Investors Now Better Able To Gauge Climate Risk In Investments
Investors are now better able to gauge the climate risks likely to impact their investments thanks to a new risk management tool developed by Deutsche Asset Management and Four Twenty Seven, which maps more than a million physical corporate locations alongside climate models to assess their climate risk.
One of the world’s leading financial services companies, Deutsche Asset Management, announced earlier this month the new risk analysis tool which it developed with California-based climate intelligence advisory firm Four Twenty Seven, at the same time as it published a white paper at the COP23 climate change conference in Bonn, Germany, detailing the tool in more detail.
Specifically, the paper outlines the three tasks necessary for an investor looking to assess the climate risk of their investments — determining physical locations from companies traditionally close-lipped about such things, mastering increasingly complex climate change science, and finally accounting for the nature of the business being carried out at respective locations.
“Thankfully for investors, this white paper does all of that,” said the white paper’s authors. “We leverage data analytics from Four Twenty Seven, which maps the physical locations of corporate facilities around the world alongside climate models. Four Twenty Seven’s scoring methodology identifies both the geographic exposure to climate hazards of individual companies, but, also the business sensitivity of facilities or companies to those hazards.”
Four Twenty Seven has mapped the physical location of more than a million corporate facilities globally and their respective exposure to climate-related events. This means that Deutsche Asset Management can now integrate a company’s physical climate risk equity score within new investment products, allowing them to assess the implications of climate events for individual companies in its portfolios.
“The availability of this new data on physical climate risk is a major step forward to addressing a serious and growing risk for investors,” said Nicolas Moreau, Head of Deutsche Asset Management. “Climate risk is now centre stage, however we believe the investment industry needs to champion the disclosure of annual and once-in-a-lifetime climate risks by companies. We have a duty to understand what more hurricanes or heatwaves mean for valuations and investment returns.”
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