Credit risk appraiser Moody’s buys a firm that assesses climate change risk

Even for those not very familiar with Moody’s, this headline speaks volumes about the impact of the risk of climate change on our country and planet. In a July 24, 2019 article in The New York Times by Christopher Flavelle called “Moody’s Buys Climate Data Firm, Signaling New Scrutiny of Climate Risks,” the company that measures credit risks for bond investors in companies, cities, counties, states and countries, has added to its expertise. Per Flavelle’s article

“Moody’s Corporation has purchased a controlling stake in a firm that measures the physical risks of climate change, the latest indication that global warming can threaten the creditworthiness of governments and companies around the world.

The rating agency bought a majority share in Four Twenty Seven, a California-based company that measures a range of hazards, including extreme rainfall, hurricanes, heat stress and sea level rise, and tracks their impact on 2,000 companies and 196 countries. In the US, the data covers 761 cities and more than 3,000 counties.

‘We are taking these risks very seriously,’ said Myriam Durand, global head of assessments at Moody’s Investor Service, who said the purchase would allow its credit analysts to be more precise in their review of climate-related risks. ‘You can’t mitigate what you don’t understand.’

Sudden shocks such as floods, wildfires, or storms can hurt businesses and send residents fleeing, taking away the tax revenue that government s use to pay debts. And, longer term threats – such as rising seas or higher temperatures – can make those places less desirable to live in, hurting property values and, in turn, the amount raised by taxes.”

To illustrate this risk, the same day I read a reprint of this article in The Charlotte Observer, the local paper ran a story on the town of Fair Bluff, NC which has been flooded twice in that past four years due to Hurricanes Matthew and Florence which lingered over their area. Sitting near the Lumber River, the citizens of Fair Bluff saw the river rise well beyond flood range. The previous flood of this magnitude occurred 90 years before. Sadly, the population and business is declining due to rebuilding costs. As a result, so is the tax revenue to provide services.

There is a huge financial impact of climate change on the lives and business of people and communities. Rebuilding a town that may continue to be in harms way adds to the risk and some people are choosing to relocate. And, It is not just small towns. Houston has had two major floods over the past five years, as well. Houston has felt on a larger scale what Fair Bluff has felt. Not only do the rains of the Hurricane sit over them, the rivers upstate overfill and flow toward the sea. This causes extra flooding.

So, Moody’s is improving their ability to assess repayment risk to bondholders. A city that has rebuilt or prepared poorly is at greater risk of flight of people, businesses and tax dollars. What should also be alarming to American citizens is while Moody’s is taking forward thinking action, the US government is stripping climate change reports from their websites and demoting, transferring or running off Ph.Ds who are expert in measuring and addressing climate change. In short, we are throwing away a technical advantage that could help the US and the world.

Repeating what Ms. Durand said above, “You can’t mitigate what you don’t understand.”  So, please ask all politicians what they plan to do about climate change including the US president. And, a question for those who still buy the hoax stuff, why is Moody’s spending all of that money on a hoax?

 

The Good and Bad

Several stories crossed my screen, so I decided to pair good and bad news items on related topics.

Good: Ford and Volkswagen are co-investing in developing electric vehicles sharing development costs.

Bad: In spite of the significant decline in bee populations, the Trump administration has approved a bee-harmlng pesticide.

Good: The American economy is now into its 121st consecutive month of growth with nine straight years of 2 million plus jobs created.

Bad: The 2019 economy has softened some from 2018 due to trade/ tariff concerns, slowing global markets, waning impact of the 2017 tax law, growing US debt, and increased uncertainty which impedes investment and it should slow even more as predicted by economists.

Good: The interest in space travel and exploration involves an increasing number of countries – Japan and China have gone to the moon, eg. That spawns more interest in science which is terrific.

Bad: With the heavy cost of space travel, why don’t countries share the burden as Ford and Volkswagen are doing above? There is a lot of dupication of effort requiring money that could be invested here on earth to address water, food and climate issues.

Good: In spite of the US announcing a withdrawal from the Paris Climate Change Accord, other countries, states, cities, investment groups, companies and innovators continue to execute ideas that are addressing the issue.

