Newsletter: Climate Resilience and Emerging Tools for Financial Institutions

On April 25th, the California Senate Public Employment and Retirement Committee passed Senate Bill 560, a bill directly inspired by the French Article 173, requesting CalPERS and CalSTRS, the two largest public pension funds in the US, to report annually on the financial climate risks of their investments. CalPers and CalSTRS are at the forefront of climate change for institutional investors, recognizing that climate change poses risks within their investment portfolios and that these risks, whether as physical, regulatory, or relational need to be mitigated. CalPers is also the first institutional investor to state explicitly that corporate directors should have expertise on climate change.

Art. 173 has garnered growing interest from the financial community worldwide as a path to better understand hidden climate-related risks in their portfolio. The 2° Investing Initiative (2dii) guide “Lighting the Way to Best Practice” provides an overview of emerging practices in applying Article 173-VI of the Energy Transition for Green Growth based on 2016 reports. Four Twenty Seven is working with its clients on 2017 disclosures — we will share insights on our methodology to assess physical risks in equity portfolio to help its clients comply with Art. 173 in the coming months.

Photo by © Steven Pavlov / http://commons.wikimedia.org/wiki/User:Senapa, CC BY-SA 3.0

Last Friday, BlackRock Inc, the world’s largest asset manager, cast a determining vote and helped pass a shareholder proposal for Occidental Petroleum Corp to incorporate climate change reporting, going against Occidental’s board recommendation. The resolution is the first of its kind for a major US oil company, and the first example of action by BlackRock since the asset management titan publicly committed to requiring robust climate disclosures from its portfolio companies. Read more about why and how corporate investors are pushing for their companies to disclose their climate risk in this articles on the Huffington by Four Twenty Seven CEO Emilie Mazzacurati.

• Read: Why BlackRock is Worried About Climate Change – Huffington Post.

Media giant Bloomberg launched a climate-focused news website, ClimateChanged.com. The website is devoted to stories within climate science focusing on data, finance and more. ClimateChanged looks to be a natural fit within Bloomberg’s range of platforms since the website was already reporting regularly on climate stories.

“Climate change is fundamentally an economic story, it’s an economic problem,” Eric Roston, Bloomberg’s sustainability editor, told The Huffington Post in an interview. “It’s naturally a business story and it’s naturally a concern to rationally minded executives in any sized enterprise.”

The site includes a noteworthy 3-part series on the political and economic ramifications of rising temperatures in the Arctic and the resources that the melting ice makes available.

Newly updated sea level rise scenarios were published by the National Oceanic and Atmospheric Administration in January, revealing devastating impacts for the United States. To illustrate this scenario, Climate Central created an explorable 3D map using Google Earth, allowing users to see for themselves what 10 to 12 feet of sea level rise would mean for coastal locations across the US – as illustrated above. The scenarios, published together in a technical report by the NOAA, added a new category in sea level rise, “extreme”, which supplements the high, intermediate and low-level categories. The extreme category was added to reflect recent research suggesting parts of the Antarctic ice sheet could start to collapse sooner than scientists had anticipated. While unlikely, Climate Central says the extreme rise scenarios are becoming increasingly plausible. The extreme scenario reveals roughly 10 to 12 feet of sea level rise by 2100, depending on location, which is much higher than the global average projection of a little over 8 feet.

How can financial institutions screen for climate risk? Four Twenty Seven founder and CEO Emilie Mazzacurati presented Four Twenty Seven’s approach to screening portfolios for exposure to the physical impacts of climate change. Speaking to an audience of public and private investors, Emilie discussed the relative sensitivity of asset classes, how climate hazards could become material financial events, and Four Twenty Seven’s proprietary methodology to screen real assets and equity portfolios for physical risk.

Emilie’s presentation was part of the ProAdapt symposium “Climate Risk and Investment: Framing Private Challenges and Opportunities,” a conference to discuss common challenges and emerging investment opportunities in climate resilience. Emilie also moderated a panel on “The Role of Blended Finance in Promoting Climate Resilience.” Above, Emilie provides insights in a short interview, discussing the demand for climate resilience work in the future and how companies are looking better understand climate resilience.

Watch Emilie’s interview and full recordings of both symposium panels.

The National Adaptation Forum gathered close to a thousand practitioners from the adaptation community to foster knowledge exchange, innovation and mutual support for a better tomorrow while focusing on established and emerging issues of the day. Four Twenty Seven’s Yoon Hui Kim, Director of Advisory Services, and Aleka Seville, Director of Community Adaptation, joined the convening of adaptation practitioners from around the country focused on moving beyond adaptation awareness and planning to adaptation action.

Yoon spoke on the panel, “Next Era of Market Finance for Resilience,” discussing new financial tools that can make resilience projects more interesting for investors, as well as presented a poster on Four Twenty Seven’s work to evaluate vulnerability to heat events in the United States, taking socioeconomic factors into account.

Aleka co-facilitated a pre-conference workshop on May 8th to discuss findings from our ongoing Climate Adaptation Portfolio Review for the Kresge Foundation. Four Twenty Seven is partnering with Climate Resilience Consulting and Susanne Moser Research & Consulting to conduct the review and will be publishing our results in a public report.

• May 17: Washington Public Ports Association Spring Meeting, Suncadia, WA: CEO and founder Emilie Mazzacurati will discuss how climate change will impact ports and adaptation strategies.
• May 22: California’s Climate Adaptation Strategy Draft Release and Workshop, San Francisco, CA: Yoon Kim, Director of Advisory Services, and Kendall Starkman, Climate Adaptation Senior Analyst, will join to provide input on the Safeguarding California Plan draft.
• May 22: California Office of Planning and Research Workshop, San Francisco, CA: Yoon Kim and Kendall Starkman will take part in this workshop to update California’s Sea Level Rise Guidance Document
• May 24: Climate Is Big Business, San Francisco, CA: Yoon Kim will attend the conference to discuss business opportunities in the transition to a resilient economy.
• June 6-7: RI Europe 2017, London, UK: Emilie Mazzacurati will attend Europe’s leading conference for sustainable business and investing.