company cash flows at risk due to climate change

Between 15% and 20% of company cash flows are at risk, on average, because of climate change.

This is according to an analysis developed by global asset manager Schroders. As of March 31 of this year, Schroders is responsible for the management of £416.3 billion (€486.7 billion, $520.6 billion) of assets.

Says Schroders’ Andy Howard, global warming “is a real problem, not just a societal one but a financial one.”

This month Schroders has introduced a tool, a Climate Progress Dashboard, to track, based on 12 indicators, climate change progress. The indicators include coal production, carbon prices, corporate planning, renewable capacity, oil and gas investment, and political ambition.

The Schroders Climate Progress Dashboard will provide a snapshot of likely temperature rises based on the indicators and will help its fund managers “evaluate the challenges ahead”.

The Schroders Climate Progress Dashboard currently predicts that global temperatures are on course to rise by four degrees above pre-Industrial Revolution levels.

PKA, the Danish pension fund, has demanded that companies take action to protect their business models from climate change. Such action would include reducing their reliance on fossil fuels or moving towards greener energy. PKA is divesting “from certain companies involved in energy and carbon-intensive extraction methods, which we do not believe fit in a low-carbon economy.”

See:

Schroders Launches Climate Progress Dashboard, Tracks Current Course Of 4°C Warming” | Joshua S. Hill, CleanTechnica, 19 July 2017

Schroders launches Climate Progress Dashboard” | Schroders, 17 July 2017

Schroders issues climate change warning” | Attracta Mooney, The Financial Times, 15 July 2017

Danish pension fund PKA dumps Canadian oil” | Attracta Mooney, The Financial Times, 14 April 2017

#Schroders #assetmanagement #globalwarming #finance #risk #PKA #Denmark #climaterisk #resilience #realestate #business

sudden heavy rains damage works in the Louvre

During the course of one hour late on Sunday evening, July 9, two inches (50mm) of rain fell on Paris during severe thunderstorms that swept across the region.

Several works in the collection of the Musée du Louvre are reported to have been damaged due to the effects of the sudden rainstorm:

  • two (“Spring” and “Fall”) of the works that make up Nicolas Poussin’s “Four Seasons” in the Sept-Cheminées room
  • “The Triumph of Mordecai” (1736) by Jean-François de Troy
  • works, housed on the second floor, by 17th-century French artists Georges de La Tour and Eustache Le Sueur

Water flowed into the mezzanine of the Denon wing also. This affected the rooms housing “Arts of Islam” and “From the Mediterranean Orient to Roman Times.” These rooms have been closed pending hygrometric stabilization

Le musée du Louvre a été touché par les intempéries d’une violence inédite qui ont frappé la région parisienne dans la nuit du 9 au 10 juillet et le 10 juillet au matin.

Les infiltrations d’eau ont entraîné la fermeture de certains espaces et l’évacuation préventive d’œuvres du département des Peintures et du département des Antiquités égyptiennes.

See:

Violent Storms Invade the Louvre, Damaging Art by Poussin and Other Holdings” | Naomi Rea, Artnet.com, 17 July 2017

Louvre masterpieces damaged in storm” | The Connexion, 16 July 2017

Informations suite aux intempéries des 9 et 10 juillet 2017” | Louvre, 13 July 2017

 

#Louvre #NicolasPoussin #Jean-FrançoisdeTroy#GeorgesdeLaTour #EustacheLeSueur #ArtsofIslam #art #rain #CO2 #climaterisk #Paris

art, museums, & climate risk | the Pérez Art Museum Miami

Museums, as stewards of cultural heritage, are in it for the long term. To safeguard the artistic, historic and scientific resources they hold in trust for the public, museums need to adapt to a world where change—and water—are the new normal.

Designing for Resilience, Elizabeth Merritt, founding director, Center for the Future of Museums, an initiative of the American Alliance of Museums

The Swiss architectural firm of Herzog & de Meuron designed what is now called the Pérez Art Museum Miami (PAMM). The museum is anchor for a 30-acre museum park on Biscayne Bay in downtown Miami. The Biscayne Bay location was provided by the City of Miami. Construction of the building cost $220 million. $100 million was provided by Miami-Dade voters in general obligation bond funding. $120 million came from private donors.

The museum of modern and contemporary art is dedicated to collecting and exhibiting international art of the 20th and 21st centuries. The museum holds the largest collection of contemporary Cuban art in the United States.

The National Climate Assessment of 2014 named Miami one of the U.S. cities most vulnerable to severe damage as a result of rising sea levels. According to the report, sea levels have risen eight inches since 1870. The report projects a further rise of one to four feet by the end of the century.

The National Climate Assessment of 2014 found that while melting Arctic and Antarctic ice and rising sea levels are threatening the entire American coastline, Miami is exceptionally vulnerable due to its natural geology.

The city of Miami is built on top of porous limestone. The limestone absorbs seawater. The rising sea waters are being absorbed into the city’s foundation. The water bubbles up through pipes and drains, encroaches on fresh water supplies and saturates infrastructure. County governments estimate that the damages could rise to billions or even trillions of dollars.

