June 4, 2025 • 43 mins
How can we prepare tomorrow’s leaders for today’s climate risks? In this episode of the ESG Currents podcast, the University of Maryland’s Dr. Cliff Rossi, academic director and professor, and Tim Canty, associate professor, join Bloomberg Intelligence’s Andy Stevenson, senior ESG analyst, to discuss their interdisciplinary approach to teaching sustainability. Together they explore how science and finance must be used to understand and mitigate climate risk, from mortgage markets to air quality. They also discuss the rising challenges posed by natural hazards, the consequences of rolling back federal data and modeling tools and the critical role students can play in bridging the communication gap between science, policy and business. The episode was recorded on May 9.
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Episode Transcript
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Speaker 1 (00:07):
Welcome to ESG Currents, your guide to navigating the evolving
ESG space, one topic at a time. Brought to you
by Bloomberg Intelligence, part of Bloomberg's research department, with five
hundred analysts and strategists working across all world markets. Our
coverage includes over two thousand equities and credits, as well
(00:27):
as outlooks on more than ninety industries and one hundred
market industries, currencies, and commodities. I am Andy Stevenson, Senior
ESG Analyst for Climate, and I am your host today
for today's episode. I am joined today by Cliff Rossi
and Tim Canty, both of which are University of Maryland
focused on Both professors focused on teaching sustainability to their students.
(00:52):
Welcome guys, Thanks for having us, Thank you. Sure so,
I just wanted to kick off the conversation with the
students perspective and then we can go into a whole
host of things about how the world is ever changing
and how we need to kind of navigate it from
a teaching and practical perspective, especially with respect to you know,
(01:15):
the physical physical risks that we're experiencing obviously from climate
and when President Trump takes away something. What does it mean,
you know, in terms of how it's from FEMA's perspective
or whatever. How is that going to make us less
prepared and not ideally prepared, etc. Right, So, but let's
(01:35):
start with the student's perspective. Both of you are professors,
and I just want to get, you know, just a
short understanding of what you think your students are looking
for when they sign up for your classes.
Speaker 2 (01:48):
So Tim and I come at it from completely opposite
ends of the spectrum.
Speaker 1 (01:52):
Right.
Speaker 2 (01:52):
I'm a finance professor. Risk management was my industry for
twenty five years. Tim comes at it from being an
atmosphere scientists really, as I call them, a real climate scientist.
And so from our perspective, what we've done in kind
of banding together of the last couple of years is
to put together educational programs, primarily coursework if we're talking
(02:18):
about our students in the area of climate models and
analytical tools, because that intersection right now is particularly problematic
for many folks in the industry that are trying to
get their arms around understanding, Okay, we've got these physical
models that we use to understand how climate is affecting,
you know, the Earth's system, and then those of us
(02:38):
that were in industry, you know, have to take the
outputs of those models and then feed them into our
financial risk models. So we teach out of the business
school on that Tim teaches out of the other college
that actually does the science part of this, but the
course itself is actually taught in our Robert A. Smith's
School of Business program. We have a track at our
Master's of Finance program. All where will students get the
(03:02):
kind of training to have them understand these intersections between
science and business.
Speaker 1 (03:07):
That's what we provide.
Speaker 3 (03:08):
Yeah, and coming from the science side, you know, I
recognize that most of these students don't all pretty much
all of them don't have the background. So it's kind
of incumbent upon me to distill fairly complicated research topics
into not necessarily actionable for the class, but understandable and usable.
(03:29):
And you know, that's that's a challenge for the scientific community,
but particularly in a situation like this, but necessary. You know,
I can't go in and start writing down differential equations
and spouting acronyms because that defeats the purpose of the class.
We're trying to get these students up to speed, not
to be experts. It's hard enough for me to get
a job. I don't need the competition from these really
(03:50):
bright students, but to be conversant. So when they go
into the room they can they can almost be the
ambassadors from the science side. They can they can help
explain and translate.
Speaker 2 (04:01):
To pick up on that. One of the other things
that we do is we have these exponential learning projects.
