Understanding Industry Relative Exposure to Physical Impacts of Climate Change

As banks and lenders increasingly aim to assess the climate risks in their portfolios, there is a growing need for an efficient way to screen thousands of companies on their exposure to climate risks. Likewise, as regulators develop new requirements for stress testing and disclosure, they’re looking to phase in requirements and understand what can be reasonably assessed and disclosed in the near term. Traditionally, a company’s sector is used as a basis for understanding its exposure to climate risk when more detailed information is not available. This approach is the foundation for transition risk approximations, as a company’s exposure to risks from the transition to a low-carbon economy is largely driven by its sector. However, a broader range of companies can face risks from physical climate hazards, based primarily on the location of their operations. Physical risks translate into business risks through damage and disruption at business manufacturing plants, data centers and other operating facilities, as well as through their supply chains.

Approach

One way to obtain a high-level view of a company’s exposure to physical risk is to understand the trends of risk exposure both in its sector and in the countries in which it operates. We leveraged our database of 5,000 global companies and their underlying 2 million global corporate facilities  scored on their forward-looking exposure to climate hazards to provide a view on relative risk exposure by industry. We use the framework in figure 1 to assess companies’ exposure to climate risk and aggregate the findings up to the sector and country level to provide a high-level view that’s informed by asset-level analysis.

Framework for assessing a company’s exposure to physical climate risk:

  • A company’s Operations Risk is based on its facility-level exposure floods, heat stress, hurricanes & typhoons, sea level rise, water stress and wildfires. The analysis also considers the sensitivity of different types of facilities. For example, manufacturing plants with their high energy demands are more sensitive to extreme heat than offices.
  • Supply Chain Risk is based on the risk in countries that export commodities that the company depends on and a company’s reliance on climate-sensitive resources such as water, land and energy, based on its industry.
  • Market Risk is based on where a company’s sales are generated and how its industry has historically been impacted by weather variability.

Figure 1. Framework for assessing companies’ exposure to physical climate risk.

Scores are normalized, with 0 being the least exposed and 100 being the most exposed. In line with considerations of relevant time horizons and of impacts being locked in over the climatic short term our company risk scores consider projected climate impacts in the 2030-2040 time period under a single RCP scenario, RCP 8.5 (the worst case scenario, also known as business as usual), but leverages several climate models.

 

Key Findings by Sector

In this analysis we share key findings on companies’ Operations Risk, which is based on their facilities’ exposure to each climate hazard. Understanding relative exposure by sector can inform high-level assessments of market-wide risk based  on the concentrations of certain industries in loan portfolios.

Manufacturing, construction and transportation/storage sectors have the highest Operations Risk scores (Figure 2). This is noteworthy because these are industries with particular vulnerabilities to disruption from extreme events such as floods, as well as vulnerability to chronic stresses like increasing temperatures which affects labor productivity and energy prices. Companies in the manufacturing sector are often part of global supply chains, such that disruptions at plants in one country can lead to shortages around the world. Construction and transportation, on the other hand, are often critical for local economies.

Figure 2. The average Operations Risk for companies within each sector. The size of the box represents the number of facilities assessed within each sector and the color of the box represents its relative risk to physical climate hazards. The number in the box shows the average Operations Risk for companies in that sector.

 

The next layer of detail provides an understanding of a sector’s relative risk by hazard, based on the average risk scores of companies in that sector. As risks and also relevant corporate resilience measures vary based on hazard, this detail can help inform risk management and engagement efforts.

Figure 3. The average hazard risk score for companies within the manufacturing sector.

 

Key Findings by Country

Within a sector there are significant differences in average exposure depending on the country, as physical climate risk varies by location. For example, in the construction sector the average Operations Risk scores are highest in the Philippines, Vietnam and Mexico, while the average scores are lowest in Finland, Bulgaria and Switzerland.

Different countries also have different risk exposure based on the hazard. For example, the Philippines, Indonesia and Mexico are countries with significant numbers of corporate facilities that also stand out with the highest Operations Risk scores. However, for wildfires, Indonesia, Mexico and Brazil stand out as countries with significant numbers of corporate facilities that are among the highest risk (Figure 4). Meanwhile, for water stress Kazakhstan, Morocco and  Australia are among the most exposed (Figure 5)

Figure 4. Facilities owned by transportation and storage companies, colored based on their exposure to wildfires.

