I was dispatched with others to the area of homes with floodwaters that had yet to recede. I was Mayor of my community and saw so many homes impacted. I entered a home and was greeted by an elderly lady who had tears in her eyes. The floodwater had entered the kitchen and was inching to the rest of the house. In the corner was the husband in a wheelchair with an oxygen tank. He was still in the dry part of the living room. Both were so happy we were there to get them to safety. Weeks later I revisited the house, and no one was there. I always wondered what happened to them. I kept this memory to explain what happens when resiliency is not a main focus. California wildfires; winter storm URI; and Hurricane Sandy are recent examples of the dangers of extreme weather.
The debate over the term Environmental, Social and Governance (ESG) has been unfortunate. Issues have gotten confused and as key factors to weigh in investing, the political debate on social issues has confused the issues facing most regions of the U.S. Social factors are important but as an investment factor, complicated, and should have its own separate focus and high priority.
ESG should be changed to ERG or Environmental, Resiliency and Governance. The resiliency factors should also be front and center in investment decisions as we move further along in understanding the causes and impacts of extreme weather.
For resiliency, the climate change debate is relevant, but the solutions are a different topic. Extreme weather has impacted communities for generations. Possibly the most significant change has been communities are built closer to weather impacted areas or areas that have been overdeveloped. Extreme weather is the key focus.
Resiliency measures for local governments remain critical given the potential damages and the rising cost of property insurance.
While federal assistance is important and the current effort is important to make sure FEMA works the best it can, greater focus from the municipal bond sector to enhance the resiliency of communities is required. ERG would integrate the municipal evaluation of resiliency to attract investment towards communities that are working at it. For example, an electric utility that protects its transmission lines to ensure reliability of electricity or a community that is proactive at flood-proofing ordinances for building and existing housing should be weighed positively.
New metrics and approaches are needed to upgrade resiliency in upcoming investment decisions. ERG as a framework could assist in that discussion.
Dan Aschenbach
AGVP Advisory
[email protected]