Think of those as capstone and capstone courses in our
Masters of Quantity of Finance and Masters of Finance programs.
And what we do is we seek out corporate sponsors
to support the work that we're doing and climate risk.
And in this case, we've done a number of projects
(04:21):
like that where we take let's say four or five
hundred thousand mortgage loans and all the characteristics of that
along with data from FEMA's National Risk Index and other areas,
and we build tools to say what kind of impact
would this type of natural hazard have on loan modern
(04:43):
income barbers, And then we try and understand what kind
of associated mitigation strategies could be brought in to kind
of help address that. And what we found is that
the companies find that extremely interesting. The students have a
leg up on their competition and looking for jobs because
they're already familiar with this kind of information and how
(05:05):
to actually use it to kind of make these business decisions.
Speaker 1 (05:09):
Yeah, and it goes beyond just you know, pricing insurance.
You know, like this is not this is affects spending habits,
It affects the welfare of those communities, It affects the
tax space. It's a very broad swath of like problems
associated with this. Right, It's not just you know, the
pricing of insurance. We found out every year whether they
(05:31):
made money or lost money. Right, so it's like you
can it's especially at Bloomberg, we do a lot of
analysis around what we call net premiums after loss to
understand is the industry making any money at this in
a state like Florida or a state like Texas or
state like California, you know, and you don't want that
to go below the red the turn into a negative
(05:53):
number on a regular basis, because what that implies is,
in simple terms, is that the price of the insurance
was too you know, like so you know, going forward,
they're going to have to raise it just to break even.
And you know, no business is in business to break even, right,
So it's a it's a kind of a complicated thing.
I wanted to go back to something that Tim spoke
(06:13):
about earlier, which is this idea of communicating effectively kind
of business impacts from science, you know, and the I've
been at this for a very long time and as
you guys may may or may not have, but that
is always difficult because the ambassadors with the most knowledge
(06:36):
are rarely the ambassadors with the best ability to convey
that information, you know, like they I used to work
with the MIT Air and Aviation Group and frighteningly brilliant people,
some of the smartest people in the world. And as
you know, these calculating how the wind the wind blows
for lack of a better description of it with respect
(06:57):
to air pollution or whatever, is in incredibly exhausting from
a data perspective. I mean, those models run for months,
you know in some cases to try to figure out
these problems, and they end up with results, but then
communicating it to not only to students but just to
the business community. What this means is a skill that
unfortunately is sort of in short supply. Well the science
(07:21):
talk about that a little bit.
Speaker 3 (07:22):
Scientists are never trained for this. We're trained to We've
always been told just do good science and let the
science speak for itself. Well, science doesn't speak for itself,
and now no one's listening anyway. And so I professionally,
I'm an air quality policy scientist. So to be effective
in helping write effective policy, I have to be able
(07:44):
to communicate very challenging scientific concepts to policy makers who
are very limited time, right, And we just got to
get the point across. And so I've had to acquire
this skill. But even internally within the sciences, I've sat
through many seminars that are really look forward to from
brilliant scientists and like, oh my god, I can't understand
what the hell they're saying, you know, So it's so frustrating.
(08:07):
And that's that's a problem that really truly is a problem.
And I'll put this on the scientific community. I don't
think over the years we've focused enough on building the
skill sets to communicate important science to people outside of
the scientific community. We're never trained for it. It's not
part of our curriculum. But that has to change. That really,
really truly has to change. And for the jobs of
(08:29):
the future. I keep pushing our students to look at
the business sector. You know, you can be a good
scientist and work for a company and probably make a
lot more money and and and do good work right
and and help inform people. But it's this is a
relatively recent push within the scientific community. We relied on
(08:51):
Bill Nye and Neil de grass Tyson, but all of
us really should be better ambassadors for the field.