Figure 5. Global corporate facilities owned by manufacturing companies, colored based on their exposure to water stress.

 

This dataset provides a multifaceted view on physical risk exposure by industry and country, which can be tailored to the needs of specific risk assessments and inform views on aggregate portfolio risk.

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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Four Twenty Seven sends a newsletter focused on bringing climate intelligence into economic and financial decision-making for investors, corporations and governments. Fill in the form below to join our mailing list. As data controller, we collect your email address with your consent in order to send you our newsletter. Four Twenty Seven will never share your mailing information with anyone and you may unsubscribe at any moment. Please read our Terms and Conditions.
 

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Newsletter: Climate Commitments

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

In Focus: Climate Commitments

Climate Summit Commitments

The leaders of 40 nations and key private sector participants who joined Biden's Climate Summit last week, made new emissions reductions targets or recommitted to existing promises. The US, Canada, Brazil, Japan and other countries made ambitious new commitments. While change comes when commitments are followed by tangible action, these have the potential to accelerate the transition to a low-carbon economy, with implications for businesses and investors, including significant opportunities.


Financial Sector Action on Climate Change

Meanwhile, financial regulators around the world continue to issue guidance and expectations around climate risk. Last week the EU published the climate adaptation and mitigation portion of its Sustainable Finance Taxonomy and investors will be expected to disclose in line with the taxonomy starting next year. The EU also published a draft legislative proposal for a Corporate Sustainability Reporting Directive, which would replace the Non-Financial Reporting Directive and greatly expand the number of companies mandated to report on a range of environmental factors, including climate. New Zealand is considering passing a bill that would mandate climate risk disclosure for banks, insurers and investors by 2023. The Australian Prudential Regulation Authority issued a public consultation on its draft guidance for financial institutions to manage the risks of climate change.

Mark Carney, UN Special Envoy on Climate Action and Finance, announced the Glasgow Financial Alliance for Net Zero (GFANZ) last week, bringing together several industry-led net zero initiatives focused on supporting the transition to net zero emissions by 2050. Participating groups include the new Net Zero Banking Alliance, the Net Zero Asset Managers Initiative and the Net Zero Asset Owner Alliance. The Net Zero Insurance Alliance is expected to launch soon and will also join GFANZ. There are over 160 participating firms, which commit to science-based targets, addressing all emission scopes, issuing transparent disclosures and setting 2030 interim targets. 
 

The American Jobs Plan

Biden's $2 trillion infrastructure proposal places climate change and environmental justice in the center. The plan's wide-ranging elements include funding to grow the electric vehicle market in the US and to improve the nation's aging water and electricity infrastructure. There are provisions for affordable housing and a distinct focus on jobs training to support a just transition to a low-carbon economy. The plan aims to remove fossil fuel subsidies and mandate that the companies help pay to cleanup toxic sites. As crumbling infrastructure and polluting facilities are often in low-income communities and communities of color, these items would contribute to fostering environmental justice. Likewise, the plan allocates funding specifically to communities of color and frontline communities, and includes provisions to increase wages for in-home care workers who are often women of color, and for broadband internet development which is particularly needed in Black and Latino communities.

Moody's Analytics assessed the macroeconomic implications of the plan, saying it "provides a meaningful boost to the nation's long-term economic growth."
Banks and Climate Stress Tests

Moody's Webinar - Climate Stress Tests: What You Need to Know

As numbers of regulators begin to roll out climate stress tests and climate risks continue to grow, understanding how to undertake informative climate stress tests is becoming increasingly essential. Join us for a live, interactive panel discussion on climate scenarios and stress testing on Thursday May 6, at  3pm BST / 10am ET / 7am PT.

