This document discusses the rising economic and insured losses from natural catastrophe events globally and in the US. It notes that climate change has the potential to exacerbate future losses, and that rising sea levels could result in heavy losses for US coastal cities. The document advocates for climate resilience strategies like coastal protections to help mitigate potential losses from sea level rise and protect credit ratings. It also discusses growing investor interest in sustainable and impact investing, and S&P Global's role in developing a "Green Evaluation" analytical approach to provide transparency and evaluate the environmental impact of financings.

1. Analyzing Resiliency Risk
May 18, 2017
Laline Carvalho
Director
Financial Services Ratings Group
Copyright © 2016 by S&P Global.
All rights reserved.

2. Global Economic and Insured Losses From
Natural Catastrophe Events Are On The Rise
2
Source:
Insurance
Information
Institute.
Data
from
©
2017
Munich
Re,
Geo
Risks
Research,
NatCatSERVICE.
As
of
February
2017.
World
Natural
Catastrophes
Overall
And
Losses,
1980–2016

3. The U.S. Has Significant Exposure To Economic and
Insured Losses From Natural Catastrophe Events
3
Source:
Insurance
Information
Institute.
Data
from
©
2017
Munich
Re,
Geo
Risks
Research,
NatCatSERVICE.
As
of
February
2017.
Top
10
World
Costliest
Natural
Catastrophes
By
Insured
Losses,
1980-­‐2016

4. 0%
5%
10%
15%
20%
New
Zealand
Japan
Australia
Korea
Sri
Lanka
China
India
South
Africa
Mosambique
USA
Mexico
Indonesia
Hong
Kong
Colombia
Thailand
Venezuela
T&T
Philippines
Taiwan
Bermuda
Honduras
Guatemala
Aruba
Dom.
Rep
Vietnam
Bangladesh
Barbados
Jamaica
Fiji
Bahamas
Additional
damage
due
to
climate
change
250-­‐Jahr
cyclone,
status-­‐quo
climate
Climate Change Has The Potential To Exacerbate
Future Losses From Natural Catastrophe Events
Damage
ratios
tropical
cyclones
(%
of
economic
values/properties
in
country)
Source:
S&P
Global
Ratings
2015

5. Rising Seas Could Mean Heavy losses to U.S.
Coastal Cities
5
Average Annual Losses In U.S. Coastal Cities
In 2005 In 2050 In 2050 In 2050
(Mil. $)*
AAL with no rise in sea
level
Projected AAL with no
protection from 20-­cm sea-­
level rise
Projected AAL with
protection from 20-­cm sea-­
level rise
Projected worst-­case AAL for
sea-­level beyond 20-­cm
protection
Baltimore 238 1,178 271 12,741
Boston 741 5,557 793 38,400
Houston 119 6,088 190 9,053
Los Angeles-­Long Beach-­Santa Ana 188 9,427 203 9,960
Miami 2,099 7,340 2,549 228,589
New Orleans 1,583 161,141 1,864 182,592
New York-­Newark 1,960 7,914 2,056 198,885
San Juan 68 1,680 89 4,239
Tampa-­St. Petersburg 763 2,997 859 40,022
Virginia Beach 278 1,520 303 40,549
*Constant 2005 dollars. AAL-­-­Avg. annual losses. Cm-­-­Centimeter. Source: World Bank.

6. Rising Seas Could mean Heavy Losses To U.S. Coastal
Cities
6
Ø Between 1960 and 2013 relative sea-­level change (the height of the
ocean at particular locations, rather than globally) rose eight inches or
more along parts of the Atlantic and Gulf coasts, according to the
National Oceanic and Atmospheric Administration.
Ø Population growth and development that encroaches on shorelines and
low-­lying areas could greatly elevate losses if coastal protections aren't
added
Ø Depending on the level and pace of the rising seas, coast-­hugging
highways, seawalls, harbors, nearby water, sewage, and power facilities,
and other seaside infrastructure-­-­in addition to millions of homes-­-­could
see billions of dollars in losses over the next few decades if protection
measures are not in place.
Ø Damage to these facilities also could seriously erode local tax bases,
adding another level of risk to coastal areas.