Bad: The US federal governmenf needs to do more, not less to abet these efforts. Yet, another concern is getting little notoriety – the global water crisis, which is made even worse by climate change. Another city in India of 5 million people is in dire straights as its reservoir has almost dried up.

We should celebrate the good, but address the bad. We seem to be ignoring too many signals. It is hard to move forward, if we only look in the rearview. mirror. Food, water, climate, debt are signaling needs that must be addressed.

 

 

 

Two renewable energy/ climate change articles

Two articles relating to renewable energy and climate change crossed my path this week. The first is about a Reuters poll on what Americans think about climate change. The second is from The Guardian regarding a first time occurrence in the US.

In Reuters,Valerie Volcovici wrote the following about a recent poll of 3,000 Americans in article called  “Americans demand climate action (as long as it doesn’t cost much): Reuters poll.” 

“According to the poll, 69% of Americans – including 56% of Republicans and 71% of independents – believe the United States needs to take ‘aggressive’ action to fight climate change.

Some 78% believe the government should invest more money to develop clean energy sources such as solar, wind and geothermal, including 69% of Republicans and 79% of independents.”

When asked if they would accept an additional tax of $100, only a one-third said yes. While I am pleased with the interest, Americans (and all people) do not want more in taxes. Fortunately, the cost of renewables has become very favorable relative to coal energy production cost. This leads us to the second article.

The Guardian posted the following article later in the week about a key first called, “US generates more electricity from renewables than coal for first time ever.” A couple of paragraphs follow:

“The US generated more electricity from renewable sources than coal for the first time ever in April, new federal government data has shown.

Clean energy such as solar and wind provided 23% of US electricity generation during the month, compared with coal’s 20%, according to the Energy Information Administration.”

For several years, I have been reading and commenting the tipping point on the move away from coal has occurred. Natural gas put the first nail in the coffin, followed by other nails from renewable energy.

What I like about these two articles, is the future is here. Climate change is too noticeable to ignore. A politician does so at his or her own peril. Questions must be asked of them as to what do they plan to do about it. The other is politcians need to know renewables are here, the cost has dramatically declined and the growth in market share and jobs is pronounced.

And, we can do much more. The renewable energy technology is here. We just need to invest more in the infrastructure. Plus, we need to do more about the carbon and methane in the air along with other measures to reduce carbon footprints.

Ice on Fire

I encourage people to watch the excellent HBO documentary called “Ice on Fire” on concerns over climate change and remedial actions underway that should and can be leveraged. The documentary is produced and narrated by Leonardo DiCaprio, but the most impactful voices are the scientists, inventors and trendsetters who are seeing dividends from their actions and investments.

To sum up, we have two major problems facing us – too much carbon in the air along with a growing concern over methane as it is released from beneath melting ice caps and frozen tundra, on top of the venting from natural gas sites. The title comes from researchers lighting methane leaks on fire as it is released from melting ice covered waters. The scientists note with data that it is quite clear man is causing the hastened uptick in temperatures as we leave our carbon fingerprints in the atmosphere.

These are major concerns, but we are not sitting still. Significant efforts are underway. They can be categorized as putting less carbon in the air and capturing more carbon from the air. To avoid a novel, I will touch on some of the ideas, but please do deeper dives and watch the documentary airing now.

Stop putting carbon in the air

We must hasten the move to renewable energy. The costs are more on par and less, in some cases, than fossil fuel energy production. Wind and solar energy are growing at accelerated rates. One CEO noted, the technology is here to make this happen even more than it already is. Here in the US, California gets 25% of its electricity from solar and Texas gets 16% of its electricity from wind energy.

Yet, a very promising start-up off Scotland is tapping tidal energy. There is a company producing electricity today with an offshore platform with two turbines turned by the tides to generate electricity. I have written before about this group as they use existing technologies to harness the sea. Their success is gaining notoriety around the world, as it appears to be replicable.