Key Discussion Points:
  • How are central banks incorporating climate stress testing into financial supervisory requirements?
  • What are the different types of scenarios needed for assessing climate risk?
  • What are the key building blocks for climate stress testing? How do they fit together?
Speakers:
  • Carmelo Salleo, Head of Division, Stress Test Modelling Division, European Central Bank
  • Emilie Mazzacurati, Global Head of Moody's Climate Solutions, Moody's ESG Solutions
  • Burcu Guner, Senior Director-Risk & Finance SME, Moody's Analytics
  • Rahul Ghosh, Managing Director-Outreach & Research, Moody's ESG Solutions (moderator)
Register Here

Moody's Investors Service: Climate Risk for Banks

Moody's Investors Service report, Climate change to force further business model transformation for banks, outlines ways in which carbon transition and physical climate risk will influence banks' risk assessment requirements and present new costs and credits risks for banks. The analysis covers the forthcoming stress testing requirements, discussing their credit implications. 
BIS Resources on Climate Risk for Banks
The Bank for International Settlements released two reports on climate risk, focusing on transmission channels of climate risk to banks and methodologies to measure climate-related financial risks. The report on transmission channels finds that climate risks affects banks through the traditional financial risk categories including market risk, liquidity risk and
operational risk. It underscores the ways in which the impacts of climate risk depend on geography, sector and the economic and financial system and emphasizes the need for more research on how climate risk translates into different types of financial risk. 

The report on measurement tools underscore the needs for granular, forward-looking data on climate-related financial risks, which includes new climate data tools in addition to improved information on counterparty locations. It discusses the early emphasis on risk assessment for near-term transition risk and the need to expand assessments and scenario analysis to include a range of physical climate hazards. The report highlights the increased research focus on translating climate risks into traditional financial risk metrics, noting that much progress to date has focused on credit risk, with market and liquidity risk at even earlier stages. 
Real Assets Exposed to Physical Climate Risk

Moody's Investors Service Adds Climate Data to RMBS Presale Reports

Moody's Investors Service presale and new issues reports for residential mortgage backed securitizations rated out of the US or Europe, now include Four Twenty Seven's physical climate risk scores as an appendix. "While these climate risk scores are not specifically incorporated in our ratings analysis, we believe these additional disclosures will be of great value to market participants," says London-based Moody's Investors Service Senior Vice President Anthony Parry in the press release.

Moody's Investors Service: Climate Hazards Threaten US Seaports

This Moody's Investors Service analysis, Intensifying climate events risk disruptions to seaport operations across the US, leverages Four Twenty Seven's physical climate risk data to assess the exposure of ports to climate hazards including floods, heat stress, hurricanes, sea level rise, water stress and wildfires. It highlights that landlord ports typically have more fixed revenues than port operators, which can reduce the short-term impacts of extreme events. In addition to significant exposure to storms and flooding, West Coast ports often face risks from wildfires, with implications for supply chains and transportation infrastructure. Similarly, while less damaging for the ports themselves, heat stress and water stress can affect agriculture exports, in turn affecting a port's business. Register for free to read the analysis.
Increasing Global Wildfire Potential 

Four Twenty Seven's Peer-Reviewed Research on Wildfire Potential Under Climate Change

2020 was a devastating wildfire year and this year is gearing up to just as hot and dry in many regions. This is a global trend exacerbated by climate change. Four Twenty Seven's article, A global assessment of wildfire potential under climate change utilizing Keetch-Byram drought index and land cover classifications, published in Environmental Research Communications, explores the effects of climate change on global wildfire potential. It shows that by 2040, regions like the American West, Australia and the Amazon will be drier and hotter for much longer than historical averages, experiencing more than 60 additional days of high wildfire potential per year.  

This article provides the detailed methodology behind Four Twenty Seven's publication, Climate Change and Wildfires: Projecting Future Wildfire Potential, which discusses key findings including regional trends and hotspots.

Current Drought & Wildfire Potential in the Western US

Drought contributes to conditions that are conducive to wildfires and also presents significant health and economic risks. In California, farmers are questioning the viability of their businesses and many families are facing depleted and contaminated wells. The snowpack in the Sierra Nevada is at 28% of normal, dry conditions are expected to persist through June and the summer is expected to have higher than average temperatures. This all suggests that a dangerous fire season is on the horizon. As the state continues to face these costly climate-driven events, California launched a Climate-Related Risk Disclosure Advisory Group earlier this month, to support the development of a climate risk disclosure standard.