Speaker 1 (08:56):
Yeah, and even they, I would say, are not business oriented,
you know, like they really aren't there there they communicated
to people and you know, just to super simplify what
you do, tim and then this is oversimplifying it probably
in your mind and everyone else's mind. But from a
business perspective, what does more air pollution mean? More air
pollution means your hospitals have to are going to have
(09:18):
higher expenses that you can't control, you know, like that
that's that's like the punchline that that a congressman wants
to hear and how much you know, like that that
this not putting a scrubber on top of the smoke
stack is costing us whatever, five million dollars a year
at three hospitals, because that's that's the net impact, you know,
(09:41):
like of pulmonary disease going up. You know, like that's
just what the costs are, whether.
Speaker 3 (09:46):
It's air quality or climate. I don't think we've fully
follow through in the cascade of impacts. We look at
the initial but then what's the cascade of impacts after
that and and the cost of that. We just published
a study and work with epidemiology. It's tuny Buffalo showing
the increased risk of NIQUE admission based on air pollution
exposure the month before birth. So I can create plots
(10:10):
of pollution. I can create plots of increased risk. What
I want then is a nice color contour plot of
dollar signs, because what motivates people, especially maybe this audience,
more than anything else, it's the dollar signs. Out of
pocket expenses for a NIQU admission. Medium cost is five grand,
So where you live impacts your ability to have a
(10:30):
healthy child, which has a huge economic impact and further
drain on already stressed out resources.
Speaker 1 (10:37):
It will follow the local community to pay for in
some cases because poor people are more exposed.
Speaker 3 (10:43):
So you end up with with this problem and we're
not allowed to talk about that any.
Speaker 1 (10:46):
Yeah, yeah, exactly, But I mean it's a dollars. Thing
is dollars like it's a dollar. It's the translation is
air pollution is bad. Yes, air pollution is bad because
it costs my tax based money. You know what I'm saying.
Like that is the that is like the full sentence
if you want to go that way.
Speaker 3 (11:05):
Initial costs of niek you But then what about missed
work or reduce worker productivity? It's the other cast a
miss school. Sure the cascade of impacts that we need
to do that full cost accounting somehow, And I'm not
sure we have the tools for help, you know, for
air quality or Cliff and I've been focusing on for climate.
Speaker 1 (11:22):
Yeah, let's go back to maybe Cliff on this in
terms of your ability to translate what you're hearing from
the tims of the world and or the femas of
the world. How are you finding your ability to and
your students. I mean, let's face it, you know, as
smart as your students are, there's just no education that
(11:43):
they could have prepared themselves for to understand this stuff
in five minutes. You know, it's a very challenging thing
that you've taken taken you years to do, taking me
years to do, taking tim years to do. So how
do they absorb this and how do you communicate with it.
Let's there's two audiences I'm going to ask you about, Cliff.
The first is the audience of your classroom, which is,
(12:06):
how are you communicating this in a way that resonates
with them? And then the second question is you are
obviously trying to get donors and you're also a fundraising
but you're also trying to highlight the fact that this
matters to business, you know, and obviously you have to
communicate that in a business language. So can I may
(12:26):
maybe if you could ask answer on you know, from
the the young pup perspective and the you know, guy
that really doesn't want to listen to you unless there's
a dollar sign attached to it perspective.
Speaker 2 (12:38):
Sure, So what we do is we spend a lot
of time on applications, we go through concepts, and what
Tim and I basically do is we tag team this
this this climate models and analytics course. Because at the
end of the day, one of the things that I
realized was that if you're on deck at let's say
a financial institution, a big bank or whatever, and you're
(12:59):
having it some sort of climate scenario you're very used
to doing, you know, to taking financial information and running
it through your your models. Right, It's a whole other
set of kettle or fish when you're taking you know,
physical outputs from very complicated climate models and integrated assessment
models and then having to run them through. So we
(13:20):
go through this very methodically, but as I said, with
a lot of with a lot of examples, a lot
of case studies. We also one of the things that
we spend a fair amount of time on is critical
thinking about about the models that.
Speaker 3 (13:34):
Are being used and deployed.
