[House Hearing, 116 Congress]
[From the U.S. Government Publishing Office]

CREATING A CLIMATE RESILIENT AMERICA: BUSI-
NESS VIEWS ON THE COSTS OF THE CLIMATE
CRISIS

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HEARING

BEFORE THE

SELECT COMMITTEE ON THE
CLIMATE CRISIS
HOUSE OF REPRESENTATIVES

ONE HUNDRED SIXTEENTH CONGRESS

FIRST SESSION

__________

HEARING HELD
JULY 25, 2019

__________

Serial No. 116-7

[GRAPHIC NOT AVAILABLE IN TIFF FORMAT]

www.govinfo.gov
Printed for the use of the Select Committee on the Climate Crisis

__________

U.S. GOVERNMENT PUBLISHING OFFICE
37-917 WASHINGTON : 2019

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SELECT COMMITTEE ON THE CLIMATE CRISIS
One Hundred Sixteenth Congress

KATHY CASTOR, Florida, Chair
BEN RAY LUJAN, New Mexico GARRET GRAVES, Louisiana,
SUZANNE BONAMICI, Oregon Ranking Member
JULIA BROWNLEY, California MORGAN GRIFFITH, Virginia
JARED HUFFMAN, California GARY PALMER, Alabama
A. DONALD McEACHIN, Virginia BUDDY CARTER, Georgia
MIKE LEVIN, California CAROL MILLER, West Virginia
SEAN CASTEN, Illinois KELLY ARMSTRONG, North Dakota
JOE NEGUSE, Colorado

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Ana Unruh Cohen, Majority Staff Director
Marty Hall, Minority Staff Director
climatecrisis.house.gov

C O N T E N T S

STATEMENTS OF MEMBERS OF CONGRESS

Page
Hon. Kathy Castor, a Representative in Congress from the State of
Florida, and Chair, Select Committee on the Climate Crisis:
Opening Statement............................................ 1
Prepared Statement........................................... 2
Hon. Garrett Graves, a Representative in Congress from the State
of Louisiana, and Ranking Member, Select Committee on the
Climate Crisis:
Opening Statement............................................ 3

WITNESSES

Paula DiPerna, Special Advisor, CDP North America
Oral Statement............................................... 5
Prepared Statement........................................... 7
Garvin Jabusch, Chief Investment Officer, Green Alpha Advisors,
LLC
Oral Statement............................................... 15
Prepared Statement........................................... 17
Jay Walker, Executive Vice President, South Louisiana Bank
Oral Statement............................................... 18
Prepared Statement........................................... 20
Francis Bouchard, Group Head of Public Affairs and
Sustainability, Zurich Insurance Group
Oral Statement............................................... 23
Prepared Statement........................................... 25

SUBMISSION FOR THE RECORD

Letter from 52 organizations in support of H.R. 3623, the Climate
Risk Disclosure Act of 2019, submitted for the record by Mr.
Casten......................................................... 45

APPENDIX

Questions for the Record from Hon. Kathy Castor to Paula DiPerna. 55

CREATING A CLIMATE RESILIENT AMERICA: BUSINESS VIEWS ON THE COSTS OF
THE CLIMATE CRISIS

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THURSDAY, JULY 25, 2019

U.S. House of Representatives,
Select Committee on the Climate Crisis,
Washington, DC.

The committee met, pursuant to call, at 2:11 p.m., in Room
2261, Rayburn House Office Building, Hon. Kathy Castor
[chairwoman of the committee] presiding.
Present: Representatives Castor, Bonamici, Brownley,
Huffman, Levin, Casten, Graves, Griffith, Palmer, Carter, and
Miller.
Ms. Castor. Well, good afternoon, everyone. The committee
will come to order.
Welcome to the July 25, 2019, hearing of the House Select
Committee on the Climate Crisis. Without objection, the chair
is authorized to declare a recess at any time.
Today, we will discuss the risks, costs, and opportunities
that businesses, investors, and the economy face as a result of
the climate crisis. I now recognize myself for 5 minutes to
give an opening statement.
Today, we are examining the escalating risks and costs of
the climate crisis. When we look at these risks, we see some
big numbers. And when businesses across America look at the
growing risks, they also see huge peril ahead.
In 2017 alone, insurance companies paid out a record $135
billion in climate losses, with $100 billion just in the United
States. The world's largest businesses estimate that they face
nearly $1 trillion of climate-related risks. That is trillion
with a T.
The risks have gotten so large, the Federal Reserve is now
interested. This fall, the Federal Reserve Bank of San
Francisco is hosting its first conference on how the banking
system will deal with climate change. The Fed has identified
climate change as one of three forces transforming the economy
this century, and experts there recognize the need to
understand the financial implications of it to fulfill their
obligation to foster financial stability.
The numbers are eye-popping, but the costs come in real
human terms. When a home or business floods, a cascade of
financial implications follows. The value takes a hit. They may
have to relocate and pay to live or work somewhere else. The
insurance company has to cover their losses. The reinsurance
company has to cover the insurance companies losses. And
evidence shows that these losses will continue to grow.
And when the disaster is large, we step in here in the
Congress because we have an obligation to our fellow Americans
when disasters strike. But experts say we should be investing
more to avoid disasters in the first place.
Rising heat projections highlight other serious risks. When
we face brutal heat waves, it is too hot to work outside.
People who work outside don't get paid for not working. And I
want everyone to think back to just a few days ago with the
massive, brutal heat wave that kept many of our neighbors
inside and off the job. That is the type of heat that wilts
crops. It is the type of heat that keeps us cooped up indoors
instead of enjoying our summers. And when we face heat like
that, businesses take a hit too. Many sectors of the economy
are impacted, and the risks will grow.
So thank you to our witnesses today for being here, for
kicking off what needs to be an ongoing dialogue with members
of this committee relating to the material risks of the climate
crisis for businesses, insurers, and all Americans.
Climate change is impacting our economy now, not 50 years
from now. It is happening now. This is important because, for
years, big businesses ignored the climate crisis. Some even
actively promoted climate denial. Some still do, but
increasingly, with the help of experts who measure growing
economic risks, with the help of scientists and shareholder
activists, businesses not only recognize the growing economic
climb of the climate crisis, but they recognize that we can
solve it and create new opportunities, create new industries,
and grow jobs.
Recognizing the risks, investors are getting out of fossil
fuels. They are looking at opportunities to create the next
wave of clean energy and clean transportation technology. They
are building the clean energy economy because that must be the
future.
It is no longer business as usual. We need to go further.
We need to make a 100 percent clean energy future our shared
objective.
As we heard in our second hearing, global carbon emissions
need to reach net zero by 2050 to give us a chance of avoiding
the most catastrophic impacts of climate change. The
alternative isn't just unacceptable, it is dangerous and would
be very costly to everyone.
So I am looking forward to hearing from our witnesses about
how Congress can highlight their work regarding the growing
risks, shift the country to clean energy, and protect the
places that we know and love.
At this time, I will recognize Ranking Member Graves for an
opening statement.
[The statement of Ms. Castor follows:]

Opening Statement (As Prepared for Delivery), Rep. Kathy Castor (D-FL),
U.S. House Select Committee on the Climate Crisis

Creating a Climate Resilient America: Business Views on the Costs of
the Climate Crisis, July 25, 2019

Today we're examining the escalating risks and costs of the climate
crisis. When we look at these risks, we see some big numbers. And when
businesses across America look at the growing risks, they also see huge
peril ahead.
In 2017 alone, insurance companies paid out a record $135 billion
in climate losses, with $100 billion just in the United States. The
world's largest businesses estimate that they face nearly a trillion
dollars of climate-related risks. That's trillion with a ``t.''
The risks have gotten so large, the Federal Reserve is now
interested. This fall the Federal Reserve Bank of San Francisco is
hosting its first conference on how the banking system will deal with
climate change. The Fed has identified climate change as one of three
forces transforming the economy this century and experts there
recognize the need to understand the financial implications of it to
fulfill their obligation to foster financial stability.
The numbers are eye-popping, but the costs come in real human
terms.
When a home or business floods, a cascade of financial implications
follows. The value takes a hit. They may have to relocate and pay to
live or work somewhere else. The insurance company has to cover their
losses. The reinsurance company has to cover the insurance company's
losses. Evidence shows those losses continue to grow.
And when the disaster is large, we step in here in Congress because
we have an obligation to help our fellow Americans when disasters
strike. But experts say that we should be investing more to avoid
disasters in the first place.
Rising heat projections highlight other serious risks. When we face
brutal heat waves, it's too hot to work outside. People who work
outside don't get paid for work they can't do. I want everyone to think
back to just a few days ago when many of us were sweltering in hot,
muggy heat waves. That's the type of heat that wilts crops. It's the
type of heat that keeps us cooped up indoors instead of enjoying our
summers. When we face heat like that, businesses take a hit, too. Many
sectors of the economy are impacted and the risks will grow.
So thank you to our witnesses today for kicking off what needs to
be an ongoing dialogue with members of this committee relating to the
material risks of the climate crisis for businesses, insurers and all
Americans. Climate change is impacting our economy now, not 50 years
down the road. Now.
This is important because for years, big businesses ignored the
climate crisis. Some even actively promoted climate denial. Some still
do. But increasingly--with the help of experts who measure growing
economic risks, with the help of scientists, and shareholder
activists--businesses not only recognize the growing economic harm of
the climate crisis but they recognize that we can solve it and create
new opportunities, industries and jobs in doing so.
Recognizing the risks, investors are getting out of fossil fuels.
They're looking at opportunities to create the next wave of clean
energy and clean transportation technology. They're building the clean
energy economy because that must be the future.
It's no longer business as usual. We need to go further. We need to
make a 100% clean energy future our shared objective. As we heard in
our second hearing, global carbon emissions need to reach net-zero by
2050 to give us a chance of avoiding the most catastrophic impacts of
climate change. The alternative isn't just unacceptable, it's dangerous
and very costly to everyone.
So I'm looking forward to hearing from our witnesses about how
Congress can highlight their work regarding the growing risks, shift
the country to clean energy and protect the places we know and love.

Mr. Graves. Thank you, Madam Chair.
I want to thank all the witnesses for being here today. I
appreciate you joining us, and those in the audience as well.
Madam Chair, as you know, we can look across the United
States, and through the Corps of Engineers water resource
program, we have about $100 billion in project authorizations.
Many of these are the projects that are designed to improve the
resilience of this Nation. This is a key issue that we must
aggressively address, that we address. And let's be clear, the
status quo what we have done historically for decades is
absolutely inappropriate, it doesn't properly prioritize. It is
not the process that corresponds to the urgency that we are
facing.
As you all know, we can reduce, as we have had witness
after witness testify before this committee, we could cut all
emissions from the United States today, every bit of emissions,
and we are going to continue to see changes in our weather, we
are going to continue to see seas rise. Especially when you
recognize the fact that climate change is a global issue, you
recognize the fact that the United States has actually reduced
emissions by approximately 1 billion tons. And during that same
period of time, China has increased their emissions by 4
billion tons. There is momentum built up in the environment, in
the climate. If we do not have truly a global approach to this,
then no matter how aggressive the efforts are in the United
States, it will not change the trajectory that we are on. We
also need to recognize the importance or the urgency of
resiliency, because even if we cut all emissions from around
the globe, we would continue to have momentum and continue to
have change in our environment.
One of the reasons that we have sought to try to break this
backlog of Corps of Engineers and other resiliency projects is
because of the need to ensure our communities are adapting, to
ensure our coastal communities are safe. As we have discussed
in this committee before, you can take the coastal counties,
parishes, and boroughs around the United States, they only
constitute 10 percent, just 10 percent of the actual land area,
yet over 40 percent of the population lives there. We cannot
allow for this slow and expensive process to continue to thwart
our efforts to become the more resilient Nation that we should
be, that continues to thwart our ability to adapt to the
changes that we are seeing.
Just recently, we offered an amendment to the
appropriations bill for Energy and Water trying to facilitate
this process of reevaluating the Corps of Engineers' efforts,
and how in the world we got to $100 billion backlog while
Presidents from Clinton forward have requested less than $2
billion in construction funds. And we were thwarted in that
effort to try to change, to try to move this mission up and
make it a priority by this very Congress. The same people that
are sitting here talking about how we need to adapt, we need to
be resilient, effectively or affirming, affirming this both
slow and expensive process that has prevented our Nation from
making the proactive investments that we need to make.
I do want to highlight that within the last 2 years, we
have been able to make some progress, and that we have made
some of the most substantial investments in resiliency that we
have ever made in the United States. We have changed the
definition of resilience or actually allowed for the definition
of resilience to actually be established whenever we have
disasters, to come back and actually build smarter, not build
back the same way. Build higher, build stronger, providing for
more adaptation, providing for more flexibility under our
Disaster Recovery and Reform Act, under our Stafford Act
amendments that we did in October of last year.
So, Madam Chair, one, look, I agree 100 percent that we
have got to be a resilient Nation, but we have to have the
tools, we have to have the processes in place that recognize
the urgency of the challenges that we are facing today.
My home State of Louisiana, we have lost 2,000 square miles
of our coast. The reason Arkansas doesn't evacuate when
hurricanes come is because they have a buffer. It is called
Louisiana. Our buffer is gone. Our buffer is gone. And that is
why in 2005, when you saw Hurricane Katrina hit our coast, it
became a quick wakeup call for many people, recognizing that
the loss of our coast is not a habitat problem for birds and
fish. It is an economic problem. It is a historic preservation
problem. It is a problem for economic development. It is a
problem for homes and businesses, one of the most pervasive
problems you can possibly explain or experience. James
Carville, a New Orleans resident, described it as a war. And
you know what? He is right.
So, Madam Chair, I look forward to working with you to
ensure that we can develop a government response or perhaps
proactive approach to resiliency that our Nation deserves.
I yield back.
Ms. Castor. Thank you very much.
Without objection, members who wish to enter opening
statements into the record have 5 business days to do so.
Now I want to welcome our witnesses. Paula DiPerna is a
special advisor at CDP. Through CDP, more than 500 U.S.
companies disclose information about their environmental
performance. Ms. DiPerna previously served as a vice president
for the Chicago Climate Exchange and led the Joyce Foundation.
Garvin Jabusch is the chief investment officer and co-
founder of Green Alpha Advisors, a financial services firm
focused on sustainable, fossil-free investment strategies.
Prior to Green Alpha Advisors, Mr. Jabusch served in many roles
in the financial industry, including as vice president of
strategic services at Morgan Stanley.
Jay Walker is the executive vice president of commercial
lending at South Louisiana Bank. Mr. Walker is also the
president of the Morganza Action Coalition, which advocates for
the authorization and funding of the Morganza-to-the-Gulf
Hurricane Protection System.
Francis Bouchard is the head of sustainability at Zurich
Insurance Group, one of the world's 100 largest companies.
Zurich has run a global flood insurance program since 2013.
Without objection, the witnesses' written statements will
be made a part of the record.
With that, Ms. DiPerna, you are now recognized to give a 5-
minute presentation.

STATEMENTS OF PAULA DIPERNA, SPECIAL ADVISOR, CDP NORTH
AMERICA; GARVIN JABUSCH, CHIEF INVESTMENT OFFICER, GREEN ALPHA
ADVISORS, LLC; JAY WALKER, EXECUTIVE VICE PRESIDENT, SOUTH
LOUISIANA BANK; AND FRANCIS BOUCHARD, GROUP HEAD OF PUBLIC
AFFAIRS AND SUSTAINABILITY, ZURICH INSURANCE GROUP

STATEMENT OF PAULA DIPERNA

Ms. DiPerna. Thank you very much.
Thank you for the opportunity to testify and for your
service to our country. I also want to thank Chairman Castor,
especially for her leadership of the committee; Ranking Member
Graves for that very insightful statement; and Speaker Pelosi
for convening the committee. I know well her commitment to
addressing climate change dating back at least to 2007 when she
led a vanguard effort to create a zero emissions target for
these very buildings in the House.
Now we come together again, and perhaps we feel a bit like
the rabbit in Alice in Wonderland, running around with a clock
and being late, late, late for a very important date, a date we
all have with our destiny to recognize the climate change
challenge for what it is, the greatest impetus in a generation
to create jobs, retool, reset, and modernize our economy and
protect our people.
A few words on CDP which operates as a public good.
Launched in 2003 as the Carbon Disclosure Project, we pioneered
the idea of specific environmental disclosure to shareholders.
Today, as you have just heard, we have roughly 650 companies in
the U.S. and Canada disclosing to us voluntarily, 70 percent of
the S&P 500, and about 500 signatory investors representing
most of the world's financial service sector who use CDP as a
reference on corporate environmental performance and investment
decisions.
Our annual request is global, qualitative, and
quantitative, aligned with the recommendations of the Task
Force on Climate-Related Disclosure, and to an extent, we model
ourselves on the SEC EDGAR system for 10-K filings. In fact, we
are a standardized, one-stop shopping information platform on
the doability and the desirability of addressing climate
change, and we are unique in the world.
A word about me. My CV is in the record, but suffice it to
say that I am proud to say I have seen climate change from 360
degrees, from coral reefs to carbon markets, literally.
On the subject of today's hearing, climate resilience and
business views, this month, CDP issued a comprehensive report
on the two things that the chairwoman just referenced: risks
and opportunities.
On risks, of the world's 500 largest companies, 215
companies representing $17 trillion in market cap did reference
near term financial risks from climate change at nearly $1
trillion, with over half of those risks reported as likely,
very likely, or virtually certain to materialize in 5 years or
earlier. Of those 215 companies, 81 are based here in the
United States.
On the opportunities side, on the other hand, the
opportunities seem to outsize the risks, with 225 of the
world's 500 biggest companies reporting potential upsides,
totaling nearly $2 trillion. Of these 225, 89 are based in the
United States. And I can answer questions about the forces
involved in those numbers.
Notably, on the opportunities side, companies headquartered
in the United States among the largest 500 reported less than
half the potential opportunities than their EU counterparts.
And it is possible that the policy framework evolving in the
EU, which is consistent with the Paris Agreement, that global
regime that you referenced, Mr. Graves, supports an opportunity
viewpoint by offering reasonable regulatory certainty conducive
to investment.
As to how risks are expressed by companies themselves, the
following are just a few examples, with additional examples in
my written testimony and in our repository. Harris Corporation,
Jacksonville, Florida close to 7,000 employees see risks for
their data centers, reduction in operational efficiency and
increased component failure rates as increases in average
temperatures and associated humidity will affect baseline
design parameters, end of quote.
Conagra, with headquarters in Chicago, in our forest
disclosure said, quote, our paper suppliers are impacted by
U.S. flooding caused by extreme weather and exacerbated by
climate change, and forest fires exacerbated by drought that
have appeared with increasing frequency over the past few
years.
Yum! Brands based in Louisville, Kentucky, with 38,000
employees and operating 48,000 restaurants in the world, 145
companies they say, says, quote, climate change influences
could negatively impact production, including extreme weather
events, changes in precipitation and temperature, forest fires,
loss of ecosystem services, reduce crop yields, and thus,
availability of certified sustainable material, which is
already limited.
Eli Lilly based in Indianapolis said, quote, changing
precipitation patterns, droughts, flooding, and tropical
cyclones could potentially damage our manufacturing research
and development. Our principle active ingredient manufacturing
occurs in our U.S., Ireland, and Puerto Rico sites. Puerto
Rico, where we employ 1,400 people, was devastated by Hurricane
Maria.
I will stop here just to bring back later our reference to
Matchmaker, which has a tremendous listing of climate resilient
projects, 108 costed projects just in the States represented by
this committee, ranging from the Embarcadero Seawall in Saint
Louis to $23 million in Gretna, Louisiana.
I will be very happy to answer any questions. Thank you.
[The statement of Ms. DiPerna follows:]