Other Western states are also enduring damaging droughts, with North and South Dakota entirely in drought conditions and parts of Texas, Iowa and Colorado all experiencing drought impacts. Last week the White House launched an Interagency Working Group to focus on addressing the drought conditions in the West and their dire implications for farmers, Tribes and other communities.
Upcoming Events

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

  • May 6 Moody's Webinar on Climate Stress Tests: What You Need to Know: Founder & CEO and Global Head of Moody's Climate Solutions, Emilie Mazzacurati, will present on the drivers behind emerging stress testing requirements. See more details above.
  • May 25 Moody's Investors Service Emerging Markets Summit 2021: Associate Director, Research, John Naviaux, will present on sovereign physical climate risk.
  • Jun 2-4 Green Swan 2021: Emilie Mazzacurati will present during the session on climate-related risks data and accounting. Invitation only. 
  • 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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Four Twenty Seven sends a newsletter focused on bringing climate intelligence into economic and financial decision-making for investors, corporations and governments. Fill in the form below to join our mailing list. As data controller, we collect your email address with your consent in order to send you our newsletter. Four Twenty Seven will never share your mailing information with anyone and you may unsubscribe at any moment. Please read our Terms and Conditions.
 

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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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Four Twenty Seven sends a newsletter focused on bringing climate intelligence into economic and financial decision-making for investors, corporations and governments. Fill in the form below to join our mailing list. As data controller, we collect your email address with your consent in order to send you our newsletter. Four Twenty Seven will never share your mailing information with anyone and you may unsubscribe at any moment. Please read our Terms and Conditions.
 

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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.

Moody’s Launches Comprehensive Suite of Climate Solutions

Moody’s launches its new Climate Solutions Suite incorporating physical and transition climate risk data into Moody’s best-in-class risk management solutions and economic models. Read the press release from Moodys:

LONDON- (BUSINESS WIRE) – Moody’s ESG Solutions Group today announced the launch of Climate Solutions, a comprehensive product suite that provides market participants with enhanced risk measurement and evaluation tools to better understand, quantify and manage climate risks and opportunities. Climate Solutions incorporates physical and transition risk into Moody’s best-in-class risk management solutions and economic models to enable banks, insurers and investors to better assess climate risks and comply with the emerging regulatory requirements for stress testing and disclosures.

“Climate change has a profound impact on the world’s economies and societies,” said Mark Kaye, Chief Financial Officer and Executive Sponsor of Moody’s ESG Solutions Group. “Moody’s is committed to offering science-driven, objective analytics to advance strategic resilience and to help market participants navigate the transformation to a low-carbon, climate-resilient future.”

Powered by Moody’s affiliates Four Twenty Seven, a leader in climate risk data, and V.E, a leading global provider of ESG research, data and assessments, Moody’s Climate Solutions includes:

  • Forward-looking, physical and transition climate risk assessments for over 5,000 listed companies and more than 10 million real estate properties; dynamic, on-demand scoring for listed and unlisted companies, and SME support in risk identification, reporting and screening are also available;
  • Climate-adjusted Probability of Default (PD) for listed and unlisted companies that leverage Moody’s Analytics award-winning Expected Default Frequency (EDFTM) model to provide consistent, transparent and customizable analysis of the credit impact for physical and transition risk;
  • Macroeconomic Climate Risk Scenarios, based on Moody’s Analytics Global Macroeconomic Model and the Network for Greening the Financial System’s representative designations, for assessing physical and transition changes, including an 80-year forecast horizon to support stress testing and risk management needs;
  • Climate Pathway Scenarios to help power insurers’ and pension funds’ asset and liability projections with climate-aligned scenarios to facilitate customers’ efforts to align with Own Risk and Solvency Assessment (ORSA) and Task Force on Climate-related Financial Disclosures (TCFD) reporting practices; and
  • Powerful, but easy to use TCFD reporting solutions and analytics for banks, pension funds and insurance companies.

“Combining advanced climate know-how with proven models for credit risk and economic forecasts has enabled us to create a sophisticated set of climate risk analytics to support the systematic integration of climate change into investment and risk management decisions,” said Emilie Mazzacurati, Global Head of Moody’s Climate Solutions. “Our solutions support growing market needs for robust modelling of climate risks and their financial impacts.”

To learn more, visit Moody’s Climate Solutions.

