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?

 

Saturday in the park (redux)

It is a beautiful spring day and we just got back from a walk. With due credit to the band Chicago, hum “Saturday in the park,” as you read on.

– Speaking of walking, there were multiple hundreds of thousands marching in London pleading for another Brexit referendum. Some of it has to do with Parliament’s inability to plan a smooth exit, but the large part is due to Brexit being a financially imprudent idea.

– The Mueller report is in and I encourage a large dose of patience. Let people read and digest the thing. Plus, this is just the end of one phase, with much more to come. Future indictments will likely come from the Southern District of New York and be of a campaign finance or conflict of interest nature. Spiking the ball in the endzone is premature, especially when dealing with such an untruthful man.

– Boeing is in a heap of hurt, with an order for 50 737’s being canceled. Training is everything and, apparently, it has been shortchanged on this unwieldy plane. A pilot said the switch from autopilot to pilot in some instances maximizes the worst attributes of both at the wrong time. Unfortunately, hundreds have died.

– Seeing the horrible flooding in the US and the cyclone damage on the east coast of Africa reminds me of a report sanctioned almost ten years ago by the largest pension trusts in the world on the financial impact of climate change. Between the increased severity of forest fires, drought, flooding and sea rising, they estimated a cost on the order of multiple tens of trillion dollar. I think that might be light as there will be an echo effect that is worse than predicted then.

– Kudos to New Zealand, its people and its  leader, Prime Minister Jacinda Ardern. From the heartfelt solidarity to the grieving Muslim community and nation to acting with seriousness of purpose banning assault weapons, Ardern showed what leadership looks like. As an American, I am envious of her leadership and proud we have such in our world.

Have a great weekend all. Best wishes to those in need or grieving their lost loved ones.