Written Statement of Paula DiPerna, Special Advisor, CDP, 25 July 2019

Thank you for the opportunity to testify before you today, and I
congratulate the vision of Speaker Pelosi and Chairwoman Castor to
convene the Select Committee. I've had first-hand experience with the
Speaker's commitment to addressing climate change, dating back to 2007
when she led a vanguard effort to create a zero emissions target for
the House office buildings, and to do so, the U.S. House of
Representatives became a member of the also vanguard Chicago Climate
Exchange at the time, where I as Executive Vice President.
Now, nearly a decade later, we come together again to address the
complexities of climate change, surely one of the most vexing
operational, socio-economic and policy issues before us, inescapable
across all sectors and all constituencies. No doubt the disclosure
repository of CDP, launched originally in 2003 as the Carbon Disclosure
Project, and the first international system to gather environmental
performance disclosure, contains information relevant to not only each
state represented here on the Committee, but all 50 states, and I thank
you for your service to the nation.
CDP disclosure is both qualitative and quantitative, and we send
our standardized annual request for disclosure to most of the publicly
trading companies in the world, covering climate change, water and
forests issues. No other system like ours exists elsewhere. We make all
our information available to the public, operate as a public good and
to an extent model ourselves on the SEC EDGAR system for 10K filings.
Our annual request is signed by roughly 550 institutional investors,
asset owners and wealth managers--our signatories--who represent most
of the financial services sector of the world. They use our disclosure
as a reference on corporate environmental performance, strategic
advantages and vulnerabilities, and a gauge for making investment
decisions.
On climate change, today, roughly 650 companies in the U.S. or
about 70% of the S&P 500 in the U.S. disclose to us and through us to
our signatories, providing data on environmental performance, plans and
imperatives.
CDP disclosure also information companies need to benchmark to
their peers. Our system offers years of anecdotal and analytical
information establishing both the do-ability and desirability of
addressing climate change, expressed by companies themselves, and
information about the cascade effects up and down the line to workers
and average Americans who see climate change impacts up close.
In fact, perhaps there is no longer any such thing as a purely
environmental problem. All environmental problems are now squarely
socio-economic, and the climate crisis is absolutely inextricable from
the socio-economics at work. For example, we've all heard of the recent
research in the Federal Reserve's 2018 Report on the Economic Well-
Being of U.S. Households that roughly 40% of adults would struggle to
cover an unexpected expense of $400, either by borrowing, selling
something or not covering it at all.
So, obviously, if a house is even modestly damaged by flooding, the
family would be unable to replace essentials, such as furniture, or the
washing machine in the basement. Climate change related extreme weather
events compound the precariousness of cash-strapped families.
Climate change is, in sum, a here and now issue that will hurt the
poor and disenfranchised most of all.
A word about me: My cv is part of my written testimony but suffice
it to say here that I have seen the climate change issue from 360
degrees, from coral reefs to carbon markets, literally. And I know well
the proud U.S. tradition of concern about climate change. In fact, I
recently spoke with Dr. Warren Washington, a pioneer of climate
modeling science, a long-standing researcher at the National Center on
Atmospheric Research and recipient of National Medal of Science, who
told me of his work advising six consecutive U.S. Presidents up until
President Obama, all of whom had shown concern about the possibility of
climate change. He mentioned especially President George H.W. Bush, who
not only helped set up the nation's first dedicated climate change
research programs, but who also signed the U.S. on to the original
Framework Convention on Climate Change in 1992--I witnessed his pen
crossing the paper, I should add.
This Convention, of course, provided the legal underpinning for the
2015 Paris agreement, currently the world's blueprint, which the U.S.
Administration has now rejected, breaking ranks with our own history of
thoughtful action, and leaving us alone on earth to stand outside the
global consensus that climate change must be addressed, but also
dampening the incentives that could help us reap at scale the
extraordinary opportunities that are at hand as we redesign, retool,
rebuild and refit almost all our critical infrastructure, generating
jobs and helping the U.S. regain dominance of 21st century
technological innovation and manufacturing. In fact, I sometimes feel
like the rabbit in Alice in Wonderland, running around with a clock and
running late, late, late for a very important date. A date we all have
with our destiny to take leadership on the climate change question and
recognize it for what it is--the greatest impetus in a generation to
create jobs, re-set and modernize our economy and protect our people.
On the specific issue of today's hearing, climate resilience and
business views, it is crystal clear that climate change has two basic
faces: Risks and Opportunities. This month, CDP issued a comprehensive
global disclosure report on both.
On RISKS: Of the world's 500 largest companies, 215 companies
representing US$16.95 trillion in market cap reported estimated
financial risks from climate change at US$970 billion), nearly a
trillion dollars, with over half of those risks reported as likely/
very likely / or virtually certain to materialize in five years or
earlier. Of these 215, 81 are based in the U.S.
The main drivers of this potential financial impact were:
1) Increased operating costs (due to higher compliance costs,
increased insurance premiums etc.) at US$179 billion;
2) The write-off of assets or their early retirements because
of potential damage to them / being in high-risk locations at
US$170 billion;
3) Reduced demand for goods and / services due to a shift in
consumer preferences totaling US$102 billion; and
4) Changes in policy leading to write-offs, asset impairment
and early retirement of existing asset sets totaling US$73
billion.
On OPPORTUNITIES: On the other hand, opportunities derived from
addressing climate change outsize the risks, with 225 of the world's
500 biggest companies reporting potential upside financial impacts
totaling over US$2.1 trillion dollars, driven by potential increase in
revenue due to demand for low emissions products and services, and
meeting shifting consumer preferences. Of these 225, 89 are based in
the US.
The main drivers of these opportunities were:
1) Increased revenue (through demand for low emissions
products and services)--US$970 billion;
2) Better competitive position to reflect shifting consumer
preferences--US$487 billion;
3) Increased revenue through new solutions to adaptation
needs--US$236 billion;
4) Increased capital availability (as more investors favor
low-emissions producers--US$198 billion.
In terms of opportunities, it is interesting to note that companies
headquartered in the U.S. in the G500 group report less than half the
potential opportunities as their counterparts headquartered in the EU.
As we know, the EU is evolving a clear policy framework consistent with
the Paris agreement, and it could be that this coherence supports a
business opportunity viewpoint by offering reasonable regulatory
certainty, conducive to investment.
As to how these risks and opportunities are expressed by companies
themselves, I will provide you some examples from a range of state and
company types.
CALIFORNIA RESOURCES CORPORATION, a company engaged in hydrocarbon
exploration, sees ``Risks in changes in precipitation patterns and
extreme variability in weather patterns leading to increased operating
costs (e.g., inadequate water supply for hydroelectric plants or to
cool nuclear and fossil fuel plants)'' and also says this impact could
be worsened because ``Due to the severe drought in California over the
last several years, water districts and the state government are
implementing regulations and policies that may restrict groundwater
extraction and water usage and increase the cost of water.''
EQUINIX, INC., which operates data centers in 52 metropolitan areas
in 24 countries, says ``The physical impacts of climate change,
including extreme weather conditions such as heat waves, could
materially increase our costs of operation due to, for example, an
increase in our energy use in order to maintain the temperature and
internal environment of our data centers necessary for our
operations.''
PG&E CORPORATION: As we all know, PG&E, which has 23,000 employees,
has been forced into bankruptcy by the losses and potential claims
against it related to the recent cataclysmic forest fires in Paradise,
California whose devastation was compounded by drought and other
factors. The bankruptcy affected not only the company, its customers
and shareholders, but was also a blow to the transition to renewable
energy since, PG&E had been a leading supplier of renewables and had
itself recognized climate change risk. It has said ``PG&E faces the
risk of increased electricity demand and loads from its customers due
to more extreme and prolonged hot weather events. Higher temperatures,
including warmer daytime maximums and nighttime minimums, for prolonged
periods, may also mean that certain electrical assets may fail, become
less efficient or less reliable, and may need to be modified or
replaced. Higher electrical loads increase stress and management of
electricity on the transmission system. There is also the risk of
increased PG&E customer outages during extreme heat wave events'' as
well as ``. . . the risk of higher inundation and flooding potential at
coastal and low elevation facilities due to sea level rise when
combined with high tides, storm runoff, and storm surges. There is the
risk of levee erosion or failure, putting assets at risk. PG&E also
faces the risk of damage to substations and other gas and electric
infrastructure.''
Other utilities have also been negatively affected by the PG&E
situation. After the fires, Standard and Poor's ratings stated ``we
lowered our credit rating on Edison International and its subsidiary
Southern California Edison . . . and placed all of our ratings on the
companies on CreditWatch with negative implications'' which ``reflects
the increased likelihood that Edison will continue to experience
catastrophic wildfires due to climate change.'' S&P similarly
downgraded San Diego Gas and Electric Company, for the same reasons.
Subsequently, Fitch Ratings also revised its rating outlook for Edison
International, from stable to negative adding ``Given the unprecedented
size of recent wildfires, future multi-notch downgrades cannot be ruled
out.''
These credit ratings changes may seem far from the American people,
but in fact they reflect a drain on financial stability and borrowing
power of key employers and infrastructure providers, and can cut into
the value of pension fund holdings, 401Ks, etc. causing indirect
hardship and heartbreak for ordinary Americans beyond even those who
suffer loss of life and property.
SEMPRA ENERGY is a North American energy infrastructure company
based in San Diego, California that has said, ``damages from the 2007
wildfires exceeded SDG&E's [Sempra parent company] liability insurance
coverage, ultimately leading to a $351 million charge in 2017.''
WELLS FARGO with approximately 265,000 employees, says ``Change in
precipitation extremes and droughts can impact our customers. For
example, droughts can drive up the cost of water and thereby affect our
customers' ability to payback their loans, especially if they are in
water intensive industries such as agriculture, semiconductors, energy,
select tourism, breweries and beverage companies and more.'' Wells
Fargo also said ``Global agreements were established as a result of
COP21; however there remains a lack of clear, consistent global and
national regulations associated with climate change.''
THE MOSAIC COMPANY is a Fortune 500 company based in Minnesota, the
largest U.S. producer of potash and phosphate fertilizer, with
facilities in Florida. It sees climate risks as chronic: ``Changes in
precipitation resulting in droughts or water shortages at our mines in
Florida or Saskatchewan where we manage large volumes of water in our
daily operations could restrict our operating activities, require us to
make changes in our operating activities that would increase our
operating costs, reduce our efficiency or limit our output.''
HARRIS CORPORATION, based in Jacksonville, Florida, with close to
17,000 employees, identifies increased severity of extreme weather
events such as storms, cyclones and flood risks as a current and direct
risk to its operations. Their disclosure states ``For data centers,
reduction in operational efficiency and increased component failure
rates as increases in average temperatures and associated humidity will
affect baseline design parameters. For example, the loss of ambient
cooling potential. Changes in humidity may also lead to changes in
patterns and rates of equipment corrosion. Higher humidity levels may
also lead to new requirements to maintain internal environments within
system tolerance ranges, as excess condensation can cause short-
circuiting or water ingress.''
Harris also said it will, ``expand the scope of events we consider
in our planning to include more frequent and unusually disruptive
storms in these locations, as well as the impacts of increased/more
severe winter storms on our operations in the Midwest and Northeast.''
ARCHER DANIELS MIDLAND, based in Illinois, employs 31,000 employees
serving customers in more than 170 countries. ADM can foresee potential
loss of revenue `` ``if facilities are unable to acquire enough raw
material to operate'' due to ``increased severity of extreme weather
events'' and ensuing impacts. It also says, that ``the price of raw
materials would increase, transportation via river would become
difficult, and operations could be limited or halted.''
CONAGRA, with headquarters in Chicago, has said ``Rising mean
temperatures [leads to] reduced revenue from decreased production
capacity (e.g., transport difficulties, supply chain interruptions).''
In our Forests disclosure, CONAGRA also has said ``Our paper
suppliers are impacted by U.S. flooding caused by extreme weather and
exacerbated by climate change, and forest fires exacerbated by drought
that have appeared with increasing frequency over the past few years.''
YUM! BRANDS, based in Louisville, Kentucky, with 38,000 employees
and operating 48,000 restaurants in 145 countries worldwide, said: ``.
. . Shortages or interruptions to our Concepts' restaurants could
adversely affect the . . . operations of our restaurants. Such
shortages or disruptions could be caused by inclement weather, natural
disasters, or a variety of other issues. Climate change influences
several physical rik drivers that could negatively impact production,
including extreme weather events such as tropical cyclones and changes
in precipitation and temperature, forest fires, loss of ecosystem
services, reduced crop yields, and thus, availability of certified
sustainable material, which is already limited.''
EXELON CORPORATION, also based in Chicago and employing
approximately 33,400 people worldwide with approximately 10 million
customers in the US, has said it foresees risk as ``Increased severe-
weather events leading to increased capital costs (e.g., damage to
facilities). Each utility plans for storm recovery costs in their
annual operating budget, but costs can swing year to year by 10 to 100
million dollars (as incurred during Hurricane Sandy in 2012, and again
in 2014 from February ice storms) depending on the significance of the
storm event.'' In addition, Exelon says ``Extreme weather conditions or
damage resulting from storms could stress the Utility Registrants'
transmission and distribution systems, communication systems and
technology, resulting in increased maintenance and capital costs and
limiting each company's ability to meet peak customer demand.''
In the hospitality sector, HYATT HOTELS which employs approximately
45,000 people around the world, and another 70,000 through third-party
owners and franchise partners, has described multiple risks, including
``Rising mean temperatures . . . that could result in increased cooling
demands and associated costs at our hotels. Wide-spread increases in
energy demand may also increase the cost of utilities for our hotels.''
In addition, ``Hyatt's coastal properties may need to make capital
investments in systems to mitigate the effects of sea level rise, such
as structural reinforcement and improved drainage systems. Sea level
rise would also compound the risks of tropical cyclones and flooding
mentioned above for Hyatt's coastal properties, which could impact
business continuity and increase capital costs needed for repairs. Sea
level rise could also impact the desirability of particular locations
or travel patterns of customers.''
In the real estate sector, JONES LANG LASALLE INCORPORATED is the
second-largest company of its kind in the world, with operations in
over 80 countries and a global workforce of 82,000. On climate risks,
the company says ``We expect insurance companies to raise premiums
generally as the result of projected increase in extreme weather events
resulting from the increase in global temperatures.'' Also, ``The
occurrence of natural disasters can significantly increase the
availability and/or cost of commercial insurance policies covering real
estate, both for our own business and for those clients whose
properties we manage and who may purchase their insurance through the
insurance buying programs we make available to them. For LaSalle
Investment Management, changes to weather patterns leading to
increasing precipitation pose an indirect risk through rising insurance
premiums as actuaries start to integrate climate change into their
pricing models. These costs would normally be passed on but there is a
risk they could impact the value of the asset.''
ELI LILLY, with headquarters in Indianapolis, Indiana has said,
``Changing precipitation patterns, droughts, flooding and tropical
cyclones could potentially damage our manufacturing, research and
development, and our housing/distribution facilities and those of our
key suppliers, especially in flood prone areas . . . In 2017, our
operations in Mexico, U.S. and Puerto Rico were hit by a string of
devastating earthquakes and hurricanes. Our principal active ingredient
manufacturing occurs at our U.S., Ireland, and Puerto Rico sites.
Puerto Rico, where we employ 1,400, was devastated by Hurricane Maria
in 2017, causing power outages, food and water shortages.''
And the CDP repository has many years of similar descriptions from
companies, and since all companies are employers, these and other risks
described, all touch people.
But there is also an upside concerning people and the ongoing drive
for jobs creation. The International Labour Organization (ILO)
forecasts that ``24 million new posts will be created globally by
2030,'' with the caveat that, ``the right policies to promote a greener
economy must also be in place for this to happen, along with better
social safety nets for workers.''
To take just one significant company, in Maryland, Lockheed Martin
Corporation, which has more than 590 facilities in 50 U.S. states and
employs approximately 100,000 people worldwide, identified in our
disclosure the use of lower-emission energy sources as a $21 billion
opportunity, which in turn presumably could generate significant new
employment.
And just for perspective, while of course the use of artificial
intelligence and the IT revolution have cut into jobs creation, on the
other hand, ``green jobs'' exist across the spectrum of work that needs
to be done. I helped spearhead an entity called the Jobs and
Environment Initiative back in 2006 to survey the landscape then of
what are overly simply called ``green jobs,'' in a range of states in
the U.S. and, for example we found in Florida, environmental demands
were generating more jobs for sheet metal workers than geoscientists,
in Ohio, more jobs for welders than biochemists, and so forth.
Regarding business expectation and preparedness for policy, there
is significant evidence of wide-open eyes. Take, for example, the
question of whether and how to ``put a price on carbon''--meaning
either a tax or cap-and-trade or combination.
As of our tally two years ago, 96 companies disclosed that they had
already set an internal carbon price for the purpose of internal
planning, indicating that they accept and understand that greenhouse
gas emissions carry a hidden cost to their business which they seek to
make visible using a projected surrogate cost, an internal carbon
price. An additional 245 companies stated they are likely to be using
an internal carbon price by the end of this year's disclosure cycle.
And many companies using this internal mechanism indicate they do so
because they wish to be better prepared for eventual regulation and/or
are operating in a jurisdiction where they already face mandatory
requirements, such as in the EU or in China.
Among the companies using an internal carbon price is Oklahoma Gas
and Electric, which employs 2,500 people and serves more than 800,000
electricity customers. Citing opportunities ahead, OG&E disclosed that
it ``has leveraged its advantageous geographic position to develop
renewable energy resources and completed transmission investments to
deliver the renewable energy. The Southwest Power Pool (SPP) has begun
to consider and authorize the construction of transmission lines
capable of bringing renewable energy out of the wind resource area in
western Oklahoma, the Texas Panhandle and western Kansas to load
centers by planning for more transmission to be built in these areas.''
Also of interest but less discussed, given the links between
drought and water availability, and anticipated scarcities in
predictable water supply, 89 companies have also begun using internal
water prices to better gauge rising costs and risk, as of our 2018
Water Disclosure request.
And on the question of climate science, far from denying climate
science, there is essentially no debate about it among any thoughtful
business leaders. In fact, climate science could be said to be a new
business language, given the growth in companies setting science based
targets (SBTs) for greenhouse gas emissions reduction, meaning targets
in line with the terms of the Paris agreement. As of the end of 2018,
150 companies disclosed they had or were in the process of setting
SBTs, up from 128 companies in 2017 and 88 in 2016.
Regarding trends in capital investment, mainstream investors are
also recognizing the significant upside of shifting capital to
companies that take environmental and social factors into strategic
account in their business management. According to the Sustainable
Investment Forum of the US, for example, which tracks relevant data,
today 1 in 4 dollars invested in the U.S. is screened for
environmental, social or governance factors (esg), or 26% of the
approximately $46 trillion US-based assets under management. That is up
from 1 in 6 dollars in 2019 and 1 in 9 dollars in 2012.
And, in a basic core indication of how integrated low carbon
efficiency has become, the S&P 500 Carbon Efficient Index, which
overweights carbon efficient companies and underweights carbon
intensive companies, is now tracking virtually to a T with the
venerable classic S&P 500, an alignment that indicates if nothing else
that valuations are not reduced if low carbon intensity and energy
efficiency are prioritized. On the contrary.
But despite progress, returning to the science, we see that the
clock is ticking on reversing the most dangerous climate change trends,
as greenhouse gas emissions continue to rise due to a variety of
interlocking factors. So looking ahead to solutions and meeting new
demands and needs, it could be worthwhile to think of what I call the
three I's--indemnification, insurance and infrastructure.
First, indemnification. Currently the risks of climate change are
bouncing around the economy like a wayward pawn on a chessboard looking
for a place to land. They are not hitting the general economy yet
because they are not priced in yet--but costs there are, and they are
being borne either by the government and taxpayers, through FEMA and
other social safety net programs, already stretched thin; insurance
companies,; or the victims themselves, who have no recourse, either
because they are cash-strapped, under-insured, or just plain unable to
respond to catastrophic extremes.
So perhaps new forms of indemnification will be needed to absorb
risks and insulate at least the individual victims.
This leads to insurance.
The Committee will be hearing from Zurich Re, of course. But for
additional relevance, according to a July 2018 overview report on
climate risk by the Sustainable Insurance Forum and the International
Association of Insurance Supervisors:
On insurance market risk, the report says: ``From a pricing risk
perspective, insurers' capacity to write insurance business may be
constrained by increasing physical risks to insured property and
assets, if risk-based pricing rises beyond demand elasticity and
customer willingness to pay. There is evidence that domestic property
in high risk areas is being rendered uninsurable due to high exposure
to physical risks, such as wildfires, storms and sea level rise. In the
United States, US$600bn of property within one mile of the coast is
covered under the National Flood Insurance Programme, much of which
will not be viable in coming decades, absent intensive adaptation
investments.''
And on investment risk: ``The profitability of insurer investment
portfolios may be affected if invested in sectors or assets which may
be especially at risk from either physical or transition-related
factors. This could, at the extreme, constrain insurers' capacity to
pay future claims.''
Also, regarding insurance and risks, according to the 2018 Annual
report from global insurance broker, AON, entitled Weather, Climate and
Catastrophe Insight, in 2018: ``64% global insured losses from natural
disasters came from the United States; the years 2017 and 2018 were the
costliest back-to-back years for weather disasters on record globally,
with an economic impact of US$653 billion, and the costliest for
private and public insurers on record at $237 billion.:
Moreover, of the $225 billion economic cost of natural disasters in
2018, $215 billion were weather related.
And finally infrastructure. We all know that America's
infrastructure is crumbling and in urgent need of modernization. To
undertake what is needed will require decades of capital investment,
but we also know that any dollar invested in infrastructure
improvements pays dividends for years to come.
This is especially obvious as we celebrate the 50th anniversary of
the Apollo 11 landing, one of the most fantastic accomplishments in our
nation's history. The space program gave us much more than Tang--it
built the communications systems that became the internet and gave the
U.S. such an edge in digital technologies. And consider the compounding
benefits of investments in the U.S. highway system, much of which also
needs climate resilience updating, by the way.
There is room for an ambitious and comprehensive focus on not only
modernizing infrastructure but designing and planning it with climate
change trends in mind. Climate change resiliency means strengthened
security--if we build it, we will have it when we need it. And a focus
on climate change as an infrastructure opportunity, rather than an
existential threat, can mobilize and galvanize the American people
across the nation.
In fact, there are climate resilience infrastructure needs big and
small vividly waiting to be met all around the nation. Through our CDP
Cities program, we operate the Matchmaker portal where cities can
showcase to investors their climate resilience related infrastructure
needs, most of which have direct benefit where people live and work.
Currently, in the states represented on the Committee alone, we have
158 projects currently needing funding, of which 108 have preliminary
cost estimates totaling roughly $10 billion in projected cost, ranging
from the multi major Embarcadero Seawall renewal project in San
Francisco, to smaller flood and mitigation projects needed valued at
$23 million in Gretna, Louisiana. Globally, there are about 650 costed
Matchmaker projects seeking funding, half of which need funding of
under $1 million.
When it comes to infrastructure we all have our horror stories. In
my own experience, one day earlier this month, not only did Amtrak come
to a halt because of a fire in the rail tunnel now crossing the Hudson
River--the walls were still so hot after the all-clear, they looked
like the inside of a toaster as our train limped through. A few days
later, flights from Reagan international were delayed for hours due to
overheated airplanes, too hot to board, we were told, because of high
external temperatures on the ground that prevented normal cool down
after a flight. The airline company had to wheel in a portable unit to
pump cool air into the cabin, a contraption that looked like a giant
vacuum cleaner in reverse. Anomaly, maybe, but more likely a harbinger
of what is to come as we try to match our wits and technology to the
exigencies of a changing climate. Perhaps there is even room for a
Climate Resilience Infrastructure Act?
In sum climate change is present and costly to companies and
average Americans, and coherent inter-sectoral policies would make the
U.S. less vulnerable. Thank you and I will be glad to answer any
questions.
visuals for cdp/pdiperna testimony, u.s. house of representatives,
select committee on the climate crisis--25 july 2019

