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when buying a home in a “global warming zone”

Ron Lieber, the “Money” columnist for the New York Times, suggests a team to work with and a process to follow when purchasing a house “in a global warming zone.”

Mr. Lieber suggests:

a real estate professional

“who has deep knowledge of the local market and has lived through a few floods, fires or hurricanes”

a municipal flood expert

“preferably someone from town or city government who can explain any and all regulations you might need to know about when or if you ever want or need to fix your place up”

a local insurance expert

    • what sort of insurance claims the home has generated in the recent past
    • two reports to obtain and read: the CLUE, for Comprehensive Loss Underwriting Exchange, and A-PLUS
    • “get both, follow up with the homeowner and ask about any flood insurance claims or FEMA grants that may not show up on the reports”

“Read every word of the Federal Emergency Management Agency’s website on the flood insurance program before you buy a home”

a home inspector

    • who can check how well the roof might hold up in a hurricane

When out looking at houses, check the features of the houses

    • look out for special impact-resistant glass in the windows or hurricane shutters.
    • wind mitigation inspection, how well the roof might hold up

“Make like a reporter and talk to any potential neighbors”

    • ask questions

See:

“You’re Buying a Home. Have You Considered Climate Change?” | Ron Lieber, The New York Times, 2 December 2016

#realestate #climatechange #climaterisk #resilience #smartluxury #finance #insurance #floods #municipalfloodexpert #art #artcollections #museums #privatemuseums

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David Zwirner ・forward-thinking art-world luminary

In a time of arguably increasing climate risk and concomitant regulatory risk, price risks, and prospective market adjustments, mega art dealer David Zwirner is a forward-thinking art-world pioneer and luminary. Mr. Zwirner has set a new environmental standard for art-related facilities while presenting a “a clean, elegant, modernist aesthetic that is very much about welcoming visitors today.”

During 2012’s Hurricane Sandy, more than five million gallons of water flooded the construction site of New York’s new Whitney Museum. In response, the engineering and construction of the museum building, the lobby of which is 10 feet above sea-level, and infrastructure were re-designed and re-engineered.

David Zwirner’s second Manhattan location, on West 20th Street, is situated in Chelsea close by the Hudson River. The 537 West 20th Street gallery opened in early 2013, mere months after Hurricane Sandy.

Designed by Annabelle Selldorf and design consultants Atelier Ten, the five-story, 30,000-square-foot structure is built to museum standards and to accommodate large-scale installations and the full range of artists the gallery represents. The gallery is also the first known commercial art gallery built to LEED Gold standards.

The building incorporates five green roof spaces, premium efficiency mechanical, maximized daylighting, and locally and responsibly-sourced materials.

Sound business sense.

See:

“Frick Collection Names Selldorf Architects for Its Renovation” | Robin Pogrebin, The New York Times, 20 October 2016

“This Quietly Elegant Architect is Now the Darling of the Design World” | James Tarmy, Bloomberg, 5 June 2015

“Protecting Priceless Art from Natural Disasters” | John Whitaker, The Atlantic, 27 May 2015

“Annabelle Selldorf Designs the New David Zwirner Gallery” | Samuel Cochran, Architectural Digest, 30 April 2013

“David Zwirner Opens New Manhattan Gallery” | Tamara Warren, Forbes, 29 January 2013

“David Zwirner 20th Street,” New York, New York | Selldorf Architects

David Zwirner

Selldorf Architects | Architects

Atelier Ten | Environmental Design Consultants + Engineers

 

#art #artmarket #architecture #design #DavidZwirner #AnnabelleSelldorf #AtelierTen #WhitneyMuseum #Whitney #HurricaneSandy #climatechange #climaterisk #regulatoryrisk #marketadjustments #finance #LEED #LEEDGold

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valuing climate-related risks, investing well, & avoiding stranded assets

The Task Force on Climate-Related Financial Disclosures (TCFD, @FSB_TCFD) has published a new report on June 29. The report is published as part of a G20 initiative led by the governor of the Bank of England Mark Carney and the former mayor of New York City Michael Bloomberg.

The report provides a framework for companies to disclose in their financial filings all of their direct and indirect greenhouse gas emissions and describe the risks and opportunities caused by climate change under a range of potential scenarios. The objective of such disclosures would be to allow economies to properly value climate-related risks and to help minimize the risk, to investors, banks, and insurers, that market adjustments to climate change will be incomplete, late and potentially destabilizing.

Importantly, the report recommends that banks should disclose lending to companies with carbon-related risks.