Speaker 2 (13:36):
Because one of the things that we find is that
you know, all models are wrong, some are useful comes
up a lot, particularly in the case of these climate models,
and so having an understanding of the strengths and limitations
of these models where they can be deployed is quite critical,
and having them think about other ways in which these
models can be adapted and applied in other ways to
(13:59):
help to gate climate issues down the road. So we
do a spend we do spend a fair amount of
time that way. In the applications. I'll say on the
second question, we've been involved, for example, Tim and I
uh with with organizations where they'll bring us in, uh
to kick the tires, so to speak, on if they're
(14:21):
looking at various climate vendors. Right there are all these
purveyors of these of these climate models, and so we
can come in and help give them our insights as
to what questions to ask when they're bringing in these
great presentations. Right but don't want to fully disclose with
behind the secret sauce right now, I get that I've
been down that path before. So those are some of
(14:43):
the things that we're doing in addition to you know,
doing analysis again apply to analysis. You can hear what
Tim is talking about in some of the research that
he's doing both at the state level and federal level.
I spend most of my time oriented more toward business
in terms of the kind of applied analytics that maybe
they could find you. So one of the tools, for example,
(15:04):
that we're going to be deploying next week is called
our Smith Enterprise Risk Consortium, which sir Mortgage Climate Risk
Analyzer tool that basically takes all of the loans that
were originated in twenty twenty three with all the characteristics
that are provided on the Home Order's Disclosure Act data,
which who knows if that'll still be around next year,
(15:25):
and we integrate that with two different sets of indices.
We have a FEMA's National Risk Index we'll see if
that's still around there next year, and then a composite
forward looking NASA index from twenty forty to forty nine.
And what we do in that is we can we
built a tableau based tool that allows industry users. This
(15:47):
will wind up actually on one of the Trade Association's
website next week where they can come in and do benchmarking.
And so what they'll do is be able to toggle
and say, I want to look at my portfolio of
mortgage loans in this area in terms of loan moderate
income barwers or minority bars or however you want to
define financial capacity constrain borrowers and benchmark that against what
(16:11):
I have, and then maybe I make some adjustments to
my portfolio or whatever, and we come in and can
help guide companies.
Speaker 3 (16:18):
With that kind of analysis.
Speaker 1 (16:21):
Yeah, that makes sense just for me, just to give
you a sense of how we look at it at Bloomberg,
we actually, I mean, we have models that go out
into the future and there is a lot of work
that's you know, I think we just absorbed a company
that does that, just like forecast models and stuff like that.
But the work that I do doesn't rely on any
forecasting at all. It just measures all the damages that
(16:43):
we're seeing in the economy on a rolling basis. It's
running at about a trillion dollars a year right now,
about three point two percent of usg three point three
percent of us GDP. And then understanding the context of
that at the state level, at the county level. And
the idea is similar to what I mean I came
from kind of the hedge fund world, is something like
(17:04):
a stress loss. You know, like the idea is how
bad can it get? And you multiply that by two,
you know, for lack of a you know, simplify things.
You think about a place like Asheville, North Carolina that
would not have shown up on any climate model as
being a train wreck candidate. Right, So you have to
look at, you know, kind of forensically, what does that mean,
(17:27):
you know, what percentage of those because it's underinsured, A
huge percentage of those losses were just you know, out
of someone's pocketbook. And that's a bigger deal. You know,
Like one of the things that I have learned anyway,
is that if everything was insured, we wouldn't have a problem.
You know what I'm saying, Like it would be an
expense and to be part of your life, and it
(17:48):
may be a very highly volatile expense, like it could
move up, you know, twenty percent a year. It has,
it does happen. But at least it would be a
self contained thing because the all the losses would be eventually,
you know, like they'd be recovered in your wallet by
the mechanism of insurance. Well, when you go into areas
(18:09):
where there's low insurance penetration, and the United States in particular,
like again Asheville was only twenty five percent insured or something,
all the losses and the infrastructure wasn't prepared for it either.