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references for cdp/pdiperna testimony, u.s. house of representatives,
select committee on the climate crisis--25 july 2019
Report on the Economic Well-Being of U.S. Households in 2018, Board
of Governors of the Federal Reserve System, 2019 https://
www.federalreserve.gov/publications/files/2018-report-economic-well-
being-us-households-201905.pdf
Are companies ready for climate change? (Global Analysis), CDP,
2019 https://www.cdp.net/en/research/global-reports/global-climate-
change-report-2018/climate-report-risks-and-opportunities
CDP 2018-2017 Annual Disclosure Information requests. https://
www.cdp.net/en/responses
San Diego Gas & Electric Co. Downgraded to `BBB+', Outlook Remains
Negative S&P Global Ratings, January 21, 2019
Fitch Affirms Edison International and SCE; Rating Outlook Revised
to Negative Fitch Ratings, January 22, 2019
World Employment and Social Outlook 2018: Greening with jobs
International Labour Office--Geneva: ILO, 2018
Jobs Creation in the Environmental Industry in the U.S. and Nine
States, 2006 Management Information Systems, Inc. www.misi-net.com
Putting a price on carbon: Integrating climate risk into business
planning, CDP, October 2017 https://www.cdp.net/en/climate/carbon-
pricing
2018 Report on U.S. Sustainable, Responsible and Impact Investing,
US SIF Foundation, 2018
Issues Paper on Climate Change Risks to the Insurance Sector,
International Association of Insurance Supervisors (IAIS), 2018 https:/
/www.insurancejournal.com/research/research/success/climate-change-
risks-to-the-insurance-sector/
Weather, Climate & Catastrophe Insight: 2018 Annual Report, Aon,
2018 http://thoughtleadership.aonbenfield.com/Documents/20190122-ab-if-
annual-weather-climate-report-2018.pdf
CDP North America: Matchmaker, CDP, https://www.cdp.net/en/cities/
matchmaker

Ms. Castor. Terrific. Thank you.
Mr. Jabusch, you are recognized for 5 minutes.

STATEMENT OF GARVIN JABUSCH

Mr. Jabusch. Thank you.
And I would like to add my thanks, Chair Castor, Ranking
Member Graves, for the opportunity to testify today.
Climate disruption and resource degradation both present
significant threats and opportunities for American business. We
know that. Every industry is affected, and since my business of
asset management deploys capital across the economy, it is
exposed to all these risks and opportunities inclusively.
So risks. In investing, the purpose of it is to preserve
and grow our purchasing power. There are volumes of portfolios
today written about how to do this. And those theories have
worked well for decades, but many theories of the world work
great until the world changes. Now the change is climate
disruption. And in the exercise of fiduciary duty, I have to
think about the effects the climate crisis will have on every
business I consider placing my client's assets into. And
inversely, I have to think about the effect each business may
have upon the climate. In doing this analysis, I minimize risk
and can grow my clients' purchasing power into the future.
Now the application of this is simple; it is in realizing
that science is our path to knowing things, and science tells
us that many of our present economic activities, like fossil
fuel development, like internal combustion engines, use of
topsoil to put in chemicals have to decline dramatically and
soon. So the prudent fiduciary knows that holding securities of
companies pursuing these activities will put client assets at
risk, regardless of the time horizon, as madam chair has noted
in her opening remarks.
According to experts like former Bank of England governor
Mark Carney and investor Jeremy Grantham and, again, as Chair
Castor mentions, the Fed itself, climate has emerged as, bar
none, the most important risk in asset management, and so the
main threat to investments today is in holding the causes of
the climate crisis. De-risking a portfolio therefore means not
owning key threats to that economic stability.
So those are the risks within my industry. The main risk to
the climate that comes from my industry is that the dominant
way of investing today flat ignores the climate crisis,
indexing. A cnbc.com article explains that, quote, 80 percent
of the stock market is now on autopilot, end quote. That means,
today, the reason the stock is bought usually is because it is
in an index, not because of what the company makes or service
it provides. This is dangerous because the major indexes are
packed with causes of our risks. The S&P 500 alone includes
about 60 fossil fuels related companies and any number of risks
to water, to topsoil, to economic equality to name a few.
So let's be clear. If you own the S&P 500 today, you think
you are investing passively, but you are not. You are making an
active bet on the causes of system-level collapse. By your
actions, if not your intent, you are signaling that you hope to
benefit from causing climate disruption. The climate crisis is
the most important risk to capital preservation, yet the main
risk coming from the investment industry is that the majority
of professionals are ignoring that, and worse, investing in its
causes.
There are those in investments working to change this, my
firm among them. It sounds simple to invest for a sustainable
economy, but investment managers haven't had great principles
yet to guide them. So our approach to de-risking portfolios is
to select stocks, not because of their presence in an index,
but because of what a company does. We think the clearest line
of sight there is to look at source of revenues, simply. Is a
company being paid to help de-risk the economy or does it get
paid to help drive it towards the edge? If a company's net
activities do not mitigate risk on an ongoing basis, we
shouldn't own it.
Investing has to get back to judging individual cases on
their merits, and we can use disinterested objective principles
to make better choices. You get the economy you invest in, and
while most investors still own the S&P 500, we will be living
in a fossil fuels economy that it represents.
All right. Those are risks from my industry and how to
avoid them, but what about opportunities. Well, this is where
there is good news, and it is that innovation is increasing,
and the rate of that increase is itself accelerating. So
innovation just means doing things better. It means more
efficient economic production, getting more output from fewer
inputs. As E.O. Wilson has noted, and I note that he was here
on the Hill a couple of days ago talking, digitalization is key
to achieving sustainability, because growing efficiency of
production shrinks our ecological footprint. And we now have
the means to mitigate climate disruption, means from fields
from advanced materials in biotech, to renewable energy in
storage, to zero emissions transport, and adaptations like
indoor agriculture. Investing in solutions like these will
drive performance at the portfolio level as these innovators
gain market share from legacy predecessors.
So economic production can and will be much greater than it
is today, while consuming far fewer inputs like natural
resources, dollars, and person hours, and with fewer
externalities. This will create enormous wealth and result in a
sustainable economy, meaning we can realize good standards of
living for the 100 percent without overtopping Earth's
capacity. The greatest opportunity to grow wealth is in
investing for that endgame. That endgame is a zero-risk
economy.

Thank you.
[The statement of Mr. Jabusch follows:]

Creating a Climate Resilient America: Business Views on the Costs of
the Climate Crisis

The Select Committee on the Climate Crisis

Testimony of Garvin Jabusch, Chief Investment Officer, Green Alpha
Advisors, LLC

Thursday, July 25, 2019

I. Climate disruption and resource degradation present significant
threats to and opportunities for American business. Every sector and
industry are affected, and my industry of asset management, in its role
deploying capital across the economy, is directly exposed to it all,
risks and opportunities inclusive.
II. First, risks. The purpose of investing is to preserve and grow
one's purchasing power. Whatever amount I am investing, I want to be
able to buy as much or more with its value in the future than I could
have with its cash value today. There are volumes of portfolio theory
about how to achieve this, and, overall, those theories have worked
well for decades. But many theories of the world work great, until the
world changes. Now, the change is climate disruption, and in the full
exercise of fiduciary responsibility as an asset manager, I have to
think hard about the effects that climate disruption will have on every
business I consider placing my clients' assets into, and inversely, the
effect each business may have upon the climate. It is in doing this
analysis, no longer optional for the prudent risk manager, that I can
minimize investment risk and grow my clients' purchasing power into the
future.
What is the practical application of this? It begins with the
realization that even within asset management, it is science that is
our path to knowing things. Science tells us that many of our present
economic activities, such as fossil fuel development, internal
combustion engine manufacture, fossil powered electricity generation,
and use of topsoil depleting chemicals, have to decline dramatically,
and soon. Thus, the prudent fiduciary knows that holding the securities
of companies pursuing these activities is likely to put his or her
client assets at risk, particularly in the medium and long terms.
According to experts such as former BoE governor Mark Carney and
noted investor Jeremy Grantham, climate has emerged as bar none the
most important risk in asset management, and the main threat to
investments today is in holding the causes of the climate crisis. To
de-risk a portfolio, it is necessary to not own the primary threats
undermining economic stability.
III. Those are the risks within my industry. The main risk to the
climate coming from my industry is that the predominant way of
investing today completely ignores the climate crisis. A recent
cnbc.com article explains that ``80% of the stock market is now on
autopilot . . . Passive investments control about 60% of the equity
assets, while quantitative funds--using trend-following models instead
of fundamental research--account for 20% of market share.'' This means
that today, the main reason a stock is bought is because it is in an
index, and not because of what the company makes or what services it
provides. This is dangerous because the major indices are riddled with
the causes of our largest environmental and therefore economic risks.
The S&P 500 includes approximately 60 fossil fuels related companies
and any number of other risks to water, topsoil and economic equality,
to mention a few. Let me be clear: if you own the S&P 500 today, you
may believe you are investing passively, but you are not. You are
making an active bet on the causes of system-level collapse. By your
actions, if not your intent, you are signaling that you hope to benefit
from causing climate disruption and resource degradation. Climate is
the most important risk to capital preservation, yet the main overall
risk coming from the investment industry is that the vast majority of
professionals and their clients are flat ignoring it.
IV. There are those in investment management working to change
this, my firm Green Alpha Advisors, among them. It sounds simple to
invest for a more sustainable economy, but the problem has been that
investment managers don't have good principles to guide them. Green
Alpha's approach to de-risking portfolios has been to select stocks not
because of their presence in a benchmark index, but because of what the
company actually does. We believe the best way to begin, and the
clearest line of sight, is to look at sources of revenues. Is a company
being paid to de-risk the global economy, or is it being paid to help
drive it towards the edge? Are the majority of revenues coming from
business activities that will help society mitigate or adapt to the
climate crisis, or from causing it?
Rather than blindly indexing, investment professionals have to get
back to judging individual cases on their merits; and we can use
disinterested, objective principles to make better choices. If a
company's net activities do not create a better world on an ongoing
basis, we should wonder why we own it. You get the economy you invest
in, and as long as most investors still own the S&P 500, we are going
to be living in the fossil fuels economy that it represents.
V. Those are the risks in and from my industry, and how to avoid
them. What about the opportunities? This is the good news, and I think
it is generally underappreciated.
Human innovation is increasing in an unprecedented way, and the
rate of that increase itself is accelerating. Faster and faster, we're
coming into possession of the means to both mitigate climate
disruption, and to adapt to what we have already committed ourselves
to. Why? Because innovation means doing things better. It means, as it
always has meant, making economic production more efficient: getting
more output out of ever fewer inputs. As biologist Edward O. Wilson has
noted, the digitalization of the economy is key to achieving
environmental sustainability, because the associated expanding
efficiency of production can shrink our ecological footprint. But of
course indefinite sustainability isn't emerging only from
digitalization, we are also today seeing great strides in advanced
materials, biotech, renewable energy and storage, zero emissions
transportation, water management, and in key adaptations like indoor
agriculture. Investing in these efficiency solutions will lead to
competitive performance returns as these innovators continue to gain
market share from their legacy economy predecessors, and thus grow
faster.
VI. Economic production can be much greater than it is today while
consuming far fewer inputs, be those inputs natural resources, person
hours or dollars, and can do so with far fewer externalities like
greenhouse gasses and other pollution. This will create enormous wealth
for investors, and will also put us on the path to indefinite
sustainability, meaning we can realize a good standard of living for
everyone--the 100%--without overtopping earth's tolerances. The
greatest wealth preservation and growth opportunities for my firm come
from that; from keeping our eye on, and investing for, that endgame:
namely, a zero-risk economy.

Ms. Castor. Thank you.
Mr. Walker, you are recognized for 5 minutes.

STATEMENT OF JAY WALKER

Mr. Walker. Thank you, Chairwoman Castor, Ranking Member
Graves, and committee members. My name is Jay Walker. I am from
Houma, Louisiana, and I am the EVP and chief of lending at
South Louisiana Bank, a community bank in Terrebonne Parish in
Louisiana. It is an honor and a privilege to be here with you
here today to discuss creating a climate resilient America.
In the last three decades, my banking community have
experienced 13 named storms. The latest, Hurricane Barry, was
less than 2 weeks ago. Both my bank and my community long ago
decided to pull up our bootstraps and do whatever it takes to
build resiliency and to continue to make our living in south
Louisiana.
It is important for members to know that Louisiana is a
working coast, and those of us who live in coastal Louisiana do
largely in service of our Nation's energy and seafood needs.
While diverse, our community's economy is driven by these two
industries, and moving is simply not an option.
For the people of south Louisiana, being resilient in the
face of climate change and other challenges is a way of life.
We have been doing it for decades. There is a hope for
communities and businesses that pull together and take action
to prepare and protect themselves from the inevitable process
of climate change, erosion, subsidence and other challenges.
In spite of these challenges, my bank has maintained a loan
loss reserve of 2.5 times higher and a capital of 31 percent
greater than our peers. I am not telling you this to brag but
to point out that when you live and operate in an environment
with increased risk, you have to maintain resiliency to make it
through the tough times.
While my day-to-day job is to provide our region's banking
needs, I am also very active in the community, and those
efforts are intertwined. My community survival is tied to
managing risk from a manipulated delta and a channelized
Mississippi River. Efforts to aid the Nation's waterborne
commerce have had a severe impact on our community. Namely,
subsidence, sinking wetlands. Since 1992, the communities in
Terrebonne and Lafourche Parishes have been the subject of
Federal studies to build levee protection projects in order to
protect our citizens from the risk of hurricanes.
The levee protection project called the Morganza to the
Gulf is a 98-mile hurricane protection levee system. This
project has been before Congress four times since 2000, and was
finally authorized for construction in the 2014 WRRDA at a cost
of $10.3 billion. But to date, we have received no Federal
funding.
In 2006, the Morganza Action Coalition was formed to
advocate for the Federal funding to complete the levee
protection project. I am currently the president of MAC, and my
bank has contributed over $70,000 to MAC support advocacy to
build large-scale levee protection.
This 501(c)(4) nonprofit's efforts have been critical to
moving our Federal partner, largely to get out of the way of
local efforts, but to date, virtually all of our protection has
been constructed from local and State revenues to the tune of
over $400 million. Our community, with the State's support and
local dedicated taxes, has partially built more than 45 miles
of levees, and 9 floodgates.
Let me say it again. After years of waiting for Federal
funding, our communities both in Terrebonne and Lafourche
Parishes voted to tax themselves to begin building this system.
The most recent tax vote for an additional half cent in
Terrebonne Parish passed in December 2012 by a 72 percent voter
margin. We have taxed ourselves more than any other coastal
community in America to reduce risk largely caused by Federal
actions.
Just 2 weeks ago, a Cat 1 hurricane named Barry barreled
through the Gulf of Mexico, on a similar path to hurricanes
Rita in 2005 and Ike in 2008. But the difference this time was
that less than 15 homes flooded in Terrebonne Parish versus
1,100 for Rita and upwards of over 10,000 that flooded in Ike.
In south Lafourche where the levee system is even more complete
no homes flooded.
It is imperative that our coastal communities complete this
levee protection project to protect us from up to a Cat 3
hurricane. The most recent U.S. Corps of Engineers study
evaluating the cost of the Morganza to the Gulf levee, which
used actual cost data from completed sections, indicates that
more accurate cost to complete the project is estimated to be
$3.4 billion, one-third of the original $10.3 billion estimate.
We believe our $400 million-plus spent on flood protection so
far has probably saved at least that much in flood damages for
Hurricane Barry, a single storm.
In a couple of months, Congress will be looking at long-
term solutions for the National Flood Insurance Program. Think
of the savings that the communities of Terrebonne and Lafourche
Parish would have had on mitigating of flood claims from the
completion of our levee system. The Morganza to the Gulf levee
protection project is an investment that the citizens of my
community have made to build resiliency to climate crisis.
Is there a cost? Yes. But the cost of not building and
preparing are much greater. I encourage Congress to step up and
invest in building the Morganza to the Gulf levee protection
project and others like it which, in the end, will save
taxpayers billions of dollars.
Thank you for allowing me to be with you today, and I will
be glad to answer any questions.
[The statement of Mr. Walker follows:]

Statement of Mr. Jay Walker, Executive Vice President, South Louisiana
Bank, Houma, LA

On ``Creating A Climate Resilient America; Business Views on the Costs
of the Climate Crisis''

U.S. House of Representatives, Select Committee on the Climate Crisis--
July 25, 2019

Chairwoman Castor, Ranking Member Graves and Committee Members, my
name is Jay Walker, and I am from Houma, Louisiana. I am the Executive
Vice President, and Chief of Lending at South Louisiana Bank; a
community bank of just under $500 Million in assets, with our home
office located in Terrebonne Parish, Louisiana. My bank serves the
markets of Terrebonne and Lafourche Parishes in Southeast Louisiana. It
is an honor and privilege to be here with you today and discuss
``Creating a Climate Resilient America''.
I started my banking career in 1983, just as my community was hit
with the worst oilfield industry downturn in U.S. history. Faced with
dire straits, my management team came up with a plan to work through
the tough times and we survived. In the last three decades, my bank and
community, has experienced many storms, some natural, and some man-
made. You may remember the names of a few of them; Hurricanes Juan,
Andrew, Lily, Isadore, Katrina, Rita, Gustav, Ike, and just two weeks
ago Hurricane Barry. Then in 2010, my area was hit with a virtual
shutdown of the oil industry as the previous administration imposed an
offshore deep-water drilling moratorium. Both my bank, and my
community, have decided to pull up our boot straps and do what it would
take to build resiliency, and continue to make our living in South
Louisiana.
It is important for Members to know that Louisiana is a working
coast and those of us who live in coastal Louisiana do so largely in
service to our Nation's energy and seafood needs. While diverse, our
community's economy is driven by these two industries and moving is
simply not an option.
In Terrebonne and Lafourche Parishes, we are home to one of the
nation's most active deep-water oil ports, helping to fuel our nation.
And home to where over 21% of all fisheries landings in the lower 48
states is produced. And home to a thriving tourism business with
arguably the best sport fishing in North America. What I can tell you
is that for the people of Southeast Louisiana, being resilient in the
face of the climate and other challenges is a way of life. We have been
doing it for decades. Also what I'm here to tell you, is there is hope
for communities and businesses that pull together and take action to
prepare, and protect themselves from the inevitable process of loss
from climate change, erosion, subsidence, and other man caused
challenges.
My bank, despite all of the previously mentioned challenges, has
maintained a loan loss reserve of 2.5 times higher than our peers, and
capital at 31% greater than our peers. I'm not telling you this to
brag, but to point out that when you live and operate in an environment
with increased risk, you have to maintain resiliency to make it through
the tough times!
While my day-to-day job is to provide our region's banking needs, I
am also very active in the community. And those efforts are
intertwined. My community's survival is tied to managing risk from a
manipulated delta and channelized Mississippi River. Efforts to aid the
Nation's waterborne commerce have had a severe impact on our community.
Namely, subsidence--sinking wetlands. Since 1992, the communities in
Terrebonne and Lafourche Parishes have been the subject of federal
studies to build levee protection projects in order to protect our
citizens from the risks of Hurricanes. The levee protection project
called ``Morganza to the Gulf'', is a 98-mile hurricane protection
levee system that has been before Congress four times since 2000. It
was finally authorized for construction in the 2014 Water Resources
Reform & Development Act, at a cost of $10.3 billion. But to date we
have received no Federal funding!
In 2006, a 501(c)4 nonprofit organization, called the Morganza
Action Coalition (MAC) was formed to advocate for Federal funding to
complete the levee protection project. I am currently the President of
MAC, and over the past several years, my bank has contributed over
$70,000 to MAC to support the advocacy to build large-scale levee
protection.
MAC's efforts have been critical to moving our Federal partner.
Largely to get out of the way of local efforts, but to date, virtually
all of our protection has been constructed from local and state
revenues, to the tune of over $400 million. Our community, with state
support and local dedicated taxes, has built more than 45 miles of
levees, partially built to the first lift of 10-12 feet high, and 9
flood gates. Let me say it again, after years of waiting for Federal
funding, our communities, both in Terrebonne and Lafourche Parishes
voted to tax themselves to begin building the system. The most recent
tax vote for an additional \1/2\ cent in Terrebonne Parish passed in
December, 2012 by a 72% voter margin to continue this effort. We have
taxed ourselves more than any other coastal community in America to
reduce risk largely caused by Federal actions!
So, does becoming climate resilient have a cost? Sure it does. My
bank's stockholders waited many years to be paid dividends on their
investments, all while the bank was building capital and reserves. Only
now to reap the benefits of consistent above average earnings and
dividends. And so too will the residents of my community reap the
benefits by building resiliency in our community by protecting its
residents from the potential damage from hurricanes. Just two weeks ago
a category 1 hurricane named ``Barry'' barreled through the Gulf of
Mexico on a similar path to hurricanes Rita, in 2005, and Ike, in 2008.
But the difference this time was that less than 15 homes flooded in
Terrebonne Parish, versus over 1,100 for Rita, and upwards of 10,000
that flooded in Ike. And in South Lafourche, where the levee system is
even more complete, no homes flooded.
It is imperative that our coastal communities complete this levee
protection project, designed when completed to a height of 18 feet, to
protect us from up to a category 3 hurricane. The most recent study
evaluating the cost of the Morganza to the Gulf levee project by the
U.S. Army Corps of Engineers, using actual cost data from completed
sections, has indicated that a more accurate cost estimate is estimated
to be $3.4 billion to complete the project; a reduction in cost of over
two thirds from the original $10.3 billion. The total coastwise cost of
damages from hurricane Rita was $10.5 billion in 2005, and damage from
Ike was $30 billion in 2008. We believe our over $400 million spent on
flood protection so far, could have saved upwards of $500 million in
flood damages from a single storm, Barry.
In a couple of months, Congress will be looking at a long-term
solution to the National Flood Insurance Program. Think what kind of
savings the communities of Terrebonne and Lafourche would have on the
mitigating of flood claims from completed levee systems? The Morganza
to the Gulf levee protection project is an investment that the citizens
of my community have made to build resiliency to the climate crisis. Is
there a cost? Yes, but the cost of NOT building, and preparing are much
greater. I encourage Congress to step up and invest in building the
Morganza to the Gulf levee protection project, which in the end will
save taxpayers billions of dollars.
Thank you again for allowing me the opportunity to speak to you
today. I will be happy to answer any questions.