Two other ideas also help with both recapture and restricting release. The first is reusing depleting biowaste (such as dying trees, plants and compost) in the soils to grow crops and future trees and foliage. The biowaste holds water better, maintains top soil and is straight out of nature’s guidebook.

The other is growing more kelp offshore as it captures carbon like sequoia trees and can also be used as a food source for livestock. Feeding cattle kelp is not a new approach. Feeding cattle is important as it greatly reduces the gases released by animals and preserves more carbon capturing grassland.

Capture more carbon from the air

The documentary spells out several natural ways to capture carbon and a few technological ways. On the former, here are a few ideas:

Maintain forests, especially those with large sequoias, which are huge carbon eaters. There are several places that are nurturing huge forests, but they note we need more of these efforts. We need to be mindful to replace what we cut, but keep some protected forests off limits to cutting.

Another example is to replenish mangroves that offer buffers to oceans. In addition to offering protection against storms, they also are natural born carbon eaters.

Another effort is to grow more urban farms. These farms are usually more organic, but in addition to absorbing carbon in urban areas, they perpetuate a farm to table concept that reduces transportation fumes. Reducing auto fumes is a huge concern of cities around the globe.

The next idea is more compex, but it requires the growing of more shells in the ocean. The dusts off the shells creates “ocean snow” that settles to the bottom and absorbs carbon. The idea is to spread a very small amount of iron in the ocean to cause more shells to grow.

The more technological solutions are designed to pull carbon out of the air. There are two approaches – one is to extract carbon and store it safely underground. The other is to pull it out and reuse it through artificial photosynthesis. Both of these options need more description than I am giving them. I prefer the more natural ways, but all of the above, is a necessary strategy at this late hour.

The scientists have concerns, but they do offer hope. The uncertainty of the ice-covered methane release gives them pause. They did note the methane release from accidental leaks from fossil fuel is visible from space and reduceable with some effort.

Another concern is the well-funded activity behind climate change deniers. A Wyoming rancher scientist standing in front of a visible, leaky methane cap said it plainly – they know this stuffs hurts kids more than adults. If someone came into my home to hurt my kids, it would be over my dead body. So, why is it OK too allow this?

Another scientist was less colorful, but equally plainspoken. He said fossil fuel executives perpetuating climate change denial should be tried in The Hague for crimes against humanity. Yet, as the costs have declined, the profit of creating carbon is becoming less palatable than the profit of reducing carbon in the air. People need to know these market forces exist today and not stand for future unhealthy energy creation.

Finally, if you cannot convince a climate change denier that we have a problem, ask them a simple question – if costs were not an issue, would you rather your children and grandchildren breathe methane from vented natural gas or drink coal ash polluted water or have carbon and methane neutral solar, wind or tidal energy? Guess what – costs are not much of an issue anymore and, in an increasing number of cases, less for renewables.

Mona Lisas and Mad Hatters

I have always appreciated when excellent word smithing matches up with equally marvelous music. And, the pairing need not come from one person, as Elton John and Bernie Taupin demonstrated time and again.

One of their clever songs came off John’s 1972 “Honky Cat” album. “Mona Lisas and Mad Hatters” is John’s matching Taupin’s direct lyrics about a time in New York City, when it was less safe than it is today. The story is Taupin heard a gun shot outside his hotel room and penned a song to reflect his angst. John wrote sad, but reminiscent music which he sings so well.

Here is the middle portion of the song including its famous chorus.

“This Broadway’s got
It’s got a lot of songs to sing
If I knew the tunes I might join in
I’ll go my way alone
Grow my own, my own seeds shall be sown, in New York City

Subway’s no way for a good man to go down
Rich man can ride and the hobo he can drown
And I thank the Lord for the people I have found
I thank the Lord for the people I have found

While Mona Lisas and Mad Hatters
Sons of bankers, sons of lawyers
Turn around and say good morning to the night
For unless they see the sky
But they can’t and that is why
They know not if it’s dark outside or light”

Several references stand out. The commuters of all persuasions not knowing if it is dark or light. While they may have Mona Lisa painted smiles or the hypertension of a Mad Hatter, they do feel safety in numbers or in a cadre of friends who serve as a port in the storm.