Moody’s Launches DataHub, Collating Billions of Data Points for Decision-Makers to Explore and Analyze

Moody’s launches a new data platform, DataHub, providing data on corporates, real estate and macroeconomic variables, including climate, ESG and credit risk across asset classes. Read the press release from Moody’s:

NEW YORK–(BUSINESS WIRE)–Moody’s Corporation (NYSE:MCO) today announced the launch of Moody’s DataHub, a new cloud-based analytical platform that integrates data from across Moody’s, including its affiliates. Moody’s DataHub enables financial and risk decision-makers to explore, analyze and consume a wide range of relevant information seamlessly and efficiently.

“With Moody’s DataHub, we are bringing our vast assets together to support today’s data science and analytic needs,” said Stephen Tulenko, President of Moody’s Analytics. “Moody’s is helping customers seamlessly analyze financial and nonfinancial information, combining structured and unstructured data to support better decisions.”

Moody’s DataHub provides access to billions of data points to inform more holistic risk management and investment decisions. Coverage includes:

  • Over 4.5 million active and historical ratings from Moody’s Investors Service
  • Default and recovery data dating back to 1920 covering more than 800,000 securities and 59,000 issuers
  • Probabilities of default for more than 60,000 publicly traded firms from Moody’s CreditEdge
  • Nearly 400 million private and public entities from Bureau van Dijk’s Orbis database
  • More than 5,000 ESG assessments from V.E, part of Moody’s ESG Solutions Group
  • Climate risk scores for over 5,000 companies and 200 sovereigns from Four Twenty Seven, part of Moody’s ESG Solutions Group
  • Over 40 million loans underlying US RMBS, CMBS, and CDO transactions
  • 30-year forecasts of more than 2,100 major macroeconomic variables from Moody’s Analytics U.S. Macro Forecast Database

Moody’s DataHub delivers cross-referenced datasets in a centralized area with sophisticated analytical capabilities. The platform facilitates a holistic view of risks and opportunities related to credit, real estate investments, and climate, and provides essential inputs for Know Your Customer (KYC) onboarding and compliance screening, master data management, and entity resolution.

Easily accessible data previews, along with a readily available data dictionary and documentation, allow users to explore and efficiently interact with Moody’s datasets. Using Moody’s DataHub’s advanced tools, customers can discover and transform data while collaborating in secure environments, blending Moody’s data with their own to create engineered products and services.

“Moody’s DataHub gives customers transparency and control, and the platform was designed to facilitate rigorous data analysis while being straightforward to use,” said Mr. Tulenko. “We will continue to add datasets to the platform and will enhance its analytical capabilities in line with our commitment to deliver market-leading solutions for decision-makers.”

For more information on Moody’s DataHub and a full list of the datasets currently available through the platform, please visit the website.

Podcast: Banks are Getting Interested in Big Data to Figure out Their Climate Risk

How are banks, investors and financial regulators addressing climate risk?  Founder & CEO, Emilie Mazzacurati, joins Molly Wood in the Marketplace Tech podcast series, “How We Survive,” to discuss climate risk assessment and risk mitigation. The conversation covers regulatory developments, increased transparency on climate risks, resilience investment and the impact of COVID-19 on climate change conversations.

Moody’s Analytics Wins Climate Risk Award at Chartis RiskTech100®

Moody’s Analytics received the Chartis RiskTech100® Climate Risk Award, highlighting its commitment to integrating climate risk analytics into its world-class credit models. As part of Moody’s ESG Solutions, Four Twenty Seven works closely with Moody’s Analytics, bringing data on granular, forward-looking physical climate risk exposure. Read the press release from Moody’s Analytics:

SAN FRANCISCO, November 23, 2020 – Moody’s Analytics has won the Climate Risk category in the 2021 Chartis RiskTech100®, the first year this category has appeared. It’s one of 10 awards for Moody’s Analytics to go along with the #2 overall ranking.

The Moody’s Analytics offering helps customers first identify whether they have exposure to climate risk in their portfolios and then quantify the impact of exposure to various climate risk factors.

