Newsletter: ECB Releases Stress Test Findings

Four Twenty Seven, an affiliate of Moody's, sends a monthly newsletter highlighting recent developments in climate risk and resilience. 

In Focus: European Central Bank
Climate Stress Tests

The European Central Bank (ECB) Releases Preliminary Climate Stress Test Results, Leveraging Four Twenty Seven Data

Last week the ECB released preliminary results of its climate stress tests, covering about 4 million companies globally and 2,000 banks, which make up nearly all monetary finance institutions in the EU. The assessment looked ahead 30 years, covering physical and transition risk exposure of  EU banks' counterparties. The physical risk assessment is based on Four Twenty Seven's data, and results show that without climate policy, physical risks increase significantly and in turn increase firms' probability of default. "The short-term costs of the transition pale in comparison to the costs of unfettered climate change in the medium to long term," writes ECB Vice President Luis de Guindos. The ECB will continue exploring the results over the course of this year, which will also inform the supervisory climate stress-tests of individual banks in 2022. 
The Financial Times highlights the key findings of the ECB piece, sharing an animated physical risk graphic in this article.
Moody's Analytics on Banks' Climate Risk Assessment and Disclosure
As the ECB lays the groundwork for climate stress tests of individual banks, stress testing and disclosure requirements are picking up globally. In the recent analysis, "How US Banks Are Addressing Climate Risk and Sustainability," Moody's Analytics discusses progress made to date in banks approaches to climate risk, comparing banks' actions in the US and to progress in the rest of the world. The piece also highlights opportunities to take action ahead of mandated disclosure requirements, with potential first steps including benchmarking and conducting portfolio climate risk evaluations and ESG assessments.
Goldman Sachs Leverages Sovereign Physical Climate Risk Data

Four Twenty Seven's Physical Climate Risk Data Will Inform Goldman Sachs' Fixed Income Strategies

Moody’s ESG Solutions Group announced last week that Goldman Sachs Asset Management (Goldman Sachs) has selected Four Twenty Seven's Sovereign Climate Risk Scores 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.

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.”

Public Consultations on Climate Risk

SEC Questionnaire on Climate Risk Disclosure

Last week Acting Chair of the US Securities and Exchange Commission (SEC), Allison Herren Lee, announced that she's asking staff to evaluate the SEC's climate disclosure guidelines, considering industry feedback. The statement included a detailed questionnaire on climate risk disclosure, open for public comment for 90 days from March 15. Relatedly, last week the Commodity Future Trading Commission announced a new Climate Risk Unit.

FHFA Request for Information on Climate Risk

The US Federal Housing Finance Agency (FHFA) opened a request for information on climate and natural disaster risk in the housing finance system, including to the regulated entities: Fannie Mae, Freddie Mac and the Federal Home Loan Banks. The FHFA will use the information to explore opportunities to strengthen supervision of the regulated entities' climate risk disclosure and management. Respond by April 19.

OSFI Discussion Paper on Preparing for Climate Risk

The Canada Office of the Superintendent of Financial Institutions (OSFI) released a discussion paper about how federally regulated financial institutions and federally regulated pension plans address the risks of climate change and how OSFI can support these entities' preparedness for these risks. The paper includes 16 consultation questions and is open for public response until April 12.
Four Twenty Seven Partners with Lockton

Lockton Brings Physical Climate Risk Data to its Clients

Four Twenty Seven is pleased to announce a partnership with Lockton, a global independent insurance broker. This partnership will allow Lockton to bring science-driven physical climate data to its broad client base, enabling forward-looking decision-making.
To hear more about climate risk for construction, real estate and insurance, join us tomorrow for Lockton's webinar on Climate Matters: Risk, Resilience and Response at 4pm GMT / 12pm EDT / 9am PDT.
Register Here
Upcoming Events

Join the team online at these upcoming events and check our Events page for updates:

  • Mar. 22-25 Ceres 2021: Four Twenty Seven Founder & CEO and Global Head of Moody's Climate Solutions, Emilie Mazzacurati, will speak on the panel "The New Materiality of Climate Science and What it Means for Investors and Companies."
  • Mar. 25  Climate Matters: Risk, Resilience and Response: Director, Communications, Natalie Ambrosio Preudhomme, will present on physical climate risk for real estate during this webinar.
  • Mar. 21 - Apr. 1 Greenlight Climate Festival: Find Your Calling in Sustainability: Director, Global Client Services, Lindsay Ross, will speak on the "Climate Finance" panel.
  • Apr. 8 Moody's Career Insights: Emilie Mazzacurati will speak about the field of climate analytics at this networking event for professionals interested in developing fields such as ESG, climate change and commercial real estate.
  • Apr. 13-14 GreenFin: Emilie Mazzacurati will present.
  • Apr. 14-16 – The Eurofi High Level Seminar: Emilie Mazzacurati will present on the panel "Climate Risk Implications for the EU Financial Sector."
  • Apr. 22 Villanova Rooted in Sustainability Webinar - ESG & Climate: What Investors Want: Natalie Ambrosio Preudhomme will present on climate risk.
  • Apr. 26-30 2021 Virtual Wall Street Green Summit: Emilie Mazzacurati will speak on the panel "ESG Data Reporting and Software Solutions."
  • Sept 22 2021 CARE Sustainability Conference: Natalie Ambrosio Preudhomme will present on financial climate risk analytics during the panel "Implementation Issues."
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