Newsletter: 38% of companies associated with habitat loss

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

In Focus: Assessing Biodiversity Risk for Financial Stakeholders

Moody's ESG Solutions Analysis: Integrating Biodiversity into a Risk Assessment Framework

Biodiversity loss has emerged as a concern for responsible investors, financial regulators and companies whose activities have an impact and depend on natural capital, with scientists warning that the world is in the midst of a sixth mass extinction. Moody’s ESG Solutions launched two new reports on biodiversity, powered by Four Twenty Seven and V.E. The first outlines our framework for assessing biodiversity risk, which can provide a foundation from which to understand the biodiversity risks of companies in investment and lending portfolios. 
 
The report shares a case study evaluating company facilities associated with habitat loss globally, as one indicator of a company's impact on biodiversity. Out of 5,300 publicly-traded global companies, we find over 2,000 entities have at least one facility associated with habitat loss.

A second case study reviews company disclosures on their commitments and measures to address biodiversity, as an indication of their biodiversity governance. We find 61% of assessed companies in the heavy construction sector disclose commitments to address biodiversity. Yet less than 10% of the sector receives a "robust" or "advanced" score in terms of implementation.
Read the Report

Controversy Risk Assessment: a Focus on Biodiversity

The second report in our series focuses on controversies, as another indication of a company's governance of biodiversity risks. We found that 7% of analyzed controversies from Dec. 201 - Apr. 2021 were related to biodiversity allegations.  Geographically, they have been most frequently observed in the US, Indonesia  and Malaysia. The report explores the severity of identified controversies and discusses how companies responded to them.
Read the Report
Biden's Executive Order on Financial Risks of Climate Change

Sweeping Order Calls for Comprehensive Climate Risk Assessment 

On May 20, Biden issued an executive order, calling all government agencies to identify physical and transition risks, report on mitigation plans, and develop a financial strategy to reach net-zero by 2050. The Director of the National Economic Council Brian Deese and the National Climate Advisor Gina McCarthy, have 120 days from the order to develop a strategy covering the “measurement, assessment, mitigation, and disclosure of climate-related financial risk to Federal Government programs, assets, and liabilities.”
Janet Yellen, as Treasury Secretary and head of the Financial Stability Oversight Council (FSOC), has 180 days to report on progress and to coordinate with the Federal Insurance Office to identify any potential for significant disruptions due to climate impacts on insurance. The Labor Department is mandated to revise a rule from the Trump era that banned pensions from considering ESG and climate concerns.

Meanwhile, the SEC is expected to make a formal proposal on climate risk disclosure in June after the deadline for public inputs to its questionnaire on the topic. 
 

Investing in Climate Resilience

Biden's Order also reinstates the Federal Flood Risk Management Standard, which was revoked under President Trump. This is a critical step in improving resilience nationwide. It "will require new buildings and facilities built with federal money in flood-prone areas to be elevated 2 to 3 feet above projected flood levels or to have equivalent flood protection."  Earlier this week Biden also announced that FEMA would invest $1 billion to prepare for extreme events before hurricane season, which is twice the amount provided last year. Investing in resilience before disasters strike is an essential way to save lives and also save on long-term recovery bills.
Financial Regulators Acting on Climate Beyond the US

European Central Bank Reports on Climate Risks to Financial Stability

As part of its Financial Stability Review, the European Central Bank released a detailed report on quantifying the financial system's exposure to climate risks, including scenario analysis of the banking sector and assessing finance for the transition to a low-carbon economy. The report leverages data from Moody's ESG Solutions, powered by Four Twenty Seven, to assess the physical risk exposure of banks' lending portfolios

Singapore Taskforce Releases Guidance on Climate Risk Disclosure

Singapore's Green Finance Industry Taskforce released a guide for financial institutions to disclose their climate risks in line with the TCFD Recommendations. It's meant to help financial institutions comply with the Guidelines on Environmental Risk Management for banks, asset managers and insurance companies issued by the Monetary Authority of Singapore in December 2020 to improve the financial sector's resilience to environmental risks and position the industry to support the transition to a sustainable economy.

Canada Launches Council Focused on Financial Climate Risk

Canada launched a Sustainable Finance Action Council to support a sustainable finance system focused on mobilizing capital to meet Canada's 2030 Paris Target, supporting the transition to net zero by 2050 and maintaining a resilient economy. The council's first meeting will be in early June and its initial focus will be on improving public and private sector climate risk disclosures in line with the TCFD recommendations.
Unipol Gruppo Selects Moody's Analytics Climate Pathway Scenario Service
Italian insurance group Unipol Gruppo has selected the Moody’s Analytics Climate Pathway Scenario Service to facilitate its efforts to embed climate risk into its Own Risk and Solvency Assessment (ORSA). Moody’s Analytics will provide Unipol Gruppo with climate-aligned scenarios for a range of temperature pathways to help the group assess transition risk exposure.

As climate change creates new demands on insurers to understand their exposure to financial impact from climate risk the Moody’s Analytics Climate Pathway Scenario Service helps power insurers’ and pension funds’ asset and liability projections by providing climate-aligned scenarios that capture physical and transition risks from climate change.
We're Hiring! Join us at
Moody's ESG Solutions
There are several opportunities to join Moody's ESG Solutions' dynamic team. See the open positions below and visit Moody's Careers page for more information.
  • AVP/VP – Regulatory Analyst (Climate) – we’re looking for an individual with deep expertise in climate risk to inform product development in line with global regulatory developments related to climate risk disclosures and climate stress tests.
  • Product Strategist – Climate Solutions – we’re looking for an experienced product strategist to help drive the delivery of our climate risk solution suite.
  • Data Content Analyst - we're seeking a motivated problem solver to help develop and manage the processes that ensure the accurate, timely delivery of financial and business data to support the development of climate and ESG products. 
Upcoming Events

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

  • Jun 2-4 Green Swan 2021: Founder & CEO and Global Head of Moody's Climate Solutions, Emilie Mazzacurati, Emilie Mazzacurati will present during the session on climate-related risks data and accounting. Invitation only. 
  • Jun 3 –  Moody's Analytics Predictive Analytics Virtual User Form: Emilie Mazzacurati will discuss climate risk analytics for investors and lenders.
  • Jun 22 – Ideas + Action 2021: Sustainability and Resilience: Emilie Mazzacurati will present on the economic implications of climate risk. 
  • Jul 23 – Environmental Business Council of New England Annual Climate Summit: Director, Global Client Services, Lindsay Ross, will present on physical climate risks.
  • Sept 22 2021 CARE Sustainability Conference: Director, Communications, Natalie Ambrosio Preudhomme will present on financial climate risk analytics during the panel "Implementation Issues."
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