context, we work closely with relevant stakeholders to provide services that meet relevant policy requirements as well as address local needs and circumstances.
Contact: Yoon Kim, PhD., Director of Advisory Services – email@example.com – 415.890.9090
Director of Advisory Services Yoon Kim moderated a panel at the 2017 National Conference and Global Forum for Science, Policy, and the Environment. The session, titled “Climate Data and Public Health: Mobilizing Adaptation Action”, explored the role of interactive data tools in the adaptation continuum – from diagnosis to planning to solutions – through concrete case studies. Presenters brought local public health and private sector hospital perspectives from across the United States. You can listen to a full recording of the panel here, and follow along with the presentation slides.