By Lise Alves, Contributing Reporter
MIAMI BEACH, FLORIDA – As concerns about the effects of climate change and sea level rise increase among public officials and policy makers, investors and risk agencies are starting to look into how global warming can affect companies’ financial futures.
Last month Moody’s, one of the three largest risk agencies in the world, purchased a research firm, Four Twenty Seven, whose main service is to predict future costs incurred from sea level rise, wildfires, and other severe climate disasters caused by climate change.
“Four Twenty Seven’s climate risk analytics, combined with Moody’s global coverage and extensive analytical capabilities, provides an ideal path to help market participants integrate climate impacts into risk management and investment decisions,” said Emilie Mazzacurati, Founder and CEO of Four Twenty Seven in a press release.
Risk agencies, like Moody’s assesses debts and issues credit ratings to public and private companies. These ratings help investors decide which companies to invest in. With Four Twenty Seven, Moody’s plans to better evaluate the risks of operations and capability of repaying long-term debt, thus improving their rating risk skills.
Four Twenty Seven has been called a ‘pioneer’ in this emerging market segment of pricing climate risk. The segment, however, has a long way to go, say experts.
“Companies are not pricing those risks very well,” Nicolette Bartlett, global director of climate change for CDP, told CBS MoneyWatch recently. “I would have thought, in the U.S., that realization would be a bit more stark now, given that the country has now suffered two years of weather damage.”
If big business has been slow to incorporate climate-related risks despite pressure from investors, so has the federal government. In a recent testimony before Congress, Federal Reserve Chairman Jerome Powell was cautious to incorporate climate risks into the way the entity oversees banks.
“I guess I see climate change as a longer-run issue. I don’t know that incorporating it into day-to-day supervision of financial institutions would add that much value,” stated Powell.
The latest acquisition by Moody’s signals that Wall Street may start looking closer at how climate change will affect the economy in the near future.