You end up with these multiplier effects that affect mortgages
and everything else home, you know, like your ability to
pay back student loans, all these things. The first thing
(18:30):
that happens historically is people stop paying that stuff or whatever,
take a little mini holiday from paying it because sometimes
they get relief from interest rates and stuff like that,
and they have other things to spend money on. But
it's really hard from a you know, it's harder to
it's easier to understand the context of examples like that
(18:52):
if that makes sense. You know, like here's a situation
that happened to a community with low insurance penetration, and
you know there was a seventy billion dollars of day
and only twenty billion was insured, and things like that,
and how that how does that affect outcomes financial outcomes
in those parts of the country. So that's that's sort
of the way that we are attacking the problem, at
(19:12):
least at Bloomberg Intelligence is looking at it the costs,
and you don't have to look very far because these
things are huge, you know, Like you think what happened
in the La wildfires is a lot of a lot
of lost income took place, as well as damages to homes.
You know, I did want to spend a little time
since we have Tim on the line talking about air
(19:33):
pollution because with the wildfires that we've seen in Canada
and in general, obviously adding to the toxic soup that
we could ingest every day that we call air and
the fact that we may see regulations start to get
rolled back in certain areas. What I mean, we've had
(19:53):
this remarkable downward trajectory in air air pollution in the
United States since the seventies, going back to the First
Clean Air Act, like really remarkable progress in terms of
our air. People just used to die of air, you
know in America, Like that was like some crazy percentage
of the reason why people died in sixty five their
(20:15):
lungs just gave out because of the air quality. Cigarettes
obviously wasn't helping. My understanding from recent research is that
that is starting to kind of pick up again and
turn the other direction. Maybe talk a little bit about
first of all, is that happening. How are wildfires specifically
informing that? And you know, how what does it mean?
(20:38):
You know, like what if you can laymen us an
answer to that, that would be wonderful.
Speaker 3 (20:44):
You're right at least like here in Maryland, twenty twenty
two was the cleanest year on record, and we're at
the point thinking, well, we're done, I'm going to move
on to something else now, and then we had the
twenty twenty three wildfires in and so we are kind
of seeing a shift from ozone related air quality exceedance
(21:05):
system more particulate matter. And what people people don't realize
is that smoke travels and only takes a couple of
days to go from California or Western Canada to get here.
You know, it gets up near the stratosphere and that
it plops back down again. It's not just local. And
so as we're seeing in many places drier conditions and
(21:28):
less snowpack, less snowfall. You know, it might be lightning,
it might be a person starting the fire, but the
conditions seem to be ripe, and this seems to be
increasing for more wildfires. And so yeah, we're we're trending
back up in terms of ozone exceedances and particulate matter.
The PM standard recently came down, and so as the
(21:50):
standards get constrained, more more people are in exceedance. So
it's it's a struggle because for a state, you know
legally has to be an attainment, but then you have
to apply for an exceptional event because you say, well,
it's a wildfire in California. You know, I think globally
four hundred thousand people died from mozone exposure, but eight
million people died from particulate matters. So this is these
(22:12):
are big numbers. But the problem is it's not like
a whole bunch of people in one space at once.
It's an older person, it's a sick person, and so
it's it's not like a it's not like an aircraft disaster, right,
it's just people here, here, and here. But when you
add up and up the numbers, it's it's stunning. And
so we've we've made a lot of gains over the years,
hard won gains to improve air quality. And I get
(22:36):
pushback when I say air quality is a lot cleaner
and people say, no, the air is filthy. I'm like, oh,
go back to the seventies when people wear gas masks
in Los Angeles or like.
Speaker 1 (22:46):
Any movie in the seventies that showcases New York City.
I mean, you can't. It's not the Grany film, Yeah,
the Grany air. It's the air have to worry about.
Speaker 3 (22:56):
Right, Even nowadays, if you fly into Los Angeles at night,
it kind of of glows when you get over the
hills and you're breathing that soup. And so there has
been some gutting of the Clean Air Act. The Good
Neighbor policy is almost from my perspective, unenforceable now. So
as long as a state is entertainment, they can pretty
(23:18):
much emit whatever they want and as it goes downwind
and the government has shut down a number of air
quality sites and national parks, and these are kind of
the pristine background sites that help us track air quality.