“Expanding our climate risk capabilities is a top priority and one we have invested significantly in achieving,” said Dr. Jing Zhang, Managing Director and Global Head of Quantitative Research at Moody’s Analytics. “Severe climate events throughout 2020 underscore the importance and urgency for market participants to understand how climate change is already affecting—and will continue to affect—the risk and return of their portfolios.”

Measuring the physical risks associated with climate change is one piece of the climate risk management puzzle. Award-winning climate risk analytics from Moody’s ESG Solutions, powered by Moody’s affiliate Four Twenty Seven, a leading provider of physical climate risk data and V.E, a Moody’s affiliate with expertise in transition risk, ESG, and corporate disclosures, are being incorporated across Moody’s Analytics solutions. Moody’s climate solutions suite brings climate data into risk management tools, translating climate risk exposure into financial impact and credit risk across asset classes.

Our team recently conducted an AI-powered study of climate-related disclosures from roughly 12,000 companies, across industries and regions. Among the findings, which were presented to the Task Force on Climate-Related Financial Disclosures (TCFD) and are highlighted in the most recent status report on TCFD implementation: Only 17% of the companies examined had reported any climate-related information, and with significant variation in focus, content, and quality.

Capabilities from Moody’s ESG Solutions are also increasingly being leveraged by Moody’s Investors Service (the credit rating agency and sister company of Moody’s Analytics).

Moody’s ESG Solutions Group Appoints Global Head of Climate Solutions

Moody’s appoints Four Twenty Seven Founder & CEO, Emilie Mazzacurati, as Global Head of Moody’s Climate Solutions, with Moody’s ESG Solutions Group. Read the press release from Moody’s:

LONDON- (BUSINESS WIRE) – Moody’s announced today that it has appointed Emilie Mazzacurati as Global Head of Moody’s Climate Solutions. In this newly-established role, Ms. Mazzacurati will oversee the climate solutions suite within Moody’s ESG Solutions Group, a new business unit formed earlier this year to serve the growing global demand for ESG and climate analytics. Ms. Mazzacurati will report to Andrea Blackman, Global Head of Moody’s ESG Solutions. 

As global awareness and recognition of the financial risks posed by climate change increase, Moody’s is committed to meeting market needs for forward-looking, science-driven climate analytics that help advance a resilient financial system, responsible capitalism, and the greening of the economy,” said Ms. Blackman. “Emilie’s extensive climate expertise will be vital to our continued development of climate solutions and to ensuring that Moody’s is a leading voice in this important area.” 

As part of its climate solutions suite, Moody’s ESG Solutions provides risk measurement and evaluation tools to understand, quantify and manage climate risks for physical and transition risk, informing due diligence and risk disclosure in line with the recommendations from the Taskforce on Climate-related Financial Disclosures (TCFD).  

Climate risk analytics from Moody’s ESG Solutions are also integrated into Moody’s Analytics risk management tools, translating climate risk exposure into financial impact and credit risk metrics for banks, insurers, and investorsSimilarly, the group’s climate data and insights are increasingly being leveraged in Moody’s Investors Service credit analysisBy offering data and analytics across asset classes, including listed and unlisted companies, real estate, infrastructure, sovereigns and municipalities, Moody’s ESG Solutions supports the integration of climate-related risks into financial decision-making and risk management. 

Moody’s ESG Solutions climate offerings build on the award-winning physical climate risk analytics from Four Twenty Seven, leading provider of climate risk data and market intelligencefounded by Ms. Mazzacurati in 2012. Moody’s acquired a majority stake in Four Twenty Seven in 2019 and recently took full ownership. Moody’s climate solutions suite also leverages data from V.E, a Moody’s affiliate with expertise in transition risk, ESG, and corporate disclosures. 

ABOUT MOODY’S ESG SOLUTIONS 

Moody’s ESG Solutions Group is a business unit of Moody’s Corporation serving the growing global demand for ESG and climate insights. The group leverages Moody’s data and expertise across ESG, climate risk, and sustainable finance, and aligns with Moody’s Investors Service (MIS) and Moody’s Analytics (MA) to deliver a comprehensive, integrated suite of ESG and climate risk solutions including ESG scores, analytics, Sustainability Ratings and Sustainable Finance Reviewer/certifier services. 

For more information visit Moody’s ESG & Climate Risk hub at www.moodys.com/esg