Climate change presents global markets with risks and opportunities that cannot be ignored. The framework can be of assistance to investors (such as banks, pension funds, sovereign wealth funds, university endowments, investors in commercial real estate, and homeowners) as they evaluate the potential risks and rewards of a transition to a lower carbon economy and avoid investing in assets that might become stranded, non-performing (such as non-performing loans made to entities that are cash-strapped due to rising carbon costs or houses and buildings that themselves cannot perform and/or are difficult or impossible to sell).

While the report’s recommendations are intended to be adopted by all companies, extra guidance is given to the financial sector. Other sectors, likely to be most affected by climate change and/or the transition to a lower carbon economy, are also given extra guidance. The other sectors likely to be most affected by climate change and/or the transition to a lower carbon economy include energy, transportation, construction, and agriculture, food, and forestry.

Christian Thimann, Group Head of Regulation, Sustainability and Insurance Foresight, AXA Group and a member of the TCFD, observes that insurers “see the frequency and intensity of natural disasters linked to climate change augmenting every year.” “Insurers,” Dr. Thimann says,
consider a world of plus two degrees may still be insurable but a world of plus four degrees might not be.”

Dr. Thimann notes that while banks have a shorter outlook than insurers

  • Banks “too can use these recommendations because they will need to steer their lending between sectors aligned with a 2-degree world and sectors not aligned. They need to know which are the sectors with a high risk of stranded assets in the future and those with a low risk of stranded assets in the future.”

 

See:

“Banks should disclose lending to companies with carbon-related risks” | Michael Slezak, The Guardian, 29 June 2017

#TCFD #MarkCarney #BankofEngland #NYC #MichaelBloomberg #climatechange #climaterisk #strandedassets #banks #investors #finance #insurance #AXA #lowcarboneconomy #energy #transportation #construction #agriculture #food #forestry#realestate #homeownership #museums #artcollections #art

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climate risk, credit, bonds, & real estate: AAA is AAA? … or, move to high ground

For more than a century, rating companies have published information helping investors gauge the likelihood that companies and governments will be able to pay back the money they borrow. Investors use those ratings to decide which bonds to buy and gauge the risk of their portfolio. For most of that time, the determinants of creditworthiness were fairly constant, including revenue, debt levels and financial management. And municipal defaults are rare: Moody’s reports fewer than 100 defaults by municipal borrowers it rated between 1970 and 2014.

Climate change introduces a new risk, especially for coastal cities, as storms and floods increase in frequency and intensity, threatening to destroy property and push out residents. That, in turn, can reduce economic activity and tax revenue. Rising seas exacerbate those threats and pose new ones, as expensive property along the water becomes more costly to protect — and, in some cases, may get swallowed up by the ocean and disappear from the property-tax rolls entirely.

When asked by Bloomberg, none of the big three bond raters could cite an example of climate risk affecting the rating of a city’s bonds.

This is climate risk: risk to fundamental variables such as economic activity, property values, and tax bases caused by natural factors (such as storms and floods)  that may be exacerbated by our changing climate.

Climate risk has yet to be fully and sytematically incorporated into investigations into municipal creditworthiness.

Will your municipality will be be able to make timely and full payments on its then current debt load after a storm or flood, or repeated storms or floods, negatively influences economic activity?

What happens when the storms or floods are so severe that they “wipe out the taxation ability? I think this is a real risk” observes Bob Buhr, a former vice president at Moody’s who recently retired as a director at Societe Generale SA.

Predictions are imperfect, especially about the future; no one, no algorithm, no model can perfectly predict the future. The pace of climate change remains uncertain. What climate change, and concomitant effects on communities, community tax revenues, and the likelihood of any community being able to pay back bonds “is not a simple calculation.”

To date, the major ratings agencies are not asking questions about the expected effect of climate change on the economic activity and future tax revenues of US municipalities that look to “cheap money” (municipal bonds) to finance government.

Last September, when Hilton Head Island in South Carolina issued bonds that mature over 20 years, Moody’s gave the debt a triple-A rating. In January 2016, all three major bond companies gave triple-A ratings to long-term bonds issued by the city of Virginia Beach, which the U.S. Navy has said faces severe threats from climate change.

Investors, including 117 investors with $19 trillion in assets, say it would be prudent to include “systematic and transparent consideration” of environmental and other factors in order to identify systemic ESG risks in debt capital markets.

In other words, bond buyers should be warned. If storms and floods decrease property values and tax revenues while increasing spending on mitigating infrastructure such as sea walls, storm drains and flood-resistant buildings, pay back to bond buyers may be impacted.

Property owners – both residential and commercial – might take note.

Should your municipality meet a storm or flood that significantly impacts economic activity and the ability to collect tax revenues, it might be stressed and its ability to make scheduled payments on its municipal debt obligations might be impacted.