The EPA develops the emissions inventories that we modelers need
to use to run the regulatory air quality models, and
(23:39):
there's been some question of their ability to continue doing
that and developing the national emissions inventories that we need
to use, maintaining the models themselves, providing some of the
benchmarking of the models, and the regional consortative states. In Maryland,
we're part of the Northeast state, so it was on
Transport Commission discussion of how regionally we can try to
(24:02):
do some of this on our own. But it's it's expensive, sure,
you know, it's in time consuming and we you know,
we need our EPA partners as part of this, and
there's just a lot of question. Well, they have the personnel.
They're the Office of oa QPS Office of Air Quality,
I can remember the acronym, but that's a plan to
(24:23):
be shut down. A couple of other agencies within EPA
that focus on air quality and climate are our schedule
to be shut down, and so you were losing our
tools that we need to study these problems. We're losing
the data we need to track these problems. And the
partners at the federal the federal leadership that we've had
for so long, and their ability to bring all of
(24:45):
the states together on things like air quality and climate
as well, we're just losing that capacity. And there's just
a lot of fear of how we move forward trying
to solve these problems that have such a profound economic impact.
Speaker 1 (25:00):
I mean, air quality is an interesting thing. It's almost
like heat in some way affects the very young and
the very old very disproportionately to the rest of us. Right,
So it's right, it's not you're you do not want
to be near, you know, toxic air around at an infant,
because it's just infinitely worse because they're they're they're trying
(25:20):
to their bodies growing and they're trying to adapt, and
and you're you're, you know, putting a smoke plume in
the way of of kind of a normal development of
their lung capacity, which.
Speaker 3 (25:31):
Is well and it's a lifelong problem.
Speaker 1 (25:34):
Yeah, exactly, you know, and so it's.
Speaker 3 (25:36):
Not just oh my baby's sick and they got healed
from it. You know, often lung damage is cumulative. And
so now you have condemned someone the families to costs
and then that individual lifetime of costs. And again those
are people who are kind of blind to that or
they say, oh, well it's a cost of living in
a modern society, and well who's paying that cost?
Speaker 1 (25:59):
Right? Yeah? Absolutely, I mean, as you say, the premature
lungs or a lifetime, it's the life sentence of that, right.
So it's a it's not free, you know, like a
lot of the stuff that the assumption is that you know,
it's it's kind of painless in a sense. But of
course that's not true because a lot of this is
just medical. It falls on the on the healthcare system, right,
(26:20):
So it's a one of those things. Maybe I'll turn
since we're on these cheery topics, I'll turn to Cliff
here and talk about some of the let's just let's
reset the conversation a little bit about what President Trump
and this administration is doing in terms of removing tools.
I mean, I Tim did a good job of kind
of articulating how that's affecting his work, and obviously I mean,
(26:44):
he was gonna mentioned before the call about Booiz and
maybe we can the cliff you could talk about that
too in terms of how, you know, we need these
tools to be able to give people the one week
notices or two week notices on where the heck these
things are headed, right, I mean, the the last thing
we want is for hurricanes to turn to tornadoes, which is,
you know, tornadoes, you have almost no clue as to
(27:07):
when they're going to pop up. You know, you have
very very short time windows to to be prepared, and
every every bit of data helps. But maybe if clip
talk about how you know we're seeing in an evolution
in the support that the federal government is giving towards
understanding the problem, maybe it's the best way to see.
Speaker 2 (27:26):
Yeah, it's it's what we're seeing is quite unfortunate on
the on the data side, on the research side, all
of the you know, the recisions of grants that have
already been approved on quite critical research that should be
going on.
Speaker 1 (27:41):
Can you like pick pick two that you think are
particularly like we need that you know, like it's not
this is not someone's intellectual curiosity at work, this is
like stuff that society really needs you just kind of
highlight maybe one or two that you think of it.