Important dates and events in the history of promoting the
authorization and funding of the Morganza to the Gulf Hurricane
Protection Project:

1986--South Terrebonne Tidewater Management &
Conservation District was created (now TLCD)
1986-1990--Local Investigation of Hurricane
Protection System begins with USACE suggesting Comprehensive
Study and EIS
1992--USACE led Reconnaissance Study begins (MTG was
initiated--20 years ago)
1992--Hurricane Andrew floods project area
1995--USACE begins Feasibility Study with 50/50 cost
share with the State
1998--USACE instructed to begin advance design of
the HNC Lock (PL 105-62)
2000--Morganza to the Gulf receives Authorization in
Water Resources and Development Act (WRDA) contingent upon a
signed Chief's Report by December 2000 (December deadline not
met by USACE)
2001--Local sales tax passes and currently generates
approximately $6 Million per year for construction of Morganza
2001--Tropical Storm Allyson floods project area
2002--USACE Feasibility Report completed and
submitted to Congress for action
2002--Morganza Project Cost updated for WRDA by
USACE
2003--Hurricane Lili and Tropical Storm Bill flood
the project area
2004--No WRDA Bill passes; Project Cost updated
again by USACE; however, Reach J-1 of Morganza is authorized by
Congress
2005--Hurricanes Katrina and Rita flood project area
2006--Again, Project Cost is updated for WRDA
2006--Construction of Reach J-1 initiated with $18
Million State and Local dollars, beginning state and local
efforts for construction of Morganza-to-the-Gulf
2007--Project Cost updated for WRDA by USACE
September 2007--Morganza is authorized for
construction
December 2007-- USACE informs the local sponsor that
the Project Cost has exceeded the authorized limit and Morganza
must be reevaluated.
February 2008--USACE stops environmental and design
work on HNC Lock pending completion of the reevaluation.
June 2008--State of Louisiana dedicates $98 Million
to Morganza, combined with other local funding totaling $130
Million for Morganza construction, Non-federal dollars
September 2008--Hurricanes Gustav and Ike flood the
project area
2009--Construction begins on Reach H-3 for $7.2
Million State funding
August 2009--August, USACE Post-Authorization Change
Study begins and is scheduled for completion in December 2012
2009--Present--TLCD commences construction and/or
permitting for Reaches H-2, H-1, G-1, G-2, J-2, J-3, E, F, Bush
Canal Floodgate, Placid Canal Floodgate, Bayou Grand Caillou
Floodgate, HNC Floodgate all with Non-federal dollars
December 2012--Voters in Terrebonne Parish
overwhelming approve an additional half-cent sales tax for
local completion of the first lift of levees and floodgates
along the Morganza alignment.
May 2013--U.S. Senate approves 2013 WRDA bill,
including re-authorization of Morganza-to-the-Gulf at $10.3
billion.
May 2013--U.S. Army Corps of Engineers Senior Review
Panel releases the project's final draft Post-Authorization
Change (PAC) Report for federal and state agency comment.
July 11, 2013--USACE signs off on Chief's Report for
the Morganza-to-the-Gulf Hurricane Protection Project. A 120-
day mandated review period by the Assistant Secretary of the
Army for Civil Works and the Office of Management and Budget
begins.
December 9, 2013--Record of Decision released,
signaling final approval of project by the Obama
Administration.
May 22, 2014--U.S. Congress authorizes the federal
Morganza-to-the-Gulf Hurricane Protection Project as part of
the Water Resources Reform and Development Act (WRRDA) of 2014.
A map of the Morganza-to-the-Gulf Hurricane Protection System is
available at http://www.morganza.org/morganza-to-the-gulf-description/.

Ms. Castor. Thank you very much.
Mr. Bouchard, you are recognized for 5 minutes.

STATEMENT OF FRANCIS BOUCHARD

Mr. Bouchard. Good afternoon, and thank you for this
opportunity to testify. My name is Francis Bouchard, and I am
the head of public affairs and sustainability for Zurich
Insurance Group.
Zurich is the leading direct insurer that has been serving
customers around the world for nearly 150 years, including over
100 years in the U.S. As a risk management expert, we have
identified climate change as perhaps the most complex risk base
in society. It is intergenerational, it is international, and
it is interdependent. We concur with the IPCC findings, and it
is our aim to leverage our sector's role in society to help
deepen awareness of climate risks and to incentivize the
behaviors and best practices that will be required to mitigate
against and adapt to the worst impacts of climate change. As an
insurer, this effort is core to our mission. And as a
responsible steward of the planet, it is simply the right thing
to do.
It is clear that the frequency of extreme weather events is
increasing. NOAA captures this trend well in its analysis of
billion-dollar weather-related disasters, with the 3-year
average of 15 such events per year far exceeding the 30-year
average of 6.2 events per year. Perhaps even more alarming,
though, is the growing gap between overall economic losses and
insured losses, both in the developing world and in the U.S., a
phenomena insurers call the protection gap.
The committee has asked witnesses to address the costs of
climate change to businesses. In our view, those costs come in
two primary forms, physical risks and transition risks, both of
which present complex risk management challenges. This is why
we view the disclosure regime, such as the one developed by the
Financial Stability Board, to be constructive first steps for
boards, management teams, and investors to improve risk-aware
decisionmaking.
As for managing our own physical and transition risk,
Zurich is taking concrete steps. We became carbon neutral in
2014, decreasing our own CO2 emissions per employee by 50
percent from our 2007 operations, recently committing to use
100 percent renewable energy across our global operations. We
also set targets to reduce the use of internal paper by 80
percent and eliminate the use of single-use plastics.
In reality, though, insurers are relatively small emitters
of carbon. So our ultimate impact will be achieved through our
marketplace role, both as an institutional investor and as an
insurer of risks. As an investor, we proactively evaluate ESG
factors in our investment decisionmaking process, with over 87
percent of our in-scope investments already meeting or
exceeding our minimum standards. We are also major impact
investors, and by year-end 2018, had invested $3.8 billion,
avoiding 3.5 million tons of CO2 and benefiting 2.4 million
people.
Like other economic sectors, it is still quite early in the
evolution of a climate-focused insurance market. That said, we
have products that encourage better or even less driving, cover
electric vehicles, and offer build back better options. We
developed the first dedicated carbon capture and sequestration
liability offering, increased our renewable energy sector
business, and are bolstering our modeling capabilities to
support clients who are seeking to deepen their own
understanding of climate exposures.
As market demands evolve, then, insurers are developing
products and services that will help facilitate or even
incentivize longer term resilient behaviors. In some cases,
though, we feel the need to accelerate those trends, which is
why Zurich recently announced a new policy to engage in risk-
based dialogs over a 2-year period with customers or those
companies we invest in that have significant commercial
operations in thermal, coal, oil sands and oil shales. The aim
is to drive a deeper conversation regarding their mid- to long-
term transition plans for reducing the carbon intensity of
their operations.
The insurance mechanism has a clear role to play in helping
society manage climate risk. However, a model that prices risk
over a 12-month period, no matter how sophisticated the
methodology, will struggle to fully reflect longer term
evolving exposures like climate change. In those cases,
insurers must find new ways to play their role in society that
go well beyond the traditional products and services they
provide. That is why Zurich and other insurers have undertaken
a series of knowledge-based initiatives to work with other
societal actors to apply the analytics of insurance to a much
broader group of stakeholders.
In 2013, as the chairwoman referenced, we launched our
Global Flood Alliance. And with NGO and academic partners, we
deployed a sophisticated resilience framework in over 100 at-
risk communities and have now expanded the program to broaden
our impact even further.
Today, 87 percent of disaster-related funding goes to post-
event recovery. And it is our goal to demonstrate both the
humanitarian and economic benefits of shifting more funding to
pre-event preparation.
Another approach we take to sharing our knowledge about
resilience is through the publication of PERC reports that
assess human-induced elements of what are typically considered
natural disasters, with the research revealing several
important truths as outlined in my written statement.
Finally, we are proud of our affiliation with SBP, a
national resiliency nonprofit located in New Orleans, which has
evolved into a true system level thought leader on disaster
preparedness and recovery, particularly for the most vulnerable
at-risk populations.
In closing, let me acknowledge that the precise costs of
climate change are difficult to calculate and are subject to
unknown future scenarios. That should not inhibit business from
acting, though, which is why we are proud of the role that
insurers are playing to help society prepare for and address
the costs associated with climate change. At Zurich, we take
that responsibility seriously and are eager to work with others
who share that commitment.
Thank you.
[The statement of Mr. Bouchard follows:]

Written Testimony of Francis Bouchard, Group Head of Public Affairs and
Sustainability, Zurich Insurance Group

``Creating a Climate Resilient America: Business Views on the Costs of
the Climate Crisis''

House Select Committee on the Climate Crisis--July 25, 2019

Good afternoon. I would like to thank the Chair of the Committee,
Congresswoman Castor, as well as Ranking Member Graves and other
members of the committee for the opportunity to testify before the
Select Committee. My name is Francis Bouchard and I am the head of
Public Affairs and Sustainability for Zurich Insurance Group.
I plan to break my testimony into four main sections: a broad
overview of how insurers view climate risk, how Zurich is addressing
the issue of climate within our own operations, how we incorporate
climate and environmental, social and governance (ESG) thinking into
our market activities, and how we engage with society more broadly to
help advance risk-sensitive climate-aware decision-making.
Before I start though, let me introduce the company I work for.
Zurich is a leading multi-line direct insurer that has been serving its
customers in global and local markets for nearly 150 years. With about
54,000 employees, it provides a wide range of property and casualty,
and life insurance products and services in more than 210 countries and
territories. Zurich's customers include individuals, small businesses,
and mid-sized and large companies, as well as multinational
corporations.
For over a century, Zurich North America has called the greater
Chicago area home. In 2016, Zurich moved its U.S. corporate campus a
few blocks north in suburban Schaumburg, Illinois to an award-winning
headquarters that has earned LEED Platinum certification, the
highest rating from the U.S. Green Building Council. The distinctive
design underscores our commitment to resilience, collaboration and
innovation. The headquarters became the largest LEED
Platinum-certified structure of its kind in the United States
and the only one of its kind in Illinois. On the one-year anniversary
of Zurich's headquarters, we reported a 30% reduction in water and
electricity consumption compared with our previous location.
Using our core risk assessment skills to respond to some of the
most significant long-term societal and environmental trends, we have
identified climate change as perhaps the most complex risk facing
society today. It is inter-generational, it is international and it is
interdependent. Representing the consensus of the international
scientific community, the Intergovernmental Panel on Climate Change
(IPCC) finds strong evidence that climate change is occurring, that it
is influenced by human action, and that it is leading to changes in
extreme weather and climate events.
Zurich shares this belief that climate change is real, influenced
by human actions and impacting weather patterns. It is our aim to
leverage our sector's role as the primary risk signaler for society to
help deepen awareness of the risks climate change poses, and ultimately
to incentivize the behaviors and best practices that will be required
to both mitigate the worst impacts of climate change and adapt to
changing weather patterns. We do this because Zurich's mission is to
protect individuals, businesses and communities, and because we believe
it's the right thing to do.
Furthermore, we do this because the impact of extreme weather
events is escalating. The National Oceanic and Atmospheric
Administration's (NOAA) National Centers for Environmental Information
captures this trend well in its analysis of billion-dollar weather-
related disasters, with the three-year average of 15 such events per
year far exceeding the 30-year average of 6.2 events per year (https://
www.climate.gov/news-features/blogs/beyond-data/2018s-billion-dollar-
disasters-context).
Perhaps even more alarming, though, the gap between overall
economic losses and insured losses due to natural catastrophes is
growing, not just in the developing world but in the United States as
well. As this chart from Munich Re illustrates, both economic and
insured losses have been steadily growing over the past three decades,
with scientific forecasts suggesting the trend will accelerate and
likely worsen. This ``protection gap'' is a significant cost of climate
change to governments and communities, and it is the reason
policymakers should focus on pre-event resilience, knowledge sharing
and risk-informed decision-making. To be clear, insurers are not only
focused on the risks they insure, but are committed to securing more
resilient communities for all stakeholders.

[GRAPHIC NOT AVAILABLE IN TIFF FORMAT]
risk management of climate exposures
Broadly speaking, risk management responses to climate change fall
into two categories: adaptation to the largely physical consequences of
climate change; and mitigation of greenhouse gas (GHG) emissions and
its associated transition risks.
If further impacts from a warming climate are to be avoided, the
global economy needs to be transformed over the coming decades to
reduce greenhouse gas (GHG) emissions. If not, then a further buildup
of GHGs in the atmosphere will lead to a rise of average temperatures
beyond the Paris Agreement's 2 C level, which, over time, will have
increasing effect on severe weather event patterns, frequency and
severity.
While the most severe physical changes of climate change are likely
to take decades to manifest, they are largely irreversible in the long
term. So, the challenge is to act now, to transform the global economy
and largely decouple global economic growth from GHG emissions. At the
same time, due to the lag effects of GHGs in the atmosphere, the world
will need to continue to adapt to the physical effects of climate
change for decades to come. The challenge, then, is to drive risk-
informed climate-sensitive decision-making across all sectors.
In contrast to the physical risks, transition risks are those
economic disruptions caused by changing customer sentiment, new
technologies or public policy. They tend to impact sectors with a
shorter timeframe and with less predictability. Therefore, it is
critical that policymakers develop a clear and holistic approach to
transition-relevant issues in order to take into account the unintended
consequences of even the most well-meaning policy approaches.
Assessing the potential cost of these physical and transition risks
is essential for communities and corporations. For business leaders,
this process may yield benefits beyond shoring up supply chains, for a
truly holistic review of environmental risks will reveal opportunities
as well. It is crucial that companies develop a climate resilience
adaptation strategy, defined in four key steps:
identify the broad business and strategic risks;
identify the critical exposures, vulnerabilities and
hazards;
develop a granular view of the risks involved
including, for example, individual locations; and
develop a mitigation and resilience strategy,
involving--where appropriate--insurance.
The challenge for business leaders and policymakers is to create
strategies that optimize the opportunities associated with climate
change adaptation and mitigation. In some cases, this can be done by
individual initiatives carried out by the private sector and public
sector, but in most cases, it will require multistakeholder action. In
a few cases, it will require new technologies, new industries or new
business models to be developed with new approaches to managing risk.
The Financial Stability Board, the global standard-setting body
responsible for financial stability, established a Task Force on
Climate-related Financial Disclosures (TCFD) that has created a useful
framework for companies to start to address the corporate governance,
risk management, scenario-playing and measurement aspects of either
adapting to or mitigating the impact of climate change. The hope is
that this approach, already adopted by 800 firms globally, will form
the basis of information that investors and other stakeholders can act
upon to target `green' investment and policies to enable a transition
to the low-carbon economy. This task is of course challenged by the
definition of what is `green' and what needs to be prioritized to
deliver sustainable finance.
The TCFD is a good framework for disclosure of climate change
impacts on a business, but we recognize that we are early in this
process, and that it will take time to develop meaningful analysis of
longer-term exposures under difficult-to-predict transition scenarios.
That said, Zurich's research suggests that based on current disclosures
and strategic responses companies' collective actions will not be
sufficient to achieve the 2 degree goal of the COP 21 Paris Agreement.
Businesses have always had to change their strategies to respond to
market conditions, but climate change is different in that the
timescales of the most severe impacts are far beyond most strategic
plans. In these circumstances, scenario planning as recommended by the
TCFD is an appropriate way to deal with such future uncertainty. In
fact, as evidenced in a multi-sector modeling exercise hosted last week
by the Geneva Association, a global insurance think tank, meaningful
disclosures can serve as the basis for collective action and cross-
industry collaboration.
climate-proofing our own operations
At Zurich, being a responsible and sustainable company is at the
foundation of our business. It is the reason we have signed the UN
Global Compact in 2011, the Principles for Sustainable Investment in
2012, the Principles for Sustainable Insurance in 2017, and most
recently the Business Ambition for 1.5 degrees. Even more important
than these public commitments however, are the steps we are taking to
future-proof our own operations.
Zurich became carbon neutral as of 2014 through its ambitious
internal carbon emissions reduction efforts and by offsetting remaining
emissions. We have decreased our own CO2 emissions per employee by 50%
percent, eliminating over 150,000 tons of CO2e (equivalent of removing
32,000 passenger vehicles per year from the road) from our operations
since 2007.
We are a member of RE100 (a global corporate leadership initiative
committed to 100% renewable energy, www.there100.org) and have
committed to utilize 100% renewable energy across all our global
operations by the end of 2022. Additionally, we have set ambitious,
near-term operational targets like the reduction of internal paper
usage by 80% and the total elimination of single-use plastics by the
end of 2019.
Reflecting the keen interest our people have in being part of the
climate change solution, we have also initiated an internal training
initiative aiming to educate at least 10,000 employees on the basics of
the climate change challenge, as well as the role that the insurance
mechanism can play in creating awareness of and incentives for
solution-based thinking. In addition, we will soon be launching an
internal platform that will allow our people to voluntarily offset
their own carbon footprints while enhancing resilience in flood-ravaged
regions.
marketplace impact
In reality, though, insurers are relatively small emitters of
carbon, so our ultimate impact will be achieved through our marketplace
role, both as an institutional investor and an insurer of risks.
As an investor, we focus on both ESG integration and impact
investing. We pro-actively evaluate ESG factors in our investment
decision making process, both pricing risks and seizing opportunities
in an award-winning approach. Currently, over 87% of our in-scope
investments are meeting or exceeding our minimum standards on ESG
integration and we are aiming to reach 100%. As part of this, we are
embedding climate risk into our risk management processes, and are
strengthening our technical and analytics capabilities for managing
climate risk within our global investment portfolios.