This will influence the municipality’s credit. If the credit is downgraded, the municipality will have to pay greater interest on its debt. To pay higher interest, it will have to collect more tax revenues. That means greater economic activity and/or higher taxes.

And/or, the municipality might have to reduce services. Municipal services include physical infrastructure (such as roads, bridges, water) and civic benefits such as fire departments and schools.

If such services are reduced, how prepared are you in your private capacity to initiate efforts and implement necessary steps towards the robust resilience (basically the ability to bounce back after a shock  or multiple shocks to the system) and operability of your real estate holdings (residential, commercial, …)?

Do you have the means (financial, intellectual, technical, etc.) and the time to “do it yourself” (e.g., water, energy, transportation)? How do you use your real estate holdings? How long do you expect to own them? What are your expectations of resale value?

Moving to high ground might help manage the risk.

Food for thought.

See:

“Rising Seas May Wipe Out These Jersey Towns, But They’re Still Rated AAA” | Christopher Flavelle, Bloomberg, 25 May 2017

“Credit ratings agencies embrace more systemic consideration of ESG” | PRI, Principles for Responsible Investment, 26 May 2016

#climatechange #climaterisk #creditrisk #risk #finance #municipalfinance #bonds #credit #realestate #resilience #luxury #smartluxury #urbanluxury

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real estate investment & climate change futures ・ the next dry neighborhood

If there’s anything more complicated than the global forces of thermal expansion, ice sheet melt and ocean circulation that contribute to worldwide sea-level rise, it might be the forces of real estate speculation.

Real estate investment may no longer be just about the next hot neighborhood, it may also now be about the next dry neighborhood.

“‘That’s it, it’s that simple. To be on the beach and to be on the water costs a lot more money, and the cheaper parts of town were furthest from the beach — but it just turns out that the cheapest parts of town farthest from the beach are the highest elevation, and now they’re worth a lot more than they used to be.'”

Jesse M. Keenan, Harvard Graduate School of Design

“‘The real issue is: Are people making real estate decisions based on climate change futures, rather than sort of normal speculation?'” observes Hugh Gladwin, an anthropologist at Florida International University in Miami. Gladwin’s specialty is using geographic information system mapping to understand large, diverse urban settings.

Jesse M. Keenan is a lawyer who teaches climate change adaptation at Harvard University’s Graduate School of Design. Mr. Keenan formerly served as the co-founder and research director of Columbia University’s Center for Urban Real Estate (CURE). His family roots are in Miami and he owns a house and has an office and parking space in Miami. He thinks people are making real estate decisions based on climate change futures.

Using survey data, Mr. Keenan is beginning to see see evidence that middle-income people are leaving Miami Beach and other places with nuisance flooding. Such flooding makes  it difficult to get around at high tides or insure a car.

Mr. Keenan observes, “‘Everybody I know that is a small owner of real estate that isn’t within the billionaire class — average middle-class, upper-middle-class Miamians who have real estate on the beach — is in the process of selling their properties and moving to the mainland.'”

Sea-level rise is exacerbating the effects of coastal flooding in South Florida. A 2016 University of Miami study finds that coastal flooding is accelerating. The coastal flooding is coinciding with an accelerated rate of sea-level rise in South Florida. The average rate of sea-level rise jumped from an increase of 3 millimeters a year before 2006 to an increase of 9 millimeters a year on average after 2006. Over the course of one decade, from 2006 to 2016, that’s about 3.5 inches of sea-level rise.

Sam Purkis, a marine geologist at the University of Miami, observes,

“‘What will happen, more than likely, is that you’ll have one big hurricane, and you’ll get a big inundation into the city. And that will serve to rot out the infrastructure — the sewer lines, the electricity, the telecoms. Everything that’s under the road. That becomes very costly to keep replacing every time this happens.'”

“‘That’s it, it’s that simple,'” says Harvard’s Jesse Keenan.

“‘To be on the beach and to be on the water costs a lot more money, and the cheaper parts of town were furthest from the beach — but it just turns out that the cheapest parts of town farthest from the beach are the highest elevation, and now they’re worth a lot more than they used to be.'”

Local governments are considering  what sea-level rise means for all those mortgage holders who pay taxes.

Coral Gables released an analysis of how it would pay for infrastructure investment in the face of a shrinking tax base if people leave.

“We’re concerned about it, we’re planning for it, we’re spending money on vulnerability studies trying to know what our vulnerabilities are in terms of our essential infrastructure, and planning to build up and save our communities as long as we can,” Jim Cason, Mayor of Coral Gables, said.

