Four Twenty Seven Looks to Grow Climate Data for Banks, Asset Managers

Traders and portfolio managers use the data to assess risk and to develop portfolios that are environmentally conscious.

Climate change

Climate change data provider Four Twenty Seven is looking to expand its offering to finance, selling the specialized information to investment banks, asset managers and asset owners.

The vendor is currently undergoing a round of fundraising to hire on additional climate scientists. It will also look to add developers to grow its data delivery system, says Frank Freitas, chief development officer at Four Twenty Seven, as some clients prefer a text file while others want an interactive dashboard where they can slice and dice the data themselves.

“There’s plenty of work left to do in terms of teasing out more detailed information about what climate’s effects are on firms’ operations,” he says.

He says that the focus right now is on incorporating new sources of data into the company’s offering to allow them “to present an ever-more faceted view of how companies are exposed” to events such as flooding, tornados, hurricanes and extreme heat. This will mean finding new sources of data generated from internet-of-things (IoT) devices and geospatial data. That will require Four Twenty Seven to add addition technology resources to process those data sources and make them available in a form that is easily consumable, he says.

The company, which is headquartered in Berkeley, California, also has offices in Paris and Washington, DC. Freitas says that the firm would like to expand into Asia in the near future, given the growing number of climate-related events that have increasingly hit the region in recent years.

“We’d like to set up shop somewhere in Asia in the next year or so,” he says. “If you think about it, Asia is one of the most exposed regions in the world to climate risk and all of the typhoons, cyclones, and flooding that have beset the region over the past few years.”

Freitas says that the company hopes to close this round of funding by the end of this summer.

Climate Data for Traders

Four Twenty Seven’s flagship offering is the Equity Risk Score, a subset of what would be considered environmental, social and governance (ESG) data that is comprises an ensemble of climate models that are available via open-source tools and various other scientific agencies to produce forward-looking predictions for things like average precipitation, extreme precipitation or heat, sea-level rise, and hurricane, typhoon and tornado activity.

“They produce a breadth of metrics in a very arcane and hard-to-unpack format,” he says. “So part of the IP is understanding how to interact with the models and how to interact with the output of the models, but basically using 1975 to 2005 as the baseline, we come up with forward-looking estimates for all of these variables, looking out to 2020, 2040 to 2090.”

Four Twenty Seven has over one million facilities mapped worldwide. It then crunches the data to arrive at an exposure score for a facility related to climate risk based on where it is located and what industry it’s in. A portfolio manager or trader would then use that information to determine if they have outsized risk, whether it makes sense to trim positions that are disadvantageously positioned to climate-change events going forward, or add positions where they feel like there is relatively less risk either in total space or relative to their benchmark, Freitas says.

“It’s an area for creating an optimal portfolio, an area to overweight/underweight to a risk factor,” he says. “We intend to subject our scores to the same quantitative, analytical tests that a portfolio manager would.”

Freitas recently joined Four Twenty Seven to help build out its finance coverage. He was previously the founder and CEO of Pluribus Labs, an analytics firm that takes in unstructured data to deliver investable signals. Prior to that he was chief operating officer and head of product strategy at Instinet and was in the product management organization first at Barra and then at MSCI from 1992 to 2005.

Four Twenty Seven will target banks, asset managers, asset owners and the corporations they cover.

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