Speaker 2 (27:57):
I you know, and again some of this hasn't been
decided at this point, but I like and I know
it has limitations because it's not forward looking. But I
do like what FEMA has done around the National Risk Index,
the data that they've collected at the census track and
county level and looking at things on a social vulnerability,
(28:19):
a community resiliency, and looking also at expected annual loss
spaces to form that risk index. It is quite important
across eighteen different natural hazards, right, So if you want
to toggle in there and look at what the top
risks are, if you're a emergency manager and State of Florida,
you can do that. I'm sure you're sitting on top
(28:40):
of other data, but that information is critical as a
forward looking, right early warning type of exercise to have
you say, well, I have to get my communities ready.
Without that kind of information, I think we're going to
find yourself in a very sorry state here very soon.
The only thing I'd say, too, is that we have
(29:00):
seen the policy pendulum shift hard, right. We saw it
shift hard in one direction. I think what we're seeing
in this administration is a shift completely hard to the
other direction, and that's most unfortunate in the sense that
balance and equilibrium is kind of what we need here,
and that data and that research that Noah, NASA, EPA,
(29:21):
all these these agencies have been providing are quite critical.
And Tim, I know you can talk even at a
higher level about some of the things that you're seeing
going away.
Speaker 1 (29:32):
Yeah, I just want to introject one thing before what
he does. But like, for it's not just critical for
those communities to understand, it's critical from a what's the
best use of funding dollars? Yeah, you know, like because
you're you, you want to obviously, if you're going to
provide some kind of support for these communities at the
federal level or some kind of structural way, you want
(29:54):
to rank order what's going to do the most good, right,
I mean, at the end of the day, you can't
give everybody fire money. You know, some people are in
Tampa or no, sorry not. Yeah, Tampa is a good example.
There's not a lot of fire risk there. So it's
like it's important to be able to identify what is
most helpful to those communities in you know, for just
(30:15):
for resilience, this is just to make sure their local
economies keep running like they run like that's the whole goal.
It's not. This is not a way of upscaling their lifestyle.
This is a This is a way of just making
sure that the businesses that are operating today enjoy the
same business environment that they enjoy tomorrow.
Speaker 2 (30:35):
Right maybe, And the booty network you talk about is
a good example of this early warning system that without that,
how do we even know what's what's happening?
Speaker 1 (30:46):
So so so, Tim.
Speaker 2 (30:47):
I don't know. You work more on the hydronet side
of this on the Bay, and I think that's that's
very interesting because you've got cities like Annapolis and cities
on the eastern Shore over here that are you know, right,
you know, concerned about the blood risk and putting up
sea walls on all these things. And it's like, how
do they know if they don't have the data to
be able to anticipate what's coming at them.
Speaker 3 (31:10):
We've been working with Chrisfield, Maryland, and it's not even
a flood risk. It's flood happening, you know, almost on
a weekly basis, sunny day flooding. You know, their hospital
is maybe a foot couple of feet above sea level
and the bridge to get to the hospital is right
at sea level. So this is a real thing. This
isn't a theoretical and is a research scientist. It's not
(31:30):
like I say, day dream, Oh, I have an idea,
give me a million dollars to study this. This will
be fun. You know, the grand process is highly competitive.
You know, maybe fifteen to twenty percent in my field,
at least fifteen to twenty percent chance of getting funded.
And that doesn't even provide you enough funding for a
full salary. So you're writing all these proposals just to
if you're a full research scientist, which I was for
(31:53):
many years, just to pay yourself a full salary. And
even as a tenured professor now the university pay seventy
five percent of my salary. So if I'm on summer money,
you know, I need to find that that kind of money.
And so we're really trying to find, you know, work
on projects that are impactful for our communities. And just
(32:13):
again speaking of Chrisfield, they had a brick grant for
thirty seven million dollars to build or something around that
order magnitude to build sea walls, to build kind of
marsh grasses to mitigate tidal flooding, and that was just cut.
Speaker 1 (32:29):
You know.
Speaker 3 (32:29):
They they this said, this is a this is an
extreme this is happening. It's not a theoretical it's happening now.