In such circumstances and given Miami’s geology, how is the Pérez Art Museum Miami designed to fulfill its responsibilities as a steward of art and cultural heritage?

The architecture has been designed to adapt to the climate of Miami. The new building, opened in 2013, was specifically designed to withstand hurricanes. The museum is raised on an elevated platform above the flood plain. The museum features the largest sheets of hurricane-resistant glass in the U.S. Art storage facilities are situated more than 46 feet above sea level. The museum’s backup-electricity system runs on generators. The generators are located on the third floor.

  • The first floor of the museum was elevated by Herzog & de Meuron above the 18-foot high-water mark left by Category 5 Hurricane Andrew in 1992. The elevation acts as a safety cushion for projected effects of climate change.
  • Gaps in the floors of the patio surrounding the museum allow water from rain, storm surge or flooding to drain into the parking garage, located underneath the museum.
  • A power generator is located on the third floor of the museum. Electricity to the building is ensured even if lower floors are affected by flooding. The generator has enough fuel for three days of use, and can be refueled by truck or barge (in case the roads are blocked).
  • Second-floor windows feature the largest panels of hurricane-resistant glass in the US (17.5 feet tall by seven feet wide, each weighing 2,500 pounds).
  • The teak entrance doors weigh 550 pounds each. They each feature a multi-prong pin system. The pin system locks the doors in several places to secure them against category-five hurricane winds.
  • The hanging gardens, inclusive of the mechanical system and irrigation system, are designed to withstand a category five hurricane.
  • Should a major hurricane head towards Miami, the museum maintains plans to de-install and place in storage as much of the art as possible, starting with the most sensitive works, such as particularly rare works on paper that are sensitive to humidity and temperature fluctuations.
  • The museum’s art storage facility is situated 46 feet above sea level. This is to ensure security from flooding and water damage. Storage HVAC is designed to handle humidity levels that might follow a storm event.

See:

Jorge Pérez Donates $15 Million in Cash and Art to Miami Museum” | Hili Perlson, Artnet, 30 November 2016

Designing for Resilience” | Elizabeth Merritt, Center for the Future of Museums, an initiative of the American Alliance of Museums, 11 August 2015

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

Trendswatch 2015” | Elizabeth Merritt, Center for the Future of Museums, an initiative of the American Alliance of Museums

“Miami Finds Itself Ankle-Deep in Climate Change Debate” | Carol Davenport, The New York Times, 7 May 2014

Pérez Art Museum” | Knippers Helbig Advanced Engineering

National Climate Assessment

Pérez Art Museum | Wikipedia

 

#PérezArtMuseumMiami #Miami #Herzog&deMeuron #JorgePérez #art #artcollections #climaterisk #resilience #realestate #artstorage #electricity #powergeneration #carbondioxide #CO2 #risingsealevels

 

 

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

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

21st c building design & construction ・re-exploring wood & rammed earth

While concrete, glass structures, polished stone walls, brick facades and steel beams now prevail in urban design, wood and rammed earth are getting attention.

The use of steel in urban buildings began with the production of steel in bulk. Mass production of steel was enabled by Henry Bessemer’s development of the Bessemer converter in 1857. Once steel could be produced in bulk, it became cheaper and easier to obtain.

The 10-story Home Insurance Building, completed in 1885 in Chicago, was the first building in the world to use structural steel in its frame. Due to its architecture and weight-bearing frame, the building is considered the world’s first “skyscraper.”

The 16-story Ingalls Building, built in Cincinnati, Ohio in 1903, became the world’s first reinforced-concrete skyscraper.

The production of steel and the production of concrete are, however, both energy intensive and carbon intensive. Steel and concrete have high levels of embedded energy. Neither steel nor concrete are renewable.

As of 2014, 54% of the world’s population lives in urban areas. The world’s urban population has grown rapidly, from 746 million in 1950 to 3.9 billion in 2014. The world’s urban population is expected to continue to grow – to 66% of the world’s population by 2050, surpassing six billion people by 2045.

With more people moving into urban areas, the demand for big buildings is likely to grow. The building industry (materials production, building technology, architecture, construction, …) is increasingly exploring the ratio of demand for buildings with the environmental impact of building materials.

Two building materials that are coming to attention are wood and rammed earth.

Wood is manufactured into large cross-laminated timber panels for purposes of tall building construction. Cross-laminated timber panels, a layered composite like a super-strong plywood, are made by gluing pieces of smaller wood together.

In order to build tall buildings, large wood panels that can be as large as 64 feet long,  eight feet wide, and 16 inches think  are engineered. Builders use concrete and steel only at high-stress locations like joints.

Architects are now able to build with timber, in tandem with precision digital manufacturing processes like CNC milling, to heights that have hitherto been unimaginable.

