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
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.”
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.
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."
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.
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