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We are also rapidly increasing our impact investments. In 2017, we
announced our mid-range commitment to invest USD 5 billion in impact
investments, avoiding 5 million tons of CO2e and benefiting 5 million
people. By year-end 2018, we had already invested USD 3.8 billion
avoiding 3.5 million tons of CO2e and benefiting 2.4 million people. We
are not passive investors, however, and instead work with groups like
the Principles for Responsible Investment (PRI), Global Impact
Investing Network (GIIN), the Green Bond Principles (GBP) and others to
help define the standards that will mainstream ESG investing. In this
way, we have also been instrumental in the rapid development of the
green bond market over the past six years.
On the product and market side, like other economic sectors it is
still quite early in the evolution of a climate-focused insurance
market. Many insurers have developed products utilizing technology to
encourage better or even less driving, thereby reducing carbon
emissions. Many, Zurich included, have dedicated policies for electric
vehicles, and offer ``build back better'' options that achieve higher
resilience standards. In terms of new technologies, Zurich developed
the first dedicated carbon-capture and sequestration offering, and has
systematically increased its solar and renewable energy business. In
addition, it is methodically enhancing its modelling capabilities in
order to support clients who are increasingly seeking to deepen their
understanding of climate exposures. In short, as customer awareness
grows and business models evolve, insurers are developing products and
services that will help facilitate or even incentivize longer-term
resilient behaviors.
In some cases, though, we feel the need to accelerate those trends
and seek to deploy a risk-based engagement strategy to some of the more
fundamental challenges posed by climate change. That is why Zurich
recently took an important step aimed at helping to reduce the use of
carbon-intensive fossil fuels by expanding its existing thermal coal
policy to include fuels produced from oil sands and oil shales.
At the core of this new policy is Zurich's commitment to engage in
risk-based dialogues over a two-year period with customers or those
companies we invite in that have significant commercial operations in
thermal coal, oil sands and oil shales. The aim is to drive a deeper
conversation regarding their credible mid-to-long-term transition plans
for reducing the carbon intensity of their operations.
Depending on the outcomes of its dialogues, Zurich has pledged to
no longer underwrite or invest in companies that:
generate more than 30% of their revenue from mining
thermal coal, or produce more than 20 million tons of thermal
coal per year;
generate more than 30% of their electricity from
coal;
are in the process of developing any new coal mining
or coal power infrastructure;
generate at least 30% of their revenue directly from
the extraction of oil from oil sands;
are purpose-built (or ``dedicated'') transportation
infrastructure operator for oil sands products, including
pipelines and railway transportation;
generate more than 30% of their revenue from mining
oil shale; or
generate more than 30% of their electricity from oil
shale.
Our intent is to help drive a deeper conversation regarding mid-to-
long-term transition plans for reducing the use of these fuel sources
and their impacts on the global environment. In this same vein, Zurich
has also committed to developing science-based targets that will
hopefully help encourage a smoother transition in the sectors that we
underwrite and invest in.
a broader societal impact
The insurance mechanism has a clear role to play in deepening
awareness of climate risks and incentivizing the economic and
behavioral models to address those risks. However, keep in mind that
the primary mechanism by which it sends risk signals is the price of an
insurance policy. It is this price--conveyed through a simple dollar
term--that reflects the massive amounts of historic data collection,
modeling, diversification and risk assessment that insurers undertake.
That policy, though, is typically for a duration of 12 months, which
allows both insurer and insured to reassess their exposures and reprice
the policy. That model typically works well for immediate well-known
exposures, but less so for risks that will manifest over a 30-year
period, like climate change.
In those cases, insurers must find new ways to play their role as
society's risk assessors that go well beyond the traditional products
and services they provide. That is why Zurich and other insurers have
undertaken a series of initiatives to work with other societal actors
to apply the analytics of insurance to a much broader set of
stakeholders.
For example, in 2013 Zurich launched its Global Flood Alliance, a
multi-sector partnership focusing on finding practical ways to help
communities strengthen their resilience to floods. Together with our
Alliance partners, which included the International Federation of Red
Cross & Red Crescent Societies, Practical Action, the Wharton School
and the International Institute for Applied Systems Analysis, we not
only developed a unique Flood Resilience Measurement Framework,
including a toolbox to actively measure flood resilience, but we also
applied the framework to over 110 communities in nine countries around
the world, generating over 1.1 million data points.
With this framework, we plan to close the gap acknowledged by the
UN: that currently no empirically verified measurement framework for
disaster resilience yet exists. We do this by applying the measurement
framework through our partners and program countries, thereby
establishing the baseline of community resilience at the inception and
measuring how sources of resilience develop over time as interventions
are implemented. In addition, to validate the framework and ensure our
sources or proxies of resilience do actually have an impact and build
resilience, we measure outcomes of resilience should flooding occur in
the program communities.
Building on the success of our first five years, we have widened
the context of the Alliance over the last 24 months and are now working
with further implementing partners, including: Concern Worldwide
(Haiti, Afghanistan), Mercy Corps (Indonesia, Nepal, Timor-Leste), the
National Academy of Sciences (Charleston SC and Cedar Rapids IA) and
Plan International (Nepal). In this second five-year phase of the
program Alliance members aim to increase third-party investments
dedicated to pre-event resilience by $1 billion. We seek do this by
rolling out best-practice community programs that demonstrate the value
of resilience-building, compiling best practices and success stories,
and advocating for more investment in resilience with authorities and
public and private funders.
From our perspective prevention and resilience-building are not
just about humanitarianism, they are about more effective use of scarce
funds. Our research of the cost-benefit analysis from dozens of
specific flood resilience programs has determined that there is, on
average, a 1-to-5 cost/benefit ratio, underlining not only that
resilience building is the proper approach to reducing human misery,
but that it is responsible budgeting as well. However, currently around
87% of all disaster-related funding is targeted ``post-event''. Our aim
with Zurich's Flood Resilience Program and its multi-sectoral Alliance
is to demonstrate the effectiveness of investing in pre-event
resilience building and shift global funding from recovery to
resilience.
Another approach we take to sharing our knowledge about resilience
is through the publication of award-winning Post-Event Review
Capabilities, or PERCs, that assess human-induced elements of what are
typically considered ``natural'' disasters, including the resilience of
people, supply chains, systems, legal and cultural norms before, during
and after a disaster. We have conducted 14 such reports covering
extreme weather events in Germany, the UK and Switzerland, as well as
in North Carolina and Houston. In fact, we are currently in the process
of conducting new studies of the wildfires in California.
Zurich's PERC analyses of global disasters leave no doubt that
disaster risk management professionals all face several universal
truths when it comes to attitudes and actions around preparing for and
responding to natural hazards.
The research clearly demonstrates that:
Disaster risk management is playing catch-up to an
increasingly larger exposure to natural hazards.
Globally, spending on climate-related response is
far greater than investment in pre-emptive risk reduction
strategies.
Where money is invested on weather-related
prevention, it typically goes to protecting physical structures
rather than more cost-effective risk management such as
environmental planning.
Infrastructure protection already in place--levees,
for example--can produce a false sense of security.
Few incentives exist to encourage ``building back
better'' and including resilience into the rebuilding process.
The neediest in society are often neglected before
and after disasters, and sometimes are still recovering from
one event when the next one strikes.
Several of the studies reviewed the science on the increasing
frequency and severity of climate hazards, especially extreme
precipitation and storm surges. Future climate scenarios were presented
in PERC studies on European floods, and across all the studies it was
clear that in order to achieve a certain level of protection simply
relying on historical data is not enough. Hazards are changing rapidly
and planning must take this into account.
The studies also show that societies can be vulnerable to repeated
events and may still be recovering from one when the next one strikes.
That was North Carolina's experience with Hurricane Matthew in 2016 and
Hurricane Florence two years later.
Rather than relying too heavily on disaster response, the PERC
studies show that a better approach involves preventing the build-up of
assets in high-hazard areas. The studies revealed, however, that there
is little evidence that disaster risk is considered in most investment
decision-making and land-use planning that could result in an
accumulation of assets. For example, the PERC analysis of 2014 flooding
in Nepal revealed that the risk of increased flooding from a planned
hydropower plant had not been taken into consideration. In Germany,
where flash floods caused heavy damage in 2016, the country experienced
difficulties in controlling building in unmapped flood hazard zones.
North Carolina did use its experience with Hurricane Matthew to
better prepare for the impacts of Florence two years later. Changes
were implemented at state and local levels in interagency coordination,
staging of key resources and an increased awareness of the need to
prepare for recovery prior to an event. For example, the Food Bank of
Eastern and Central North Carolina prepped branches and stocked local
partners not just along the coast, but across the state in anticipation
of inland flooding, which they hadn't done ahead of Matthew.
Businesses, large and small, are urged to stress employee
preparedness at home as well as on the job to ensure that they remain
safe and are able to continue working remotely if possible. Raising
employee awareness a day or two prior to an event by asking about
stockpiles of food, backup power or lodging and the security of key
documents can potentially lower losses and hasten a return to work.
The PERC methodology was specifically designed to turn the lessons
learned from the consequences of disasters into actions that help
businesses and communities become more resilient and recover quickly
from devastating events. It is not enough to understand the dynamics of
disaster risk and resilience, including what went wrong and what worked
well, but that is the necessary first step.
We encourage all interested parties to apply the methodology and
contribute to the repository of freely available material on success
and insights from around the world. PERC studies and a manual that
serves as a guide for conducting PERCs are available at https://
www.zurich.com/en/corporate-responsibility/flood-resilience/learning-
from-post-flood-events.
We are also working with our primary U.S. trade association, the
American Property Casualty Insurance Association, to provide helpful
data-driven analysis to advocate for public policy solutions that are
most likely to reduce catastrophe losses and provide more ready-made
solutions for increasingly resiliency.
Another resilience initiative we are proud of is our affiliation
with SBP, a national non-profit based in New Orleans. Initially
established to rebuild homes following Hurricane Katrina, SBP has
evolved into such a high-impact knowledgeable force in post-disaster
environments that it is now sharing its building techniques with other
non-profits, advising local governments on optimizing federal funding
programs and advocating for innovative approaches to disaster
resilience. Perhaps its most impactful effort, though, will be a new
approach to resilience training for individuals and small businesses
that could help avoid losses altogether. Most of the beneficiaries of
SBP's efforts are not insured, but by driving system-level change it is
pursuing its mission of reducing the time between disaster and
recovery.
An initiative we are just embarking on is to assess whether we can
partner with others to create enough scale in the carbon offset market
to drive projects towards nature-based solutions (e.g. coastal
wetlands) that offer both carbon storage/sequestration and disaster
resilience elements. The Nature Conservancy has worked creatively with
other insurers to establish such scalable projects, and Zurich is
already engaged in a series of discussions exploring how to expand the
creation of such multi-benefit projects.
A final industry initiative that is leveraging the insurance
mechanism to enhance climate resilience in developing economies is the
Insurance Development Forum. This public private partnership, led by
leading insurers and reinsurers, the World Bank and the United Nations,
is creating the technical, financial and regulatory capacity to
facilitate the use of innovative insurance solutions at the sovereign
and regional level. Initially targeting those nations most exposed to
climate risks, the IDF is one of the implementing platforms for the G7/
G20 climate resilience targets, including the goal of extending
insurance to another 400 million people by 2022. They are also
collaborating closely with the UK, German and other development
agencies, as well as the Global Centre for Disaster Protection and the
Global InsuResilience Partnership, to broaden the use of modelling,
data analysis and risk transfer vehicles.
closing
In closing, let me reinforce that the insurance sector has a
fundamental role to play in helping society prepare for and address the
costs associated with climate change. At Zurich, we take that
responsibility seriously, whether through our own operations, our
market-focused actions or our knowledge-based initiatives. We are proud
of the leadership our sector is taking in driving awareness and action
on this critical issue. Zurich is dedicated to continuing to play a
leadership role in driving global sustainability, and we invite and
encourage everyone to join us in this essential effort.
Thank you.