The other reference is to Broadway which offers a glitzier image of New York, a polished apple, so to speak. New York has been reborn, but there was a time when the city needed its underbelly to match the hype. It took a lot of effort through leadership and consistency but is once again quite the destination. I am reminded of the story of a paint crew who would paint over graffiti overnight, then do it again. The consistent effort was symbolic revealing more than an attention to detail,

Maybe we should update the song to reflect our Mona Lisa smiles and Mad Hatter hypertension on social media.

A few green thoughts for a green day

In honor of St. Patrick’s Day, here are a few green thoughts for the day. Green will take a few different meanings herein.

– Let’s give a big shout out to the kids around the world who went on strike from school to bring awareness to the need for more action on climate change. I am certain they will receive push back from the fossil fuel funded crowd, but these kids care about the future and present of our planet.

– Let’s give a shout out to the twenty kids suing the US Federal government for insufficient action on planning the demise of fossil fuel in response to what they already know about climate change. As this unheard of case progresses, the lead attorney told CBS’ “60 Minutes” that their information is very solid and comes from the files of the US government.

– Let’s give a shout out to Germany and places like Georgetown, TX, Greensburg, KS and Burlington, VT. Coal energy now lags renewable energy in Germany as they are on their way to eliminating coal use in twenty years. As for the three US cities, they are 100% renewable energy powered.  The CPA Mayor of Georgetown said the renewable energy model selected is more cost-effective than the fossil fuel model – so it is saving greenbacks as well.

– Let me state my being green with envy as China is investing a trillion US dollars in building trade corridors with dozens of countries around the world. This is occurring at the same time the US is retrenching from its global leadership role, leaving global multilateral agreements, denigrating allies and spending money to build a wall for an overstated problem. The symbolism is stark – China is building bridges, we want to build walls. The US is enabling an ascendant China.

– Let me close with a shout out to people with chutzpah to set forth a Green New Deal. While not perfect, it is an idea worth discussing to fashion a plan going forward.   Ignoring a problem does not constitute a plan.

Happy St. Patrick’s Day. May the road rise to meet you.

 

The ice is going to break

The title is a crucial line from a movie called “The Dead Zone,” based on the Stephen King novel. I use this line as a metaphor for ignoring real problems. Let me explain the context. The movie stars Christopher Walkien as Johnny, who because of a car accident, could see the future after touching someone. But, if the future was less clear, a dead zone as he described it, he could alter the outcome.

A boy he was tutoring was supposed to practice ice hockey on a frozen pond with his demanding father as the team’s coach. But, when Johnny touched him, Johnny saw the ice breaking. His father said that was crazy, even though both men knew the father did a background check before hiring the tutor. Johnny slammed his cane on a chess board and said “the ice is going to break!” The son stayed home, but the father went ahead with practice and four kids drowned as the ice broke.

So, Mr. President, members of Congress and various state legislators, let me state obvious problems with this metaphor in mind.

– We have a global water crisis including in the US with the World Economic Forum identifying it as a top long term risk. Farmers are having to fight harder to protect their diminishing water rights. It will be made even worse by climate change.  And, the problem is exacerbated with the significant water loss in fracking and lead pipes tainting some of the dear water.

– That climate change thing is a problem in its own right. Our federal government and several state government need to pitch in more and help. The President backing out of the Paris Climate Change Accord is as poor a decision as could have been made, especially when it came the day after ExxonMobil shareholders voted to order management to inform them on what they are doing about climate change.

– I learned today our EPA is turning a blind eye to asbestos. Since Brazil stopped production of this toxic product, we now are importing asbestos from Russia. As a metaphor for this President, each bag of toxic asbestos imported from Russia has Donald Trump’s picture on it. A toxic material imported by a toxic man from another toxic man.

– Although, debt is not an environmental concern, our so-called leaders are ignoring this huge and growing problem. As interest cost grows to a greater part of our budget, it will hinder our ability to do other things. We must spend less and increase revenue both. The math will not otherwise work,

The ice is going to break. We must heed the warnings now. If we don’t, we may be the ones who drown.