Climate change presents increasing risks for corporations and investors in markets today. However, the risk is currently only priced into the market ex post – there are corrections in asset prices in the wake of events only to the extent that their exposure is known. Four Twenty Seven combines leading-edge climate science with a unique proprietary database of more than one million corporate facilities to provide investors with insights into the physical risk exposure of corporations.
The company leverages outputs from an ensemble of sources, including climate, drought and flood models, and hurricane and cyclone storm tracks. The outputs are delivered in an array of arcane formats not readily usable by investors. Four Twenty Seven applies its engineering and research capabilities to gather, transform and distil the outputs into metrics that are accessible to the investment industry’s risk and portfolio management processes.
The source models, all from leading research institutions, assess future climate states worldwide and are mapped onto a 25 x 25km2 grid overlaid onto the earth. The risk of corporate assets within the grid cells is assessed in the light of the climate state projections to give forward-looking risk exposures to heat stress, water stress, sea-level rise, extreme precipitation and extreme weather events such as hurricanes, cyclones and typhoons.
Clients – which include Fortune 100 corporations, asset owners, pension funds, asset managers, multilateral development banks and government institutions – use the analytics to understand risks in their existing portfolio and assess risks of potential asset acquisitions, as well as to engage with management teams to build resilience in supply chains and physical assets.
Four Twenty Seven’s analytics are already available to equity markets, municipal bonds and real assets, and will soon also be available to real estate investment trusts. Coverage includes almost the entire MSCI All Country World Index and is growing. The company’s risk insights are ‘sector aware’, incorporating sensitivities of different industries to different types of physical climate risk. They also include market and supply chain risk components.
“Deep datasets and sophisticated analytics, setting a high bar in what will become of increasing concern to investors.”
“Four Twenty Seven has market presence, good clients, substantial research, professional execution and a noteworthy team and advisors.The topic is very relevant to financial institutions’ risk management.”
“Niche, but smart.”
Emilie Mazzacurati, founder and chief executive officer of Four Twenty Seven, says:
“Four Twenty Seven’s mission is to bring climate intelligence to financial markets, investors and regulators. We believe the pricing of climate risk is an essential component of efficient markets, and that climate data should be used to inform investment decisions and build resilience. Our science-driven analytics deliver unrivalled transparency on climate change impacts to asset valuations. We are committed to building solutions that enable users to quantify the climate risk implicit in their investments and empower the flow of capital to resilient solutions that mitigate that risk. Our solutions inform dialogue between asset owners, asset managers, lenders, multinational corporations and international development banks.”