Ms. Castor. Thank you all very much.
At this time, I will recognize myself for 5 minutes for
questions.
Ms. DiPerna, in the 2019 status report by the Task Force on
Climate-Related Financial Disclosures, the majority of the
respondents said their organizations considered climate-related
issues to be a material risk today and over the near term.
Climate change is costing companies now, not 50 years from now.
How are companies managing that risk and what actions are
they taking to mitigate it? If there are obstacles and
challenges the companies see that the Congress should address,
what would you recommend?
Ms. DiPerna. That is a long----
Ms. Castor. I know.
Ms. DiPerna. We only have a few minutes. And I am not
really in the position to recommend policy. But with regard to
what is disclosed to us, certainly return on investment,
companies are trying to manage these risks--so first of all,
you can ask Mr. Bouchard from Zurich, you know, insurance is a
very big topic, very relevant, what I call the three Is:
insurance, indemnification, and infrastructure. So companies
are looking at all three. How can we indemnify ourselves
against the risk? Build in protections against physical risk,
modernize equipment. They are seeing higher premiums.
But also, the return on investment data that we are getting
from disclosure is really interesting, because most of the
investments companies are making to address the risk either by
avoiding it, eliminating it, or building an alternative
product, the returns on those investments tend to come in
sooner than expected and at a higher rate of return.
So I think what we are seeing is companies are very, very
nimble, but it is true, as I said earlier, that these risks
are--I won't use the word ``material'' myself, because it has a
fiduciary meaning--but are significant and due to fall on
somebody within the next 5 years.
And one thing--sorry.
Ms. Castor. Well, you mentioned that in the EU, they have
appreciated regulatory certainty because they have maintained
their commitment to the goals set out in the Paris climate
accord, and that it is a little more iffy here. Can you address
that?
Ms. DiPerna. Yes. I think regulatory certainty--and I was
just speaking with one of my colleagues earlier who spent some
time at the National Academy of Sciences this week, where some
of our data does show now that regulatory uncertainty is being
registered as a risk. And I mentioned that one of the very
largest utilities in the company has stipulated that it is
sometimes more difficult to manage the uncertainty of
regulation than the challenges of climate change.
But as we know, regulation shouldn't be seen, in my
opinion, as a restriction. It is at the least a level playing
field. And if you want to be competitive, you have to know what
your competitors are doing. And the coherence of something like
the Paris Agreement, even though it has its shortcomings, does
provide everybody a report card on what other people are doing.
So if you want to make a capital investment, you want to be
sure that it is not going to somehow be undermined in 2 years
if there is a new policy or a higher tax rate or something you
can't predict.
Ms. Castor. Thank you.
Ms. DiPerna. Business hates unpredictability.
Ms. Castor. Mr. Bouchard, boy, we are just being socked by
the cost of these extreme weather events now. In 2017, the U.S.
faced the highest single total cost related to extreme weather
events on record, totaling over $312 billion. In 2018, we saw
the fourth highest extreme weather cost at $91 billion
worldwide. 2017 and 2018 were the costliest back-to-back years
for weather disasters ever recorded. People are on the front
lines but insurers are on the front lines with them. Insured
losses in 2017 totaled $100 billion in the United States alone.
So what does this mean going forward for the average ratepayer?
And then you also talked about the important investor
mission that our insurance companies have. And are they
actively transitioning away from fossil fuel investments
because they know the impact on the bottom line?
Mr. Bouchard. So first, your numbers are accurate, and that
is what we are seeing as well. We are seeing the trend lines
are clear and they are not reversing. We may have--I think we
just saw numbers for the first half of this year meeting of
actually a lower catastrophe year, which is great news, but
over time, the numbers you cite are absolutely accurate and are
the same numbers that we are working with and trying to model
as well.
In terms of what it means for ratepayers, it really depends
on the risks that they face today. I mean, I try to make that
case in the testimony, that sending risk signals in 12-month
insurance policies when the risk, yes, it is escalated today,
but the real escalation will happen over the next 5, 10, 15, 20
years, does not reflect the full escalation of the risk in
today's rates. It will come.
And I do think we are seeing, in parts of the country,
insurance rates, not only this country but other countries,
insurance rates starting to rise to reflect the increased risk,
but that is our role in society to do that. And it is the
signal we send. We are a bit of the canary in the coal mine
saying, you know, risk is up so price is up.
You know, the second question you ask about our role as
investors, the answer is absolutely, yes, we are applying ESG
filters to----
Ms. Castor. Go ahead and explain.
Mr. Bouchard [continuing]. Environmental, social, and
governance filters to 87 percent of our investment portfolio.
We announced our decision, as I referenced, to begin to have
dialogues and perhaps even divest and stop underwriting certain
carbon intensive----
Ms. Castor. I saw that Chubb insurance made----
Mr. Bouchard. Chubb has done that as well.
Ms. Castor [continuing]. Coal-related----
Mr. Bouchard. There are a number of insurers who have done
that, yeah. So we certainly are looking at the carbon intensity
of our investment portfolio and taking actions appropriately.
Ms. Castor. Thank you very much.
Mr. Palmer, you are recognized for 5 minutes.
Mr. Palmer. Thank you, Madam Chairman.
I want to talk a little bit about the storm damages. You
know, there is a report out from Roger Pielke who supports the
idea of human-caused climate change, but he points out that
over the last 20, 30 years, that the percentage of global GDP
storm damages are actually lower than they were, say, in 1990.
And also point out that when you look at it historically, the
dollar values are more reflective of the fact that we have got
more structures, more people living in coastal areas. And then
I add one last point to that, is that the International Panel
on Climate Change's last report indicated that the number of
Atlantic storms, particularly those are the ones that tend to
impact our coastal regions the most, have not increased in
number, nor intensity.
Mr. Walker, would you like to comment on that?
Mr. Walker. You know, we have noticed that they come in
waves. You know, down where we are, we tend to have storms in
cycles. And so, you know, you look back all the way to
Hurricane Andrew, then, you know, we had Katrina, Rita, Gustav,
Ike. I mean, you know, it just--it does come in cycles. I can't
tell you that it looks like it is any more severe, but we have
been through a pretty good stretch where we did not have
storms.
Mr. Palmer. A record----
Mr. Walker. We were able to get some things done now where
we are to help protect us. And so, you know, I can't really
comment too much on the science of it but, you know, we just
know they are coming.
I have been dealing with storms since I was born. I was
born right before Hurricane Betsy in Houma and so, I mean, we
face storms constantly down there. And what we do know is if we
don't do anything to protect ourselves, that we are going to
pay the damage. We seem to be gaining some progress right now.
Mr. Palmer. That is one of the main points that I have been
trying to make as a participant on this committee is that we
know that the climate is changing. There is a historical record
that indicates that the climate changes and it will continue to
change.
The thing that concerns me is the lack of attention in
regard to preparing for that change, you know, using our
technology and our engineering capability to prepare for that,
to be able to adapt and mitigate. And I think that is one of
the bigger issues. We seem to be wrapped around the axle about
it is all about carbon, when there are certain natural things
that are occurring that we can't do anything about that is
going to impact us.
I also want to go back to this issue of preparation to
adapt and mitigate. Your State particularly has had a difficult
time with the Corps of Engineers in doing some mitigation work.
We had a hearing, I was chairman of the subcommittee on the
Oversight Committee, and we had a hearing with a representative
from the Army Corps of Engineers. And I asked how many studies
they had underway that were over 5 years old, and he said about
100, which, frankly, shocked me. It might not have shocked my
colleague from Louisiana, Mr. Graves, but I found that
shocking.
So I asked him to send me a list of them, and among those
were the Comite River that had been studied for 30 something
years, about building a diversion canal from Comite River over
to the Lilly Bayou. And Louisiana residents had been concerned
about a possible major flood and the damage that it caused.
And, of course, in 2016, you had that flood, lost lives,
billions of dollars in property damage. And they finally
decided to build that canal. They have broken ground on it.
But out of that list of studies, and there were 97 of them
actually, 40-something of them were more than 5 years old. The
Corps of Engineers has spent $140 million on that.
That is part of my concern, particularly when you are
dealing with insurance and stuff, is that we are not investing
infrastructurewise, technologywise, and preparing for the
climate change that we know will come, that we must be prepared
to adapt to and have mitigation strategy.
You want to comment on that?
Mr. Walker. Yeah. I mean, as you know, we face the same
thing down where we live. You know, all the way since 2000, we
have been trying to get levees built. You know, at some point,
we just decided it was time to do something on our own.
Actually, right after Katrina, it really helped things happen
because, you know, we could see that, just decide to do
something. And so we just decided we were going to do it
ourself.
Our neighboring parish, Lafourche Parish, had done it years
before that. They had protected themselves with levees, and all
of those storms that came through there when they had that
system, you could see they didn't flood, we flooded. I mean, it
is pretty easy, it is simple, it is not science. You know, so
we just decided to do it. And thank goodness we did, because
this past 2 weeks, we would have had the same disaster happen
again.
You know, we are--just recently, I think a study was
started that we asked for of the Corps of Engineers, because we
realize the cost of what was being estimated for that system
was not what we were realizing. We could build it a lot cheaper
than what that original estimate was. And so now, I am hoping
that that might help so that we at some point can break that
ice and get some Federal dollars to come down, because, you
know, when you are one-third of what the original estimate was,
that is a whole lot better cost-to-benefit ratio. Right now,
the cost-to-benefit ratio to the Federal Government is
infinity. We have put every dollar in, so they are getting all
the benefit. We have not gotten anything.
So I think it is a great time to talk about sharing and
doing--you know, breaking that backlog that we have and maybe
looking at some of those costs to see if those are realistic.
Mr. Palmer. I appreciate your testimony.
I yield back.
Ms. Castor. Thank you.
Ms. Bonamici, you are recognized for 5 minutes.
Ms. Bonamici. Thank you.
I really appreciate all the witnesses being here today.
This is important to hear the business views on the cost of
climate change. Businesses are employers. And we have had a lot
of conversations in the select committee, on which I am honored
to serve, about the jobs that can be created, and how this--we
can address the climate crisis while supporting our economy and
building and growing our economy.
Just yesterday, The Washington Post covered this. A pair of
studies were announced. Someone has studied global temperatures
2,000 years, over 2,000 years, and found that over the past 150
years, there has been a rise in global temperatures far more
rapid than any other warming period in the past 2,000 years. So
it is very timely that we are having this conversation with
this work in the select committee.
I represent northwest Oregon, and we have an economic
vitality that is very dependent on the health of our natural
resources. I have a--Columbia River is the northern boundary of
the district, the Pacific ocean is the western boundary.
Outdoor recreation is a year-round thing in Oregon, from skiing
and snowboarding on Mount Hood, hiking on the Pacific Crest
Trail. We have wonderful wineries that draw a lot of tourism.
We have a prized dungeness crab industry and abundant
fisheries. So there is a lot that is dependent, and we know the
cost of inaction is going to affect all of these industries. So
as I said, a hub for this industry. Outdoor recreation.
Keen Footwear, I want to mention, is one business that is
actively identifying harmful chemicals in their supply chain
and deploying safe alternatives. Columbia Sportswear
headquartered just down the street from my office in Oregon,
they are manufacturing jackets with fabric that is made from
100 percent recycled plastic bottles, dye-free, PFC-free,
sustainably sourced down. They are really doing a lot, a lot of
the businesses, to be responsible. And consumers are responding
positively, and I think we are going to see this across the
country as businesses step up.
Mr. Bouchard, I noticed you mentioned that you have a LEED-
certified business and you saved 30 percent in water and
electricity in the first year. I have, in the district I
represent, a gold LEED-certified business, First Tech Credit
Union headquarters, built out of cross-laminated timber, which
is kind of a win-win because you are using sustainable building
materials.
So, Mr. Jabusch--did I say your name correctly, close
anyway--you mentioned we get the economy we invest in. So are
there policies, ways that we can transition our economy to one
that will reward climate responsive financial opportunities
over the status quo of depending on fossil fuels and harmful
pollutants?
Mr. Jabusch. Certainly. Similarly, I don't feel like I am
in too much of a position to recommend policy, but there are
things from a macroeconomic point of view that certainly would
help. You know, obviously, a carbon tax would be huge and
probably the first and most direct thing that we could do.
There are externalities--and you just listed some of them,
Congresswoman--to the price of carbon emissions, and those
things do have a direct effect on the economy, on employment,
as Chair Castor noted in her opening remarks.
And, therefore, it is not inappropriate to expect the
economy and the taxpayers to get compensation for taking on the
burden of those externalities directly. Currently, the emitters
aren't taking those on. Someone needs to. And right now, it is
kind of everybody. So I think that would be the first policy.
You know, get rid of the subsidies for carbon and replace them
with a carbon tax. That would be the first policy I would have
in mind if I were a policy maker.
Ms. Bonamici. Thank you. And I want to talk about some of
the other small businesses that are really trying to respond.
We have had wildfires, terrible air, the health effects too
that are affecting people in our communities, acidic waters,
harmful algae blooms, all endangering the livelihoods of people
who rely on commercial fishing, sports fishing.
Ms. DiPerna, in your testimony, you mention that the
climate crisis is no longer purely an environmental problem but
has significant socioeconomic effects as well. How can we
improve Federal support to help smaller businesses and workers
better prepare for and mitigate the cost of the climate crisis?
Ms. DiPerna. Well, not speaking particularly officially, I
mean, I think one has to look at how the risks are being
distributed, as Mr. Jabusch just said. These risks right now
are not being priced into the economy, and they are bouncing
around like during a chess game, like a pawn that doesn't have
a square to land on. And these risks are not hitting the
general economy because the risks are being borne by you, the
Federal Government; us, the taxpayers; FEMA; insurance
companies; and the victims themselves.
So I think some form of creative view of indemnification.
When that risk chain hits the bottom, where does that meet? We
all know that the Fed just put out a report that said 60-
something percent of adults can't meet a $400 cash unexpected
expense. So some form of indemnification at that level. I think
everyone would welcome the carbon price. I could share data
with you of how many companies have imposed on themselves
voluntarily an internal carbon price to help plan for that. And
certainly, some form of review of the flood insurance policy.
And back on jobs, I can talk all day about that. I have a lot
of data to share with you.
Ms. Bonamici. Thank you.
I know I am out of time, but real quickly, the companies
that did impose that on themselves, was that driven by the
leadership of the companies or by shareholders or by consumer
demand? Where is that decision coming from?
Ms. DiPerna. So that is a good question. It sort of knits
itself together. I think part of it is the expectation that
there will be regulation because it seems like the obvious
thing to do. If you have a pollutant, you have to sort of
somehow, quote, penalize it. We have a long tradition in this
country of talking about cap and trade. We did it with sulfur.
People are experienced with this internal pricing. Also,
regulations. EU, they have a carbon price.
But mostly it is a planning tool. It is to make visible
these invisible causes by projecting a surrogate within your
system. And now, I can give you this data, companies are also
imposing voluntarily a water--an internal water price as well,
again, to plan, if they were being charged by somebody other
than the moral compass, what would it cost.
Ms. Bonamici. Thank you.
And I know I am out of time. Thank you for your indulgence.
I yield.
Ms. Castor. Mr. Griffith, you are recognized for 5 minutes.
Mr. Griffith. Thank you, Madam Chair. I appreciate it very
much.
Mr. Walker, I am looking at your testimony and I heard your
testimony when you gave it, and I find it very interesting. The
Morganza Action Coalition, also known as MAC, was created
apparently in 2006 to advocate for Federal funding to complete
the levee protection project. And you are currently the
president of that. Is that correct?
Mr. Walker. Yes, sir.
Mr. Griffith. I then noticed in the next paragraph, a line
that we have heard before in these hearings, and that was you
want the Federal Government to help but largely to get out of
the way of local efforts. Can you explain that a little bit
more?
Mr. Walker. Yeah. You know, when we decided to tax
ourselves, we felt like we had the ability to do the work. And
part of the problem that we have had all the way along is to
get through the regulatory, you know, blockages that we have
had, getting permits, getting access to easements, negotiating
those types of things. And so, you know, part of what MAC has
done, since we have not been able to get any funding and there
is not always money to be gotten, was to try to advocate and
change those--the ways that we have to go through that process.
Sometimes it would take up to 4 years to get a permit, when
in 4 years, we have lost a lot of land in Louisiana----
Mr. Griffith. Was that a Louisiana problem or a Federal
problem?
Mr. Walker. Well, for us, it was a Louisiana problem
because we are building the levees in Terrebonne Parish.
Mr. Griffith. But, I mean, was it a problem of getting
Louisiana permits or Federal permits?
Mr. Walker. At that point in time, it was really getting to
the process with U.S. Corps of Engineers. And we have made some
progress. We have--we feel like at this point we are gaining
strides. Recently, we did get them to look at the cost again.
And I think, to us, that is a large step for us to the
possibility of us breaking the ice to get some Federal funding.
Mr. Griffith. And I appreciate it. What is interesting is
we heard earlier from Delegate Keith Hodges of the Virginia
House of Delegates, celebrating this coming week their 400th
anniversary of being a legislative body, and I would argue the
oldest legislative body, to have continuously met and be
elected in the world, but they only claim North America, but I
think you can make an argument. But, nonetheless, he said we
are trying to do what we can on the coast of Virginia, but we
run into a lot of regulatory problems and things that get in
the way.
Have you found that--besides the Army Corps, have you found
other regulatory problems that slow you down in protecting your
Louisiana properties?
Mr. Walker. Not so much for us. I mean, that was the
biggest hurdle for us, other than funding for more
construction.
Mr. Griffith. All right. Now, I am also curious that you
said you figured out a way to cut the estimated cost by a
third. And, obviously, dikes or levees are not new technology;
they have been around for about 3,000 years or maybe longer.
But tell me how you got the cost down to about a third of what
the estimated costs were to be.
Mr. Walker. Well, we always knew what the cost was because
we are building it down there.
Mr. Griffith. Right.
Mr. Walker. And so we have built this system to Federal
standards. The alignment that we have is the same alignment
that was approved by Congress. You know, we could see what we
were spending on this, and so we just asked. Finally, we had
the ear of the Corps, and we were able to get them to consider
looking at what the real cost is. We have enough of the system
built now that we know what costs are.
So they have teamed with us. We finally have been able to
work with them. We feel like they are on our side, and so we
are hoping that that does help us finally get some funding.
Mr. Griffith. And I assume that your organization, the MAC,
or the Morganza Action Coalition, would be more than willing to
share whatever you have learned in the process of building
protective dikes, levees and so forth with other States as
well. Would that be correct?
Mr. Walker. Certainly, it is a little unique down where we
are. We are in marshes. We are in areas that are not quite so
stable that some states have, but we would love to share the
process.
Mr. Griffith. Well, I had some ancestors from Louisiana, so
I have always been interested in Louisiana. But I also,--
because our textbooks were old in the mountains of Virginia.
When I was growing up, we had textbooks that talked about the
ongoing project of the Zuider Zee reclamation which, of course,
was finished in 1933, but we were still studying it in the
early sixties as an ongoing project. But they built a massive
dike and reclaimed a huge area, which I have actually been in,
the Zuider Zee where it is just mostly industrial parts today.
So I think there is a lot of promise.
You would agree with that, would you?
Mr. Walker. Oh, absolutely. We have studied things down
where we are too.
Mr. Griffith. Yes, sir. I appreciate it greatly.
And I yield back, Madam Chair.
Ms. Castor. Thank you.
Ms. Brownley, you are recognized.
Ms. Brownley. Thank you, Madam Chair.
I appreciate all of you being here today. And I must say,
reading your testimony last night gave me a lot of hope in
terms of growing partnerships between being a good steward of
our planet and along with the business community of taking a
larger and larger role in that.
And, you know, you had mentioned industry wanting certainty
and a level playing field, and I believe that that is very true
when you talked about insurance, indemnification, and
infrastructure, but yet industry, you know, here on Capitol
Hill, industry still knocks on our doors and says we want to
get rid of all these regulations, not all of them, but, you
know, we are continuing to lobby against so much of some of the
regulations that are out there. And I represent a large
agricultural community, so I hear from my farmers all the time
about regulations and how that interferes, and them being
bigger producers of whatever they are growing.
But, you know, when are we going to--you know, when we are
we going to hit that tipping point where--I know in California,
you know, labor became, you know, a great partner in all of us
who were trying to improve our climate and became a big partner
in that. When do you think businesses really, you know, on a
more global basis, here in the United States anyway, is going
to become a better--a true partner in understanding that we are
all going to be winners if we collaborate together to begin to
solve some of these issues? It is just to anybody to answer.
Mr. Bouchard. Well, let me at least begin to answer that
question. And it is a difficult question because it is such a--
--
Ms. Brownley. There are so many variables. I understand.
Mr. Bouchard. There are so many variables, right, depends
the sector you are, I mean, the regulation you are facing. In
some cases, perhaps----
Ms. Brownley. But at some point we are going to hit a
tipping point, I mean, broadly speaking.
Mr. Bouchard. I guess the point I would make is being
active on these topics for maybe the last 10, 12, 15 years from
an insurer's perspective, I have never seen the level of
sincere action from business. Now, I lived in Switzerland for
many years and I have worked for a Swiss company for the last
20 or so years, so perhaps I am tainted a little bit from a
European perspective, but I will say that there is momentum
growing and there are companies who are willing to make
commitments and live by those commitments and start to alter
their own behaviors based on the commitments they are making.
So I would agree with you. I don't think we have hit that
tipping point yet, but I would say that we are closely
approaching it.
Ms. Brownley. Well, that is good to hear. You talked
about--I think someone mentioned that this last year was a
lower disaster year than previous years. It did not feel that
way in my district. I represent Ventura, the County of Ventura
in California, and 15 months ago, we had the largest fire in
California's history. Until just recently, we had the Woolsey
fire, which then--the Thomas fire was no longer the largest. We
had northern California fires, including Woolsey, that then
became the largest fires in California. So we are--the whole
county virtually in my district is in that place of rebuilding,
and I feel like I know FEMA better than I have ever known FEMA
before.
Mr. Bouchard. Congresswoman, we are actually doing a report
on--one of our post-event review capability reports on exactly
that event. So we will have, as we have done with 15 other
events around the world, we will have a diagnostic assessment
of, not so much the physical activity, but almost the human-
induced environment in which that activity happened.
Because what we find is that natural hazards or natural
events do not always have to be natural disasters, and often it
is either the policy decisions or the behaviors or other
actions that humans have taken that actually exacerbate the
event itself. So we will have a report, I think, within the
next few months that certainly we can work with your office.
Ms. Brownley. I would love that. And that is on the Woolsey
fire then? Was it the Woolsey or the Thomas? Do you know?
Mr. Bouchard. I don't know exactly which fire, but I know
it is the California wildfires.
Ms. Brownley. Okay. Terrific.
Well, the line of questioning I was going for, and I know I
am running out of time as well, but in terms of that
rebuilding, you talked about how we have got to rethink how we
rebuild after these disasters to build a more resilient
community. And, you know, my question is, you know, if you were
us, you know, what kind of policy would you put forward in
terms of a national policy? Because there is disasters across
the country and FEMA and the Army Corps and others are putting
a lot of money into rebuilding, but are we rebuilding in a way
that is going to help us in the future?
So I have run out of time.
Ms. Castor. So answer briefly, but then if you would,
detail--provide a more detailed response for the record.
Mr. Bouchard. We will certainly do that. I would say the
Congress took a great step last year with the DRRA, you know,
the section 1, 2, 3, 4 that provides the 6 percent mitigation
fund to FEMA. If our numbers are right, and we think they are
conservative, 1 to 5, meaning you invest $1, you are going to
save $5. $250 billion I think will go into that fund. Imagine
how much money is going to be saved.
So I would continue to find ways to fund mitigation through
the existing mechanisms you have as one start, but we will
certainly follow up with other answers as well.
Ms. Brownley. Thank you, Madam Chair.
Ms. Castor. Thank you.
Mr. Carter, you are recognized.
Mr. Carter. Thank you.
And thank all of you for being here. Appreciate it very
much. I think this is a very important subject.
First of all, let me start off by saying that I believe
that climate change is real. I believe the climate has been
changing since day one, and I believe that we have to do a
number of things in order to address this situation.
A couple of those things are we have to adapt, we have to
mitigate, and we have to innovate. This is what I have been
talking about, resiliency, and what we need to be doing because
there is no question about it. I represent the entire coast of
Georgia, over a hundred miles of coastline, and we have had
three hurricanes in the last 3 years, and we have seen what has
happened. And we have experienced this, and it is important
that we boot up resiliency and not just after the fact.
I wanted to start with you, Mr. Walker, because I also have
a grandbaby in New Orleans, so I am very concerned about what
you all are doing down there. I want to make sure you all take
care of my grandbaby, okay?
Mr. Walker. I think they have already taken care of New
Orleans.
Mr. Carter. Yeah, they have. But just don't get her talking
funny like this other guy. Anyway, nevertheless--okay. I got
some serious questions here. Seriously. But I do believe that
it is going to take adaptation, mitigation, and innovation.
Mr. Graves. The subtitles for his comments are down below
the digital screen.
Mr. Walker. I like that. Sounds like Wendell.
Mr. Carter. Nevertheless, I want to ask you, do you think
that we are focusing then--not only just on this committee, but
just in general when we talk about climate change. I mean,
everybody wants to talk about, oh, we got to decrease carbon,
we got to do this--and all that is important, I agree, but at
the same time, I don't feel like we are emphasizing the
resiliency enough. I just wanted to get your thoughts on that.
Mr. Walker. You know, whether it is a fire in California or
whether it is a flood in Houma, Louisiana, you know, you have
to do something different. You can't keep doing the same thing.
And so, you know, we finally realized that we had to do that.
You know, after Andrew, after Katrina, they started
strengthening the building codes. I mean, that is wonderful. We
get stronger and better construction that can withstand the
wind. But we----
Mr. Carter. That is right. And not to interrupt you, but
you are exactly right. I give the example all the time. We have
got a barrier island off of Savannah, Tybee Island. We are
rebuilding the road now. You know, four or five times a year
that road floods, not because of rain, but because of spring
tides. Because the tides get so high, it floods. Well, we need
to build it up. We need to be smart about these kind of things.
I also give the example of, if you build a house on a slab
next to the marsh, guess what? At some point it is going to
flood.
Mr. Walker. You will get wet, right. We understand that
down in Louisiana. You know, after Ike, we have raised over a
thousand homes in my parish. We are doing everything we can. We
have rebuilt the barrier islands. We are building levees. We
have raised homes. We are putting floodgates. We have got one
of the largest floodgates in North America on our major
waterway, the Houma Navigational Canal. So you have to do it
all and you can't just do one thing.
You know, I am only active on the Morganza, you know,
project primarily, but you can't sit back and wait for it to be
done the same way every time. You have got to adopt.
Mr. Bouchard. Mr. Carter, can I jump in with a different
answer?
Mr. Carter. Yeah, please.
Mr. Bouchard. Another area that we have identified through
our PERC analysis reports is that communication, how we talk
about risk is not infiltrating policymakers or individuals or
decision makers. The insurance industry is part to blame there.
We talk about 100-year events, we talk about 1 and 250-year
events. I am not going to be 200 years old, so once I go
through one of those, my natural assumption is I will never see
one again. Whereas, if you think about the likelihood of being
in a fatal car crash in Washington, D.C., 1 in 14,000, but
every time we get in a car, that is in the back of our mind, if
not the front of our mind. We drive safely so we are not in a
fatal car crash. Get in an airplane. Your chances of dying in a
plane crash are 1 in 11 million, but when you are in the air,
or at least when my wife is with me in the air, you are
thinking constantly about the possibility of an event.
We don't have that frontal lobe kind of awareness and
understanding about natural hazards, not only in this country,
but I think across the world. We need to do something to make
this a more natural, that you would actually wonder why you
don't rebuild that road in a different way.
Mr. Carter. Exactly. And real quickly, just two more
things. Another example from Tybee Island when we were having
flooding there, we found out just how important sand dunes are,
and we got to make sure that we are replacing those sand dunes.
It is not always that you can wait on nature to do it. I mean,
how can we assist in that? That was one of the things that we
really worked hard on.
The other thing I want to mention because it is real big in
my district, as it is probably real big in everybody's
district, is the National Flood Insurance Program. You know,
some of these homes we bought two or three times. I mean, that
is ridiculous. We got to be smarter than this. You know,
whether you think--whatever you think about climate change, we
have to be resilient, we have to be smarter. And that is just
the point that I am trying to make here.
And I realize my time is out. Boy, 5 minutes flies, I tell
you. But thank you all for what you are doing.
And, Madam Chair, if I may, this is a good hearing today,
and this is something we can all agree on. We do need to be
more resilient. Thank you. I yield back.
Ms. Castor. Thank you, Mr. Carter.
Mr. Casten, you are recognized for 5 minutes.
Mr. Casten. Thank you, Madam Chair.
I would like to thank the witnesses. I would especially
like to thank Mr. Bouchard, whose corporate headquarters are
just outside Illinois 6, but draws on what many people have
told me are the smartest, best looking, and most humble people
in the country.
Mr. Bouchard. By the way, I want the record to show that
was not in my testimony.
Mr. Casten. So climate change is a--I am glad I am in this
hearing--because it is a fundamental deep, deep threat to our
financial system, and I don't think we have really internalized
what that risk is in the way that we are making investment and
business decisions oftentimes not in as informed a way as we
should have.
Let me give a couple numbers. My colleague, Mr. Palmer,
mentioned the historic records, so let me just walk through
some historic numbers. The Earth has already warmed about 1
degree Celsius since the 19th century. In the last few decades,
as we have all talked about, there has been these extreme
weather events. We have seen the arctic ice sheets melting,
wildfire seasons are getting longer, parts of Alaska are on
fire, mosquitoes are moving North carrying tropical diseases.
It has only just begun.
We are talking--the most ambitious goals in Washington are
talking about limiting future temperature rise to 1 to 2 degree
Celsius. If you look back at the historic record over the last
million years, there is a lag time, but every degree in
temperature rise, on average, is about 2 meters of sea level
rise. We have already got baked in 2 feet of sea level rise as
it sits right now. What that means when you add that up is we
are looking at sea level rise that we know is coming about the
height of this room. Louisiana is done, Florida is done. And we
don't think about that, as you pointed out, Mr. Bouchard. Our
brains don't process these risks, but we have to deal with
them.
And when I asked on the--I sit on the Science, Space, and
Technology Committee, when I asked one of our scientists, at
that level of sea level rise, what are the cities you are most
concerned about, her response was the Eastern Seaboard.
So what does that mean if you are a property manager
investing in assets in Miami Beach? What does that mean if you
are a seed developer who has seeds that are not going to be
able to germinate in my home State of Illinois within my
lifetime? I think if you are an investor, you would like to
know the answer to those questions. And the risks that we are
facing in our financial system are going to make the 2008
financial crisis look like a walk in the park.
Now, it is also a fantastic opportunity, because almost
everything we do to lower CO2 emissions means that
we burn less fuel, and fuel ain't free. I spent my whole career
helping businesses do that, and I know that sometimes in this
town, we think about spending money as how do you pay for it.
In the rest of the world it is called an investment, and it is
a pretty good thing when you can invest money and save money.
And I think we have got a real opportunity, provided that
businesses understand both the costs of the risk they are
exposed to and where there are investments that they have to
hedge that exposure.
So I want to start with Mr.--everybody is saying your name
wrong--Jabusch. In your testimony, you discussed how the nature
of these underappreciated risks and opportunities often distort
investment in capital deployment.
Mr. Jabusch. Yeah.
Mr. Casten. Would standardized disclosure of those risks,
including those that result from a corporation supply chain,
risk to physical assets, and from the nature of their business
plan, help investors like you better identify and better
allocate capital?
Mr. Jabusch. Yeah. Congressman Casten, one of the things I
said in my testimony was there haven't been great guideposts to
help investment managers figure out where, in relative terms,
to place your forward-looking bets just because there isn't a
standard, there isn't a required disclosure. There is no
general agreed accounting principles. There is just everyone's
best guess, and there is relative how does each company stack
up inside of their own industry type of thinking, but nothing
that is concrete and standard the way that regular financial
regulations and disclosures are. So, yeah, I have to conclude
that that would certainly help.
Mr. Casten. Well, I hope before you leave, you and Ms.
DiPerna swap business cards, because in your testimony, Ms.
DiPerna, you had mentioned that your CDP disclosure is both
qualitative and quantitative and based, in part, on existing
SEC disclosures.
Can you maybe expand on the prior comment and explain why
it is important to have qualitative and quantitative
disclosures in a standard format?
Ms. DiPerna. Yeah, because we are not talking about
completely concrete issues, as we just talked about. There are
variables, and companies have to maintain a certain amount of
nimbleness and qualitative judgment over the kinds of remedies
they undertake. And as you pointed out, investment also
requires a little secret sauce, so a qualitative disclosure
allows the company the flexibility to try to put their best
face forward.
That being said, standardization is, you know, invaluable,
and we are very active. As I mentioned, we are trying to
align--you know, we have been sort of a placeholder until there
was some sort of guidepost that could be said to be
standardized nationwide. In the meantime, however, we have
aligned ourselves with the Task Force on Climate-Related
Disclosure because they are seeking this kind of
standardization.
I guess I got a red light there.
Mr. Casten. Am I already over on my time? Oh, all right.
Well, let me--I had a bunch more, but let me just quickly say
that----
Ms. Castor. I know you were just getting started.
Mr. Casten. The reason for this questioning is--I am very
proud to have introduced H.R. 3623, the Climate Risk Disclosure
Act, along with Senator Warren, which would do exactly this,
quantify these disclosures and would basically help us
understand what the exposures are to companies, both in terms
of their contributions to global warming and which companies
have a strategy that is a useful hedge against that so that we
can better allocate capital.
The bill has been endorsed by over 50 organizations. Madam
Chair, I would like to ask unanimous consent to enter a letter
of support for those organizations, for the record.
Ms. Castor. Without objection.
[The information follows:]