See:

“High Ground Is Becoming Hot Property As Sea Level Rises” | Erika Bolstad, ClimateWire, 1 May 2017, re-printed from ClimateWire by Scientific American with permission from E&E News

Hugh Gladwin, Steven J. Green School of International & Public Affairs, Florida International University

Jesse M. Keenan, Harvard University Graduate School of Design

Center for Urban Real Estate, Columbia University GSAPP

Sam Purkis, Professor & Chair, Department of Marine Geosciences, Rosenstiel School of Marine & Atmospheric Science, University of Miami

#realestate #realestatedevelopment #realestatespeculation #art  #ArtBaselMiamiBeach #Miami #MiamiBeach #climatechange #sealevelrise #resilience #Harvard #Columbia #FloridaInternationalUniversity #UniversityofMiami

 

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climate change as opportunity・developing economic value through investments in resilience

From a Dutch mind-set, climate change is neither a hypothetical , nor a drag on the economy, nor an ideology. For the people of the Netherlands climate change is an opportunity – to let water in, where possible, to live with water rather than struggle to defeat it – with added economic value developed through investing in resilience.

People in the Netherlands believe that the places with the most people and the most to lose economically should get the most protection.

To the Dutch, what’s truly incomprehensible is New York after Hurricane Sandy, where too little has been done to prepare for the next disaster.

The idea that a global economic hub like Lower Manhattan flooded during Hurricane Sandy, costing the public billions of dollars, yet still has so few protections, dumbfounds climate experts in the Netherlands.

See:

“The Dutch Have Solutions to Rising Seas. The World is Watching” | Michael Kimmelman, The New York Times, 15 June 2017

#climatechange #realestate #resilience #Rotterdam #investments #economicvalue

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Apple issues second green bond, a $1 billion bond to finance renewable energy & closed-loop supply chain

Yesterday Apple issued its second “green bond”, a $1 billion bond dedicated to financing renewable energy, energy efficiency at Apple facilities and throughout its supply change, to close its supply chain loop, and procure safer materials for its products. 

The bond offering includes a specific focus on helping Apple meet a goal of

  • developing a closed-loop supply chain and
  • using only renewable resources or recycled material in the manufacture of its products.

The bond is to mature in 2027 and will yield 95 to 100 basis points more than Treasuries. Bank of America Corp., Goldman Sachs Group Inc. and JPMorgan Chase & Co. arranged the sale.

Investors are seeking lower-carbon investments. Demand for green bonds is growing significantly.

According to the Climate Bonds Initiative, in 2016 $81 billion of green bonds were issued. This is double the number of green bonds that were issued in 2015.

See:

“Apple Issues a Second Green Bond to Finance Clean Energy” | Alex Webb, Bloomberg, 13 June 2017

“Apple issues $1 billion green bond after Trump’s Paris climate exit” | by Valerie Volcovici, Reuters, 13 June 2017

Climate Bonds Initiative | “Climate Bonds Initiative is an international, investor-focused not-for-profit. We’re the only organisation working solely on mobilising the $100 trillion bond market for climate change solutions.”

#Apple #finance #greenbond #GoldmanSachs #BankofAmerica #JPMorganChase #renewableenergy #cleanenergy #investments #bondmarket #climatechange #climatechangesolutions

 

 

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Market Solutions for Environmental Challenges

Goldman Sachs today signed a long-term Power Purchase Agreement (PPA) with a subsidiary of NextEra Energy Resources, LLC.

The agreement will enable the investment and development of a new 68 megawatt wind project in Pennsylvania. The wind project is expected to facilitate up to 150 construction jobs and, once operational, result in the reduction of more than 200,000 tons of greenhouse gas emissions every year.

Goldman Sachs reiterates its commitment to market solutions for environmental challenges.

 “We are committed to being a leader in the development of renewable energy. By enabling this new wind project to come online, the agreement will help grow the renewable grid and contribute to the momentum behind a lower carbon economy.”

Lloyd C. Blankfein, chairman and chief executive officer of Goldman Sachs

The PPA with NextEra Energy Resources is a collaborative effort between Goldman Sachs’ commodities trading group (J. Aron) and its Corporate Services and Real Estate department.

Goldman Sachs has achieved its carbon neutrality commitment. The company is working towards achieving its goal of 100 percent power for its global electricity needs by the year 2020.

Goldman Sachs is a member of the RE100 initiative, “the world’s most influential companies, committed to 100% renewable power.”

See:

“Goldman Sachs Signs Long-Term Power Purchase Agreement to Spur Renewable Energy Growth and Jobs” | Press Release, 12 June 2017

“Our Operational Impact” | Goldman Sachs Environmental Stewardship

RE100

#realestate #resilience #cleanpower #renewableenergy #windenergy #PPA #GoldmanSachs #tech #greenhousegasemissions #climatechange #market #marketsolutions