The environmental properties of cross-laminated timber panels make it even more attractive. As trees grow wood stores carbon dioxide, sequestering CO2 from the air. Michael Green of Michael Green Architecture in Vancouver, British Columbia, whose firm who recently completed T3, a seven-story building in Minneapolis that is now the tallest wooden building in the US, observes that wood is manufactured using solar power:

“Steel and concrete don’t grow back. They are not renewable materials. They are not even remotely renewable materials—they use massive amounts of energy in their creation, whereas the most perfect solar power system of making any material on Earth is the making of our forests.”

Rammed earth can be used for both residential and commercial buildings. Rammed earth walls are solid masonry walls. These walls are massive, built for the long term, and not easily replaced. That said, they are beautiful and contain a fraction of the embodied energy of manufactured wall products such as fired bricks or concrete blocks. Rammed earth walls also possess unique thermal qualities that keep residents cool in the summer and warm in the winter.

The market for rammed earth now includes both residential and commercial buildings. Commercial buildings built with rammed earth walls include wineries, resorts, offices, and university buildings.

See:

The Next Wave of Building Materials” | Emma Kantrowitz, CBRE, 6 July 2017

Get Ready for Skyscrapers Made of Wood (Yes, Wood)” | Elizabeth Stinson, Wired, 30 May 2017

Will Skyscrapers of the Future Be Built From Wood?” | Natasha Geiling, Smithsonian.com, 20 June 2016

World’s population increasingly urban with more than half living in urban areas” | United Nations, 10 July 2014

Chadwick Dearing Oliver, Nedal T. Nassar, Bruce R. Lippke & James B.

McCarter (2014) Carbon, Fossil Fuel, and Biodiversity Mitigation With Wood and Forests, Journal of Sustainable Forestry, 33:3, 248-275, DOI:

10.1080/10549811.2013.839386

“History of the steel industry (1850-1970)” | Wikipedia

Ingalls Building” | Wikipedia

Home Insurance Building” | Wikipedia

Michael Green Architecture, Vancouver, British Columbia

T3, Minneapolis, Minnesota

The Earth Structures Group

#architecture #design #smartluxury #construction #climaterisk #CO2 #energy #wood #crosslaminatedtimber #rammedearth #CNCmilling

the luxury market is driving LEED & green building tech

The use of  advances in green building technology and LEED (USGBC’s Leadership in Energy and Environmental Design) by U.S. developers and architects is increasingly market driven.

Such initiatives have oftentimes been borne out of environmental regulations and tax subsidies initiated at local, state and federal levels.

It appears, however, that such environmental regulations and tax subsidies are no longer sole primary drivers.

Rather, market demand is also driving the adoption of green building technology and LEED in the design and development of luxury buildings.

People understand the need for and benefits of green building technologies and carbon neutral energy programs. Developers, architects, and designers are beginning to follow suit.

Here are some examples:

  • Marcos Corti, CEO, Consultatio, the developer of Oceana, the first building on Bal Harbour, Florida to be LEED certified:

“The trend is to go LEED and to continue that path. It is on everybody. If the government or the leader is not going that way, I think the entire population is going that way, so it isn’t going to change.”

  • Stephen Glascock, President and Managing Partner, founded New York-based Anbau in 1998 based on the vision that “good design makes good business.” The Anbau focus is on residential condominium development in New York City, seeking value and appropriate risk-adjusted returns.

“We don’t get any subsidies for LEED stuff. All the sustainable stuff comes from what we feel is the right thing to do.”

  • Christopher Gandolfo, vice president of development, Swire Properties. Swire Properties is active globally. Brickell City Centre is 9.1-acre city-within-a-city, a retail-led mixed complex of luxury condo towers, class-A office buildings, a five-star hotel, and an open-air shopping center, engineered and built on platforms over the street level that link shops, restaurants, hotel and the other buildings.

“We are pioneer for the time. I’d like to believe other good developers will follow suit. It is up to the public to demand it to some degree as well.”

LEED “helps keep the very large team of designers, specialist consultants, and contractors who work on a project like 520 W 28th Street focused on the project’s performance and indoor air quality goals, and it gives our buyers an extra level of comfort that we achieved these goals.”

  • Brandon Specketer, partner at COOKFOX Architects, “architectural studio dedicated to a vision of integrated, environmentally responsive design. We believe good design is sustainable and we are committed to being wise stewards of our shared natural and cultural resources.”

COOKFOX project 550 Vanderbilt in Prospect Heights, Brooklyn utilizes Biophilic Design principles throughout the building to connect residents to the natural world for enhanced creativity, clarity of thought, and improved well being.

“LEED isn’t a checklist. It is a standard of quality that helps everyone meet a certain standard.”

See:

Green Building in U.S. Luxury Developments Continues to Flourish” | Ariel Ramchandani, Mansion Global, 29 May 2017

City in a city: Brickell City Centre set to transform downtown Miami” | Debora Lima, Miami Herald, 15 May 2016

550 Vanderbilt | COOKFOX

#realestate #luxury #smartluxury #LEED #greentech #Consultatio #Anbau #SwireProperties #RelatedCompanies #COOKFOX #realestatedevelopment #architecture #design #NewYork #Miami #climaterisk #urbanliving

 

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