Submission for the Record

Representative Sean Casten

Select Committee on the Climate Crisis--July 25, 2019

July 15, 2015
Senator Elizabeth Warren,
Washington, DC.
Representative Sean Casten,
Washington, DC.
Dear Senator Warren and Representative Casten: The 52 undersigned
organizations write to you in support of the Climate Risk Disclosure
Act of 2019. The bill is a necessary step to ensure that shareholders
have the information they need to adequately mitigate financial,
physical and legal climate-related risks to their investments. By
ensuring that private capital can appropriately assess climate-related
risks, the bill will help accelerate the transition away from fossil
fuels to cleaner and more efficient energy sources and reduce the risk
of financial instability.
Climate change poses significant challenges to businesses, whether
or not companies have acknowledged this in their public communications.
For example, fossil fuel companies already face worsening flooding at
refineries, the potential for stranded assets, and mounting lawsuits by
municipalities seeking to recover costs of adapting to climate-related
sea level rise and other climate impacts. These impacts, and many
others, will only intensify in the coming decades. Despite these risks,
many companies continue omitting this critical information for their
shareholders.
The international financial community is already taking steps to
meet global commitments to rapidly transition to a low-carbon economy,
striving to limit global warming to 1.5 degrees Celsius above pre-
industrial levels to avoid the worst effects of climate change. The
bill tasks the Securities and Exchange Commission with developing the
standards that would allow systematic evaluation of climate-related
risks, matching mainstream investor expectations as reflected in the
2017 vote by a strong majority of ExxonMobil shareholders demanding
that the company report on its business plans for a world in which
global temperature increase is kept well below 2+ Celsius, as well as
this year's vote by 99% of BP shareholders calling for the company to
report on how its business plans align with the goals of the Paris
Agreement and in the recommendations of the Task Force on Climate-
related Financial Disclosures.
Ensuring that climate risk disclosure is standardized will allow
companies and investors--especially those managing state employee
pension funds and other long-term portfolios--to plan for a low-carbon
future, and that science and data guide the process.
We are grateful for your leadership in addressing the necessity of
climate risk disclosure and holding public companies accountable to
their shareholders.
Sincerely,
1000 Grandmothers for Future Generations, 350 Bay Area Action, 350
Spokane, 350.org, Acadia Center, Alliance for Affordable Energy,
American Family Voices, Anthropocene Alliance, As You Sow, Center for
International Environmental Law, Climate Hawks Vote, Climate Reality
Project, Connecticut Coalition for Economic and Environmental Justice
Corporate Accountability, Dwight Hall Socially Responsible Investment
Fund Earth Action, Inc. Earthworks Environment America Fossil Free
California, Franciscan Action Network Friends of the Earth, Friends of
Watersheds Gasp, Global Witness, Green Century Capital Management
GreenLatinos, Greenpeace USA, Gulf Coast Center for Law & Policy Hip
Hop Caucus, Institute for Agriculture and Trade Policy Interfaith Power
and Light, League of Conservation Voters, League of Women Voters of the
United States Mercy Investment Services. Movement for a People's Party
Natural Investments LLC, Oil Change U.S., Polar Bears International
Public Citizen, Rachel Carson Council Sierra Club, Sisters of St.
Francis of Philadelphia Sunrise Movement, The People's Justice Council,
The Sustainability Group of Loring, Wolcott & Coolidge Trillium Asset
Management, Trinity Health, Union of Concerned Scientists Unitarian
Universalist Association Utah Moms for Clean Air, Vert Asset Management
Voices for Progress.

Mr. Casten. And I am way over my time, so I just urge all
my colleagues to please join the bill. Thank you.
I yield back my negative time.
Ms. Castor. Thank you, Mr. Casten.
Mrs. Miller, you are recognized for 5 minutes.
Mrs. Miller. Thank you, Chairwoman Castor. And thank you
all for being here today.
I know that many of our American businesses work diligently
to be good stewards of our environment. My home State of West
Virginia, due to geography, has had a lot of flooding, and I
have seen how important it is for our communities and
businesses to partake in predisaster mitigation to minimize the
impacts of these natural disasters.
As this committee moves forward in making recommendations,
we must ensure that we further protect businesses from
burdensome regulation.
Mr. Walker and Mr. Bouchard, what is available to small
businesses, at present, to allow them to be involved in
predisaster mitigation?
Mr. Walker. You know, I am not sure what programs there
are, but I can tell you that for years, the people down where
we are avoided trying to do it themselves. You know, it took
repetitive, you know, storms to come through to finally, you
know, get people moving down where we are. As I said, we taxed
ourselves twice now to try to do what we do. And the reason we
did that is there was not a lot of help from anything else.
There was not a lot of other programs back then that we could
rely on, and so the first times we tried to do that, the tax
failed. But once you get beat up over and over and over, you
know, people tend not to do something until they have
experienced a problem with it, right? And that is what happened
down where we are and, finally, we have got enough, and that is
when we did what we did.
I am sure there is things now that can be utilized, but
back then, we really didn't have anything else.
Mr. Bouchard. I guess I would--I might not have the accent,
but I am going to use a Louisiana example as well. Zurich was a
sponsor of a golf tournament in New Orleans the year right
before Katrina hit. And following Katrina, we saw firsthand
that it was really small business that felt the brunt. It was
small business that wasn't returning, which meant people
weren't coming back for the jobs. It meant people didn't go to
a store or dry cleaner or restaurant to attend. It was--so your
point about focusing on small business is a critical one,
before the event, not after the event.
I would say that in terms of what is particularly or
directly available to small business is probably--I know that
an organization that I am part of, SBP, does education
resilience, education for small businesses. So I think one
thing that small business owners need to do is really
understand their exposure, really understand--not only the
exposure to their physical building, their storefront and
whatnot, but the people who work for their businesses. Are they
going to be able to come into the office? Are they going to be
able to come to the store and the shop? And there is a lot more
that you have to think about when you think about business
continuity, particularly a small business person who one or two
people don't come to work and that is really going to have an
impact as opposed to a thousand employer type of organization
that perhaps that is not going to have as much of an impact.
So I would say education is certainly a part of it, and I
would encourage small businesses in their local organizations
to really start to demand a voice and a place at the table for
local communities talking about pre-event mitigation.
Mrs. Miller. Along those same lines, is planning for
climate risk something that many small businesses have the
resources or bandwidth to do?
Mr. Bouchard. Probably not. That is why I would not sit
here and recommend that every small business go out and
undertake the same level of disclosure and scrutiny that Zurich
has done and many other global firms have done. I can tell you,
as the last staff person to look at the CDP filing before it
goes to management, it takes a lot of time to do this, to do it
sincerely, at least.
So, no, I don't think we can expect small business to have
that same level of depth of knowledge, but they can work with
their insurance agent. They can identify their basic risk and
the risk to their people and, again, ask and engage in the
community level to say, hey, small business in this area needs
more focus on preparation, because we are the ones who are
going to pay the brunt after an event.
Mrs. Miller. You are right.
Mr. Walker, I enjoyed your testimony when you talked about
how the economy in Louisiana is dependent upon the energy
industry. I see the same in my State.
What are some of the best practices that you have seen in
Louisiana to increase resiliency both in your communities and
actions taken by small business?
Mr. Walker. Like I said, way back we realized that we
needed to do something, you know, my community now has a hazard
mitigation plan that we update every year, but we actually
completely go through that on a 5-year basis. And so we look at
every risk in our community with that plan, and so I think that
was a good start to the process of what we really needed to
build. It got all of the local community leaders in line to be
able to do what we needed to do to control our risk.
Same thing at our State level. We have a State master plan
and we, you know--excuse me--the CPRA, Coastal Protection and
Restoration Authority, I couldn't get it out--was started so
that we could look at those risks and go through, you know, an
assessment of what really needs to be done and the focus of
where--what funding we have needs to go. And so I think, you
know, it is at the community level that it needs to start, and
then it builds from there.
But, you know, right now, we have assessed that we had to
block the storm surge that was coming in from every storm. It
was just happening over and over and over, and that is where
the Morganza system came to bear. And so now, you know, finally
that we are making progress, we can see some of the fruits of
it. Like I said, this past storm came through, it was only a
Category 1, we had about 60- to 65-mile-an-hour winds in Houma.
Normally, we would have had a lot of flooding for that. We
still had a little bit, but even with that Category 1 storm, we
had storm surges up to 8 or 9 feet. Some of the levels of the
system that we have were only built to that level, so we had
some overtopping.
Ultimately, we would like to get it up to 18 feet. I don't
know. You know, you may have a storm that can get over that. I
am not going to be in Houma when that happens, but certainly
having nothing was, you know, just a repetitive process of
destruction and having to rebuild every time. So right now, we
are feeling that we are making some progress on it.
Mrs. Miller. Thank you.
Ms. Castor. Mr. Levin, you are recognized for 5 minutes.
Mr. Levin. Thank you, Chair Castor.
The topic of today's hearing is extremely important
because, not only is climate change a threat to the health of
our communities, but also to our economic prosperity, so I
thank you all for the good work that you are doing.
I think it is important that those risks are explained and
quantified, which is one reason I am proud to support the
Climate Risk Disclosure Act, which my friend, Representative
Casten, spoke about a minute ago. This important bill would
require public companies to disclose how they will be impacted
by the climate crisis, creating an environment of transparency
for investors.
And before I get to questions, I do want to take just a
moment and address some of the arguments I have heard against
taking bold action. Sometimes we hear the arguments from
business, sometimes from other people here.
First, we hear that the United States is already reducing
greenhouse gas emissions better than anybody else, so we don't
need to take any further action or make significant policy
changes. I think it is clear that any reductions are hampered
by the backwards policies that we are seeing from this
administration. We only need to look to the 3.4 percent
increase in carbon dioxide emissions in 2018 to illustrate this
point.
To the extent we are making progress, we are making
progress, in large part, because of the aggressive actions
taken at the State and local level, such as the proliferation
of State renewable portfolio standards as well as the policies
of the last administration, like the fuel economy and tailpipe
standards that President Trump's EPA is working so hard to
undermine.
I applaud my friends on this day in the State of California
for their major announcement that they went out and they
negotiated a deal. My friend, Mary Nichols, and others, our
attorney general, with four major auto companies. That is a
big, big deal, and I wish we had that kind of leadership from
this administration.
I have also heard, secondly, that the U.S. shouldn't act on
climate because China and India aren't doing it, so why should
we? But I think we should measure all of the things we are
doing with the international impact and specifically the term
``followership.'' So this is a good friend of mine, David
Victor, at UC San Diego, Professor Victor always talks about
how our actions and policies lead to other countries' similar
actions and policies to reduce emissions, or are the actions we
are taking enable others to pollute freely with no regard for
climate impact?
When we fail to lead, we are letting ourselves and others
off the hook, and that is sometimes something we fail to
acknowledge. So I think we have got to continue to use our
economic power and our political power to pull others with us.
Third, some say that reducing greenhouse gas emissions will
put people out of work. The reality is that the transition to
clean energy creates jobs with high wages. The renewable energy
industry is now one of the country's major employers. Almost
3.3 million people work in clean energy in this country, which
is three times more than the fossil fuel industry, and the
industry is continuing to grow. And in 2018, the renewable
energy industry was the fastest growing workforce in 12 States
in the union. These are jobs that can and must be made
available to Americans living in all regions of the country,
not just in California.
And finally, I have heard that emissions reductions will
cost too much, but today's testimony from you confirm that the
climate crisis could cost companies almost $1 trillion, while
acting to address the crisis could have more than $2 trillion
in upside due to increased revenue. So the real costs here are
driven by failing to act.
You know, I am tired of people saying that they believe or
don't believe in climate change. We believe in things that we
may or may not know to be true. We know that climate change is
true. The scientific evidence is overwhelming, and we have got
to take action.
And with that, I will turn to questions.
Ms. DiPerna, in your testimony, you mentioned that European
companies report more than double the potential business
opportunity associated with climate solutions when compared to
American companies. You say this could be related to the
European Union's clear climate policy framework.
Can you expand on this point, and specifically, are there
policies that create business opportunity in Europe or is it
just the fact that they have a climate policy framework at all?
Ms. DiPerna. No, I think there is some specific things.
Again, back to Paris, which is a framework and a sort of
universal target system. People can find their own way to the
target, so that gives the companies the nimbleness they need,
but everybody knows we are trying to get to 2 degrees
Fahrenheit of increase maximum.
There are also some interesting things with regard to
finance. The establishment of benchmark for indices that
require companies that you can only be eligible to be listed in
that index if you have a science-based target that is
conforming with Paris. So if you are not aware of the science
of Paris in building that in your business plan, you may be
ineligible to be listed in European investment vehicles.
So they are throwing out the companies that--so this gives
companies a guidepost to think about. You want to be in that
index, I better get with the Paris science. And so, you know,
the combination of science, policy, and capital, it has only
worked together once, in my experience, which was in Paris
where you had science, policy, and capital working together.
In the absence of U.S. leadership relative to Paris, that
policy piece, the third leg on that stool, is very collapsed
because we are a big economy. If we were in there--and David
Victor's exactly right. We are permitting people to do things
which are not in their own interest or in the interest of
people around them by a lack of coherence in a policy. Whatever
the policy, it has to be coherent, and I can give you more
details. But I think the differentiation between a coherent
policy and a grab bag of policy is a very big obstacle for us.
Mr. Levin. Thank you.
And I see the red light in the corner of my eye, and I will
yield back. I thank the chair for this great hearing today.
Ms. Castor. Thank you, Mr. Levin.
The ranking member is recognized for 5 minutes.
Mr. Graves. Thank you, Madam Chair.
Let me ask you all a question, a simple yes or no, do you
believe that our own Federal Government--and I want to be
clear, not talking about any particular administration, just
collectively--our own Federal Government is doing a good job
with adaptation and resiliency? Just a yes or no.
Mr. Walker. No.
Mr. Bouchard. No.
Mr. Jabusch. No.
Ms. DiPerna. I have to say no as well.
Mr. Graves. Madam Chair, the thing is, look, you and I have
discussed this. It is a space where I used to work for many
years. We have identified the stupidity, and it is here. It is
right here. It is in this city. It is in this body. We are not
taking the steps and the policies. We are accepting mediocracy.
We are watching as the Corps of Engineers--and I have said this
before, my friend, Mr. Huffman, I mean, they may be slow but at
least they are expensive. And everybody laughs, but it is sad
because, it is--you know, Mr. Bouchard, it is our money. It is
the Federal Government's money. It is your company's money that
we are shelling out needlessly. This is so stupid what we are
doing.
Study after study after study shows that for every $1 you
invest, you get X dollars in return. You can find studies to
show anywhere from $3 to 12 bucks. I think in some cases it is
even higher.
We have allowed for this process to just sit there and
morph into this complete--just stagnant process that is
victimizing the very people that we are representing. Mr.
Walker's organization, collectively with some of the State
funds that we put forth, and like you said, they have taxed
themselves more than any other community in the Nation and
cobbled together--where are we--420 million bucks right now.
Mr. Walker. Over that. About 440.
Mr. Graves. $440 million trying to protect their homes,
their families, their businesses. And as he said--and I hope
that that subtle remark he made, I hope that you all heard it,
because of what the Federal Government has done, that is what
has made them vulnerable, and that we can't even get the
Federal Government to come to the table and participate with
them. But I will pivot for just a minute.
Ms. DiPerna, I am curious, you made mention of the
importance of stability or predictability, certainty--I don't
remember which word you used. Couldn't agree with you more. How
do we establish certainty, predictability? How do we do that
when--as I said in my opening statement, the U.S. is on a
trajectory of reducing emissions--China is quadrupling the
offsets that we are achieving? So how do you project certainty
when you have such uncertainty?
Ms. DiPerna. Well, I think as you pointed out, the global
regime--I mean, China is a signatory to Paris. We are the only
country that is outside of that consensus, so the certainty is
Paris is trying to build to that certainty. I also think there
is different kinds of certainty. There is scientific certainty.
You can manage your business at least to that certainty. And
with regard to the leakage----
Mr. Graves. Let me ask this: Is their increase in
emissions, is that contributing to certainty or contributing to
uncertainty?
Ms. DiPerna. Well, I think that is a bit apples and
oranges, because the leakage that you are talking about,
emissions going up here, down there, I take a plane, you take
the train. You take a plane, I take my bicycle. We are
constantly trading off the tonnage that we are causing to be
emitted. That is the same among companies. But you can balance
that with a cap of some kind, a reduction target of some kind.
That is the certainty that is missing, which is what is the
minimum amount of emissions that an ordinary company should be
permitted to emit under certain circumstances given a certain
amount of time, and that is where it becomes complicated.
But I think, you know, certainty comes to us from all
different--in all different forms.
Mr. Graves. I hear what you are saying. I am not sure how a
country that is substantially increasing their emissions in any
way does anything other than contributes to the uncertainty by
sending the trajectory upward into concentrations we have never
experienced. It is especially concerning. But let me pivot.
Madam Chair, as you know, every hearing I have, I want to
give a compliment to my friend, Mr. Huffman, and today will not
be an exception.
Mr. Huffman. You like my tie?
Mr. Graves. I like a lot of things about you, Mr. Huffman,
and one of the things I like about you is that one of the
challenges that we have experienced with the Morganza project
is this essential fish habitat issue, where the National
Fishery Services come in and determine that when land erodes,
it becomes essential fish habitat. So if you are going to come
back and restore it, you have to mitigate for impacts to the
fish. The fish didn't mitigate for taking our land. I don't
know why we are forced to mitigate for taking theirs.
Mr. Huffman worked incredibly well in cooperative effort
with us to come up with a solution for that to pass the House.
We are still working on the Senate, but I want to thank you for
that.
Mr. Walker, you noted that some of the regulatory
challenges, in many cases, you all are carrying out projects
that are actually environmental in nature, and our own Federal
Government regulations designed to protect the environment are
actually impeding you. Could you talk about that a little bit?
Mr. Walker. Well, one of the biggest things that gives me
heartburn is we have to mitigate to build a levee. Why do we
mitigate to build a levee? That is the mitigation. We have
already seen where freshwater marshland is building back behind
the system. So, you know, that is another thing we really want
to study, is that we think just the fact that we are building
that levee is improving the habitat. I mean, we know it is. So,
you know, those are the kinds of things that drive us crazy.
You know, some of the other things that we face are with
permitting, and we have had some good partners down where we
are, you know, ConocoPhillips, Apache. The oil companies that
own the majority of the marshland where we are have been our
partners to gain access in right-of-ways to build these levees,
but the permit process requires that they give us perpetual
servitude. Who wants to give up their land to perpetuity?
So we have been facing those kinds of things down there
where, hopefully, at some point, we can gain some ground with
that. It makes it real costly because mitigation is not cheap.
Mr. Graves. Thank you, Madam Chair. I just want to make
note that it may seem counterintuitive the levees actually
protecting an ecosystem, but when it is exposed to open water,
it erodes, you lose it all. The levee system actually
stabilizes the ecosystem that is protected behind it, and we
have got a number of examples in Louisiana.
I yield back.
Ms. Castor. Thank you.
Mr. Huffman, you are recognized for 5 minutes.
Mr. Huffman. Well, thanks, Madam Chair.
It is fun to hear Mr. Graves speak eloquently about the
value of investing in adaptation, how we can actually get a
multiplayer effect from those investments. The good news is we
don't have to just talk about treating the symptoms here; we
can also get a multiplayer effect by investing in decarbonizing
and actually treat the disease.
So my understanding, Ms. DiPerna, you studied over 7,000
companies and found that over half of them were able to
identify business opportunities in the transition to a low-
carbon economy and you found a multiplier effect for a lot of
those companies, didn't you?
Ms. DiPerna. Yes. That is what they disclose. There are
lots of opportunities that come along with, you know, taking
measures to come into conformity with, you know, the need to
reduce increased revenue, competitive advantage, even cheaper
access to capital, because----
Mr. Huffman. Those opportunities outweighed the cost of
transition by a factor of seven in some cases. Is that correct?
Ms. DiPerna. I think we set up factor--at least for the
sample of the goal, the 500 largest companies, I think was
double.
Mr. Huffman. Thank you.
Mr. Bouchard, I am fascinated by your perspective on all
this because I think, if we were all in the business of risk,
and especially for reinsurers, the ultimate backstop for huge
risks, we would have solved this thing a long time ago.
I have been working on carbon capture and sequestration for
quite some time, and at our last hearing, I bristled a little
bit when somebody referenced natural gas as a climate solution
as clean energy, because it is not. When you factor in the
methane loss, I think it is likely no cleaner than coal. And my
belief, because I think we are in a crisis here, is we don't
have time for fake solutions. I am rapidly coming to the
conclusion that carbon capture and sequestration is a fake
solution.
Over a decade ago, I wrote a bill in California to try to
set standards for geologic carbon capture and sequestration,
because my mind was open. If we could find a way to
dramatically reduce emissions, I found myself working with
Chevron and other fossil fuel companies to try to get this
done. We walked into a buzz saw of technical problems, and that
bill, despite the support of all of this industry, despite
bipartisan support in the California Legislature, didn't go
anywhere.
I then found myself in Zurich speaking at a carbon capture
and sequestration conference hosted by Swiss Re that year,
where I got to hear a little bit of an inside perspective from
the industry where I heard enormous skepticism from technical
experts and economic experts in the industry that this would
ever be cost effective or ever be feasible at scale.
And here we are today, fast-forward to 2019, and we still
hear people talk about carbon capture and sequestration as the
holy grail, but there are no projects that are actually doing
it. We have a few, the Petra Nova power plant and others that
get bandied about. They are doing enhanced oil recovery. They
are not helping with the climate; they are actually producing
more oil.
So I was intrigued to hear you say that you are offering
liability coverage for carbon capture and sequestration. I am
just wondering, are those policies selling?
Mr. Bouchard. No, they are not, sir.
Mr. Huffman. Sounds like a pig in a poke to me. Do you have
any reason to disagree?
Mr. Bouchard. I think when you look at the role that we
play, and we are not a reinsurer, we are a direct insurer,
right, so we are actually engaging directly with the industrial
companies that are trying to look at these different solutions.
You know, our role is to find a way to manage the risks that
they would be facing for such a project.
So what we did is we combined kind of the technology
expertise we had for our underground storage tank business with
our traditional energy business and found a way to create a
liability policy that we felt quite comfortable.
Mr. Huffman. Okay. So you could figure out the cost of that
risk, you can offer that liability policy----
Mr. Bouchard. Yeah. We think we can, but there has not been
a lot of, shall we say, market demand.
Mr. Huffman. And that seems to me a very significant fact,
and I thank you for telling us that. Because if people were
serious about really doing this, as opposed to the feel-good
advertisements we see on TV all the time that say that, gosh,
Exxon is already, you know, addressing the climate crisis
because of carbon capture and sequestration, nobody is even
serious enough to buy an insurance policy, I think that tells
us a lot.
The other question I have for you is that you and your
clients are basically picking up the externalized cost of
decades of enormous profits from the fossil fuel industry. Do
you have any advice--if you are advising the uninsured folks
who are also picking up those externalized costs, and I am
talking about governments, basically, and communities and folks
that don't have fancy insurance policies, you are in the risk
business, what would you advise governments to do to manage
their risk?
Mr. Bouchard. Looking at the form that those externalized
costs take today, it really goes back to that protection gap
that I cited in my testimony. It is that gap between the
economic losses and the insured losses.
So I think there are multiple things we can do. One is we
can encourage more parties to not be uninsured, whether it is
municipalities, whether it is businesses. Unfortunately,
whether it is individuals. If you look at a typical
catastrophic event, say, a hurricane or a large flood in the
United States today, half of the losses go to individual
households that are uninsured under the program today.
So we can do a better job of expanding, you know, the tools
that are out there today to insure many people. And then I
would say government, and we have been talking about it this
whole hearing, can and should be focusing on creating these
adaptation and mitigation programs that minimize those
externalities.
Mr. Huffman. Should those be funded by redirecting those
externalized costs back to those who have been able to
externalize them so well for so many decades?
Mr. Bouchard. Well, I think that is your job as a
Congressman and a policymaker to determine kind of how to
allocate funds and collect those funds, but I think there is--
as the DRRA last year shows, there is funding already available
in some forums that can make a major impact to mitigation
today.
Mr. Huffman. Thank you.
Thanks, Madam Chair.
Ms. Castor. Excellent. Well, I would like to thank our
witnesses for your outstanding testimony, and our members who
are here today. I think it is clear that we need to raise the
consciousness of the American people, businesses, and
hardworking folks about the escalating risk in cost of the
climate crisis and to focus on the opportunities ahead and the
solutions. And we have some time to do this, but we don't have
a lot of time. So I will encourage all of you to answer some
questions that we will pose in writing to follow up.
I would also like to let everyone know that the Climate
Crisis Committee is going to go on the road. We are going to
have our first field hearing starting in Colorado next week at
the National Renewable Energy Laboratory and other folks
focused on mitigation and adaptation and the solutions and
opportunities for the future.
So thank you all again.
Without objection, all members will have 10 business days
within which to submit additional written questions for the
witnesses. Please respond.
With that, the hearing is adjourned.
[Whereupon, at 3:55 p.m., the committee was adjourned.]

