ICE launches new climate transition risk solution

To better provide its clients with emission estimates and portfolio analytics in munis, along with other fixed-income asset classes, ICE has launched a climate transition risk solution.

Along with ICE’s current coverage of sovereign, corporate equity, and private companies, the new solution allows clients to “assess and benchmark their financed emissions across a comprehensive range of fixed-income asset classes in one integrated offering,” according to a press release.

In general, fixed income is largely underserved in terms of climate risk analytics and sustainability data, said Larry Lawrence, head of ICE Climate.

“Our goal is to use some pretty comprehensive scientific models to estimate Scope 1, 2 and 3 emissions across these asset classes, then enabling [market participants] to understand what their emissions footprint is, and then that will inform how they can make decisions on decarbonization,” he said.

With this solution, “clients can leverage advanced portfolio analytics to evaluate total emissions across multi-asset class portfolios, assisting clients in transition risk strategies,” the release said.
 
The new solution deals with holes in emissions data, and through integration, ICE can provide a “unified portfolio metric” that tracks financed emissions across asset classes to better support climate risk reporting, the release said. The emissions data spans more than 110 million U.S. properties and over 4.2 million fixed-income securities worldwide.

The motivation behind ICE’s multi-asset class climate transition risk solution stemmed from clients who said they wanted access to this information, Lawrence said.

There was also pressure from society or governments around the world to make more commitments around net zero and increase transparency around broader climate change and emissions growth, he noted.

Recent extreme weather events have made ICE’s new solution more timely and relevant, Lawrence said.

“It brings the conversation to the forefront and will encourage people to just at least get a sense of what their risk exposure is,” he said.

Severe storms, along with other weather events, affect the muni market as cleanup costs and mitigation efforts from extreme weather events can fall on issuers and strain their finances, said Cooper Howard, a fixed income strategist at Charles Schwab.

On the heels of Hurricane Helene, Florida is facing the threat of another storm: Hurricane Milton, which will make landfall on the state Wednesday, he said.

“Historically, the muni market has been resilient in the face of other climate disasters but given the magnitude of this storm and the fact that it’s right after Hurricane Helene, it’s likely to intensify the discussion about climate risks and the muni market,” Howard said.

“If there’s a storm that’s on the horizon, we can help you understand all of the assets that are being impacted by the path of that storm or exposed it,” Lawrence said. “As a muni investor or a holder of that security, you at least know whether or not you’re going to be significantly impacted by a particular storm or hurricane.”