Goldman Sachs Selects Moody’s ESG Solutions Dataset on Sovereign Climate Hazards

Goldman Sachs is leveraging Moody’s ESG Solutions data on sovereign physical climate risk, powered by Four Twenty Seven, to inform its fixed income strategy. Read the press release from Moody’s:

LONDON – (BUSINESS WIRE) – Moody’s ESG Solutions Group announced today that Goldman Sachs Asset Management (Goldman Sachs) has selected Sovereign Climate Risk Scores powered by Moody’s affiliate Four Twenty Seven for use in its ESG evaluation of sovereign risk. The dataset provides a detailed view of the future exposure of the global population, the economy, and agriculture to a range of physical climate hazards.

As the impact of climate factors such as higher temperatures, drought, rising sea levels, and more extreme weather events are expected to increase over time, Goldman Sachs will use the dataset as an input to its own proprietary Sovereign ESG framework. This assessment of climate risk exposure will be combined with qualitative analysis by Goldman Sachs’ investment teams on countries’ capacities to adapt to physical risks.

“Sovereign bonds are an integral part of our fixed income portfolios, but intrinsic uncertainties make it challenging to quantify the long-term impact of climate change on countries,” said Prakriti Sofat, Executive Director at Goldman Sachs Asset Management. “Using this dataset will help us assess this evolving risk and reflect it in our investment decisions.”

The Sovereign Climate Risk Scores launched in December and are the only known dataset matching physical climate risk exposure to population location, GDP (Purchasing Power Parity) and agricultural areas within countries, with detailed metrics including both percent exposed and total amount exposed to each climate hazard. Understanding multiple dimensions of sovereigns’ exposure to floods, heat stress, hurricanes & typhoons, sea level rise, water stress and wildfires informs targeted risk management strategies.

“Understanding exposure to physical climate hazards is critical for investors and credit institutions in order to price climate risk, and also to help direct finance flows towards adaptation and resilience where they’re most needed,” says Emilie Mazzacurati, Global Head of Moody’s Climate Solutions in Moody’s ESG Solutions Group. “We’re extremely pleased that Goldman Sachs has chosen to use our new dataset to enhance its ESG evaluation of sovereign risk.”

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Read our report, Measuring What Matters: A New Approach to Assessing Sovereign Climate Risk to learn more about Four Twenty Seven’s physical climate risk data for sovereigns.