United States House of Representatives, Select Committee on the Climate
Crisis

Hearing on July 25, 2019, ``Creating a Climate Resilient America:
Business Views on the Costs of the Climate Crisis''

Questions for the Record

Paula DiPerna

Special Advisor

CDP North America

the honorable kathy castor
1. Many companies in the European Union are capitalizing on
climate-related opportunities. What are some of the policies the EU has
enacted to support businesses opportunities in addressing climate
change and how can the United States learn from these successes?
First and foremost, the EU has set clear and coherent emissions
reductions targets and goals consistent with the Paris Agreement. Each
nation within the EU has its own nationally determined contribution, of
course, but the EU overall has set reduction targets. All nations in
the EU, therefore, are on the same ``carbon diet.'' With a clear
horizon line for reductions, companies can make intelligent investment
decisions about when, how and where to achieve these reductions
consistent with these targets. In turn, this regulatory certainty
enables a longer term planning horizon for companies, which in turn
enables them to make investments without concern that the return on
investment has to be too short term to show profit.
Specifics on the EU targets can no doubt be found via the U.S.
Foreign Service and U.S. Ambassador to the United Nations.
Policies on the financial front are of equal interest. The EU is
making considerable efforts to make sure that basic investment vehicles
and standards take climate change risks into account. In France, for
example, companies are asked to show how their investment portfolios
align with the national reduction target and other risk-related
assessment concerning natural resource use, inside and out of France.
Also of considerable policy relevance is the European Commission
High-Level Expert Group on Sustainable Finance (HI-LEG), which has
examined and/or instituted numerous policies aimed at integrating
climate risk considerations, and opportunities, throughout the
investment landscape. U High-Level Working Group on Sustainable
Finance. The final report of HILEG can be found here: https://
ec.europa.eu/info/publications/180131-sustainable-finance-report_en
Of particular note is the move toward integrating climate risk
through investment benchmark standards, which I referenced in my
comments at the Select committee hearing in July 2019 To expand on
those remarks regarding benchmarks, significant changes are underway to
ensure the accuracy and integrity of the main categories of low-carbon
benchmarks used in individual or collective investment portfolios by
establishing two types of financial benchmarks: 1) EU climate
transition benchmarks, which aim to lower the carbon footprint of a
standard investment portfolio. More precisely, this type of benchmarks
should be determined taking into account companies that follow a
measurable, science-based ``decarbonisation trajectory'' by end-2022,
in light of the long-term global warming target of the Paris agreement;
and 2) EU Paris-aligned benchmarks, which have the more ambitious goal
to select only components that contribute to attaining the 2+C
reduction set out in the Paris climate agreement.
In addition, there would be an obligation for all benchmarks or
families of benchmarks to provide an explanation of how environmental
factors are reflected in their investment strategy, as well as how the
methodology aligns with the target of reducing carbon emissions.
The intention of these benchmarks is to provide greater
transparency and information for investors on the carbon intensity or
``carbon risk'' or ``carbon footprint'' of a given investment option.
Companies that do not meet the criteria for the new climate-
sensitive benchmarks will be excluded from eligibility. So, to avoid
exclusion, no doubt U.S. public companies will try to come into
alignment. This begs the question of why then would their not be
comparable efforts in the U.S. so that a U.S.-based company would be
able to meet a single set of global minimum standards, which would
reduce uncertainty and operational dissonance, not to mention reduce
compliance review costs.
And disclosure regimes in the EU will track with new regulatory
requirements, so companies will be required to disclose to the public
and investors the degree to which their activities are aligned with the
objectives of the above changes. Many of these requirements are
enshrined already in the recommendations of the TCFD (Task Force on
Climate Related Disclosure). CDP, which is a voluntary quantitative and
qualitative global disclosure system, has aligned its annual
questionnaire with TCFD requirements already, so companies disclosing
to CDP, including in the US, are better prepared than others to align
and comply with emerging requirements.
In the US, we have no comparable coherent policy efforts that
integrate the exigencies of climate with investment frameworks and some
would argue this can leave U.S. companies exposed to hidden climate
risks--not to seek out may mean not to see.
2. Why are companies increasingly setting internal carbon prices
and science-based targets?
On Carbon Pricing: CDP has been tracking use of internal carbon
prices by U.S. based companies since 2013 (https://www.nytimes.com/
2013/12/05/business/energy-environment/large-companies-prepared-to-pay-
price-on-carbon.html) Since this 2013 report, the number of companies
using an internal carbon price has only risen. Reasons companies use
such prices vary: 1) to comply with existing mandatory cap-and-trade or
carbon tax regimes in jurisdictions where same apply, such as the EU;
2) to prepare for mandatory regulation, since most far-sighted
companies expect such regulation to occur, even if they do not press
for it; 3) for internal planning and/or reward systems to encourage
reductions among staff and/or budget considerations. For examples, some
companies such as Microsoft, which pioneered internal carbon pricing,
put each department in the company on a ``carbon diet'' and tie budget
allocation to a department's ability to reduce its ghg emissions/unit
of production, etc. These segmented reductions then add up to a
company-wide reduction strategy, incentivized by an internal carbon
price where planning occurs ``as if'' each tonne of ghg emitted carried
a higher cost than is today visible. (For further info See link below
to CDP Carbon pricing report, 2017)
Most importantly, internal carbon prices are an emerging
international financial tool and lingua franc that helps companies
price and gauge the financial costs of inaction as well as the premium
attached to taking action. No matter the currency or price level used,
only carbon prices can link financial implications to the actual
physical problem--reducing tonnage of greenhouse gases going up into
the atmosphere. Carbon pricing is quite literally becoming the coin of
the realm.
Carbon prices are levied on a per tonne basis, and no matter what
country, a tonne is a tonne is a tonne. Marrying this fixed physical
unit to a price per that unit helps make it possible to compare
relative costs and activities across companies, and within companies.
And whether there are regulatory drivers that have created regulated
carbon markets, such as in Europe with the European Union Emissions
Trading Scheme, or in California, or in the northeast with RGGI, or
individual state-based programs, or whether carbon pricing is purely a
voluntary act of strategic and prudent planning, more and more
companies are translating the language of tonnage to the language of
costs via the mechanism of carbon pricing.
And whereas companies may express their internal carbon prices in
local currencies for internal planning purposes only, as regulatory
regimes emerge worldwide, ultimately those prices will be expressed in
international currencies and become fungible. Companies that have acted
early on carbon pricing will have their carbon accounting well in
order--their diet plan in hand with a good grip on what it may cost.
Perhaps most to the post the standardized information in the CDP
report enables investors to compare one company to another on
environmental risk, to measure a company's progress over time, and to
make investment decisions based on actual costs.
The extensive use of carbon pricing by companies suggest that they
are increasingly preparing for the demands of a low-carbon economy and
the extraordinary opportunities inherent in shifting away from a
negative to positive. The less emissions, the less cost.
Through carbon pricing, the world speaks the same language and that
can only help companies plan and be prepared for the unpredictable
nature of climate risk, and think ahead to the significant
opportunities that attend climate change intervention, innovation and
technology shift.
On Science-Based Targets: Companies are increasingly setting
science-based targets for similar reason as internal carbon prices: to
conform corporate energy use and emissions patterns to the realities of
climate science and predicted extremes of weather, supply chain
disruption etc. Since the Paris agreement itself has a broad science-
based target, complying with Paris means each company needs to manage
its own ``slice'' of that target. Also, as noted above, various
benchmarks and investor esg requirements are increasingly asking
whether companies have science-based targets and the HILEG revised
benchmarks will make science-based planning mandatory. In short, having
a science-based target is increasingly necessary to attract investment
in jurisdictions outside the US. Since most companies are now global,
companies must conform to the highest standards regardless of home
base.
3. Can you discuss CDP's matchmaker program and provide some
examples of these projects?
What is Matchmaker? Matchmaker is a specialized dashboard aimed at
illuminating to potential investors climate-change related
infrastructure projects that likely face a funding shortfall, but which
represent significant environmental needs. Matchmaker cities disclose
to CDP through the CDP-Cities program, and Matchmaker deepens their
disclosure on infrastructure needs related to climate change. Many
cities worldwide, including in the US, seek to implement local policies
and infrastructure projects that address climate change and build
resilience. But these projects are often isolated from basic economic
development planning, and also from the investor community.
Matchmaker aims to bridge this divide. Launched in 2017, it
provides subscribers with information on climate resilient
infrastructure projects in cities through a specialized dashboard.
Using data from 570 cities, collected through CDP, Matchmaker works
with cities to highlight projects in flood control, waste management,
sustainable transportation, renewable energy, water management, and
energy efficiency and links them to the investment community. It serves
as an important clearinghouse to provide cities with a streamlined
pathway to showcase planned projects to the finance sector and better
position them to mitigate against and adapt to climate change.
Another way of looking at this is that the Matchmaker pipeline
represents a visible portion of the pending demand and need for project
funding that could be met by private, public or innovative hybrid
sources.
See Matchmaker Website (https://www.cdp.net/en/cities/matchmaker).
Potential subscribers include:
Municipal banking
Municipal bonds/municipal fixed income
Impact/responsible investing
Infrastructure/project finance
Renewable energy development
Corporate social responsibility teams
Project developers
Risk teams
Credit rating agencies
Project types include:
Renewable energy
Energy efficiency
Outdoor lighting
Building retrofits
Water management
Stormwater retention/flood control
Urban resiliency
Greenspace/tree planting
Waste management
Waste recycling
Urban planning/assessment
Current subscribers:
Bank of America
HSBC
S&P Global
Quick facts on U.S. coverage in 2018
United States
314 projects from 98 cities
161 total cities disclosed
$15.2 billion USD pipeline
Average project $86 million
Matchmaker events thus far in 2019:
Washington D.C.
Toronto
New York
Cleveland
Chicago
Information on Dashboard includes:
2018 project disclosure from disclosure cycle
2017-2019 project disclosure from Matchmaker
City-wide emissions
City-wide emissions by sector
Local government emissions
City-wide emissions reduction targets
Change in community emissions
City climate change action plans
City-wide emissions reduction activities by sector
Renewable energy & electricity targets
City climate hazard disclosure
Impact of climate hazards by anticipated timescale
City vulnerability assessments
City adaptation plans
City adaptation actions to reduce vulnerability by hazard
type
Municipal water risks
Water adaptation actions by water risk
Selected actual Projects * on Matchmaker dashboard from the United
States (at 30 Aug 2019)
* For city locations and further details, contact
paula.diperna@cdp.net
sample cdp matchmaker projects--u.s. solar and water focus
98 U.S. cities reported 314 projects worth $15.2bn seeking
investment through the annual disclosure to CDP.
Of the 314 projects, 58 are renewable energy projects, 51
are energy efficiency projects, and 20 are water management projects.
19 U.S. projects have been submitted through our more
detailed project intake process. These projects are updated on a
rolling basis.

----------------------------------------------------------------------------------------------------------------
Total cost of
Project Sector Status of Project project (USD) Project Description
----------------------------------------------------------------------------------------------------------------
Renewable energy........................ Operation................. 10,000,000 2 MW initial solar farm
for City electric
utility. There is an
additional 8 to 10 MW
opportunity on reclaimed
city land fill.
----------------------------------------------------------------------------------------------------------------
Renewable energy........................ Scoping................... 10,000,000 Series of solar energy and
energy resilience
investments for County
facilities.
----------------------------------------------------------------------------------------------------------------
Renewable energy........................ Not reported.............. 10,000,000 The City already has over
100,000 sq.ft. of green
roofs and an additional
200,000 sq.ft. of parking
garage roofs, both of
which would be excellent
candidates for large
solar installations.
Very few solar arrays have
been installed to date,
but zoning ordinances
have been adjusted to
allow for them.
These roofs could
potentially provide 1
megawatt of power.
At an estimated cost of
$10/watt this would come
to $10,000,000.
----------------------------------------------------------------------------------------------------------------
Waste recycling/renewable energy........ Implementation............ 8,000,000 Match funds for a waste-to-
energy project at the
Water Pollution Control
Plan to install a bio-
digester to use food
waste, organic fraction,
and other bio-solids to
create gas for CNG fuel
or to generate
electricity.
----------------------------------------------------------------------------------------------------------------
Waste management........................ Not reported.............. 7,000,000 The City desires a biogas
digestion plant to reduce
biosolid landfilling,
reduce carbon emissions,
and creating a
sustainable source of
independent energy.
The City owns and operates
its advanced wastewater
treatment plant (AWWTP),
which processes waste
from the City and
portions of OTHER CITIES.
A biogas digester could
save up to 85% of
emissions, which would be
nearly 15,000MTON of CO2
mitigated.
Furthermore, it could
power nearly all of the
AWWTP's energy needs and
potentially sell energy
back to the grid
providing additional
revenues.
----------------------------------------------------------------------------------------------------------------
Renewable energy........................ Pre-implementation........ 5,000,000 The City is looking to use
power purchase agreements
to increase solar on
public buildings without
upfront capital costs.
----------------------------------------------------------------------------------------------------------------
Energy efficiency/retrofits............. Scoping................... 5,000,000 Municipal building
facility assessments,
retrofits and energy
performance contracting.
----------------------------------------------------------------------------------------------------------------
Renewable energy, energy efficiency/ Pre-implementation........ 5,000,000 Installation of solar PV,
retrofits. battery storage and deep
de-carbonization/energy
efficiency retrofits to
create a Zero Net Energy
facility with microgrid
on the City's Main
Library. Would include
electrification of all
water heating and HVAC.
----------------------------------------------------------------------------------------------------------------
Renewable energy........................ Scoping................... 4,000,000 5 solar PV sites for a
total of 1.1 MW. Prefer
PPA arrangement with
buyout option. Some self-
financing may be
involved. Sites are
municipal facilities.
----------------------------------------------------------------------------------------------------------------
Renewable energy........................ Implementation............ 4,000,000 Solar PV and battery
storage for the NAME
Water Pollution Control
Plant. Current project
funding obtained from
[STATE SOURCE] to create
1 Megawatt of power
generation, comprising
60% of the plant's
electricity needs. The
City wants to add
additional PV generation
to provide a basis for
microgrid (solar +
storage) installation.
----------------------------------------------------------------------------------------------------------------

references page
CDP Archives and Key Reports:
Report on Risks and Opportunities Associated with Climate Change as
Disclosed by Companies, 2018: https://www.cdp.net/en/research/global-
reports/global-climate-change-report-2018/climate-report-risks-and-
opportunities
CDP Report on ESG and role of Boards of Directors/Investor
expectations: https://6fefcbb86e61af1b2fc4-
c70d8ead6ced550b4d987d7c03fcdd1d.ssl.cf3.rackcdn.com/cms/reports/
documents/000/002/891/original/CDP-US-Report-2017-v2.pdf?1519227634
CDP Report on Use of Internal Carbon Pricing, 2017: https://
www.cdp.net/en/climate/carbon-pricing
CDP Report on Mainstreaming of Low Carbon on Wall Street, 2015:
https://b8f65cb373b1b7b15feb-
c70d8ead6ced550b4d987d7c03fcdd1d.ssl.cf3.rackcdn.com/cms/reports/
documents/000/000/783/original/CDP-USA-climate-change-report-
2015.pdf?1471960506
For further information see: www.cdp.net
Also contact: Paula DiPerna, Special Advisor, CDP:
paula.diperna@cdp.net

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