7. Climate Resilience Can Protect Ratings From Sea-­Level
Rise and Threats To U.S. Coastal Infrastructure
7
Ø To mitigate potential losses from sea-­level rise and storm surge, local and
state authorities need to determine what the necessary infrastructure is,
what the financing needs for such projects are, and establish contingency
plans for "worst-­case" scenarios
Ø Constructing barriers to avert flooding might avert billions of dollars of
losses
Ø Entities taking steps now to protect credit quality long-­term will not
necessarily incur damage to current credit ratings
Ø Long-­term planning is key

8. There Is Increasing Investor Interest In
Sustainable and Impact Investing
8
29%
9%
6%
6% 1%
15%
15%
6%
5%
4%
2%
2%
49%
Energy Buildings
&
Industry
Transport Water
Waste
&
Pollution
Agriculture
&
Forestry
MS
Energy MS
Buildings
&
Industry
MS
Transport MS
Water
MS
Waste
&
Pollution
MS
Agriculture
&
Forestry
MS
Adaptation
Split By Project CategoriesAnnual Issuance By Issuer Type ($ BN)
MS:
Multi-­‐sector
(49%
of
bonds
cover
more
than
one
sector)
Growth Trend In Issuance Of Green Bonds
Source:
Climate
Bonds
Initiative
0
10
20
30
40
50
60
70
80
90
100
2012 2013 2014 2015 2016 2017
YTD
Development
Bank
Muni
ABS
Corporate
Bank To
be
Defined
Sovereign

9. Green Evaluation -­ Introduction
9
"For investors, green bond markets offer a stable, rated and liquid investment with long
duration. For issuers, green bonds are a way to tap the huge $100 trillion pool of patient
private capital managed by global institutional fixed-­income investors.”
Mark Carney, Governor of the Bank of England, September 2016
Define the value of "green" for capital markets and any other financing
Establish essential transparency in Green Finance
Enable institutional investment in sustainability by providing the confidence of
independent evaluation of environmental impact
Go beyond existing tools and takes a local, sector-­specific perspective on
impact
Provide a "green channel" to sustainable finance for institutional fixed income
Covers all financings such as bank debt and equity not just green bonds
S&P Global’s Role – The Green Evaluation

10. Green Evaluation Analytical Approach
10
*
eKPI – Environmental
Key
Performance
Indicator
Weighted aggregate of three:
Transparency Governance Mitigation Adaptation
Green
Evaluation
or
Transparency
‒ Use
of
proceeds
reporting
‒ Reporting
comprehensiveness
Governance
‒ Management
of
proceeds
‒ Impact
assessment
structure
Final
Green
Evaluation
(E1-­‐ E4
or
R1-­‐ R4)
Mitigation
Buildings,
industrial
efficiencies,
energy
infrastructure,
transport,
and
water
Net
benefit
ranking
eKPIs:
Carbon
emissions,
water
use,
waste
creation
Adaptation
Resilience
capex
such
as
flood
defenses,
asset
protection
etc,.
Cost
benefit
ranking
Resilience
benefit
ratio
Estimate
of
reduction
in
damages
if
event
occurs
Hierarchy
applied
Resilience
level
Adaptation
scoreMitigation
score
Environmental
impact

11. Assessing Resilience Benefit: Definitions
11
Resilience Benefit is the estimated reductions in the expected damages
that the project aims to achieve
Resilience
Benefit
Ratio
=
Resilience
Benefit/
GB
Financing

12. Assessing Resilience Benefit: Assessment
Scale
12
Range
of
Resilience
Benefit
Ratio Resilience
Level
Step 1
Determine the resilience benefit ratio
based on issuer's own assessment of
the resilience benefit and S&P
quantitative adjustments
Step 2
Apply qualitative adjustments
reflecting the adequacy of the
quantification approach used by the
issuer
Step 3
Apply qualitative adjustments for
projects in developing countries that
have high exposure to climate risk
and a high level of vulnerability
>4 1
3-­‐4 2
2-­‐3 3
1-­‐2 4
<1 5
Adjustment
For
Adequacy
of
Quantification
Benefit
No
change One notch
higher One
notch
lower
Developing
Country
Adjustment
No
change One notch
higher

13. Green Evaluation Outputs
Aggregating sub-­scores into an overall evaluation score

14. Further Information: spratings.com/greenevaluation
14

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