And we were putting in kind of low cost water
level functers to help support this, you know, this grant
they had. And now I feel like we're the only
thing they have and our funding for for even just
(32:50):
building this low cost sensor network around the bay and
and the estuaries, we're not I'm not even getting paid
for it. We're just we have money to buy sensors
right now that's in danger of being cut. We have
some seed money through the University of Maryland, we have
some grateful for our partners with Marracouse, the mid Atlantic
(33:10):
Regional Association, clost Lotion Observing Systems. It's a mouthful first thing,
you got to learn the acronyms. When you start working
with other people, you got to learn the acronyms. So
when Cliff and I started working together, I'm like, wait, wait,
what was that again? I don't you just naturally spout
them out? And so I tell my students, like write
down the acronyms first thing. And so you know, we're
trying to help help at a community level as best
(33:32):
we can. But and with pure research, it's hard because
what's the return on investment. I listened at NPR the
other day and I forgot I was like, thirty years ago,
this person got a grant at the time was three
hundred thousand dollars equivalent to a million dollars now, and
it laid the foundation for neural networking. You know, they
(33:53):
just want a Nobel Prize for that. It's how much
money is in the neural networking industry.
Speaker 1 (33:58):
If you will.
Speaker 3 (33:58):
Those tools started out with a three hundred thousand dollars
NSF grant, right, And so you don't know when you'll
get that return on investment. But you know, if you're
trying to protect communities, I like to think that's important,
and you know, we just we there's no capacity to
do that anymore. I just had a grant three days ago,
(34:20):
we had submitted a year ago, was supposed to be funded.
It was to develop the state of the art highest
resolution flood mapping capabilities. And you know, I'm biased because
this is my research, but we thought, hey, we have
an opportunity here to really help our communities to design
a tool that we can expand to other communities. And
we were just told form letter that this doesn't align
(34:41):
with administration priorities.
Speaker 1 (34:43):
Yeah, no, that's and I think the framing and again
this may be a science problem, or it may be
just a communication problem in general, but the framing is
almost all of this effort is just to ensure that
the economy keeps working as it's working, Like that's that
is the goal. It's like, you can't I mean the
(35:03):
example in South North Carolina with Ashville, they you know,
the government in the state there says we have a
forty billion dollar infrastructure hole because of what just happened.
If you don't fix sewers, it has an incredible impact
on the business community's ability to continue to operate as
they've operated period. You know, because you do have you're
(35:25):
going to end up with more days where the flood
streets are flooded and people don't go downtown. And that's
a commercial loss to you and the multi What's something
not to get too in the weeds on it. But
there's something called the money multiplier idea concept which is
if you put a dollar in what do you get
out of it? And the economic value of sewers is
very high because you are affecting the ability for people
(35:48):
sometimes three or four days of actually shopping. You know,
like it's a very practical A lot of what is
kind of being you know, taken away in a sense
terms of like pulled back on, let's say, in terms
of investment from the federal government. It will just you
don't have a choice. It's not like a luxury item.
(36:09):
It just will make you poor. You know, like at
the end of the day, our communities will be poor
for not having built this stuff because you needed to
just get through, you know, your commercial year, you know,
with some certainty. You know, like that's really what you're
building into this, some of these investments. And you know,
(36:30):
you talk about buoyes. Knowing what's going to happen and
having historical records of what has happened is the best
way we can to protect those communities. You know.
Speaker 2 (36:40):
So then there's also this, you know, businesses from a
supply chain disruption standpoint. You talk about North Carolina. You
go back a couple of years, Right Adviser had one
of their warehouses for some of their injectibles taken out
by a tornado and that recab it for that particular product.
That again health and safety issues right and without the
data sort of really understand the tracking. And Tim talks
(37:02):
about this all the time, about the shifts that are
going on right now in the various hazards, not just
the frequency and the severity increases of some of that
like a larger hail from conductive storms that are happening
across the country, but shifting. We need that data to
be able to or people like Tim need that data
to inform the business community of kind of what to
(37:23):
expect and how to figure out where they should be
citing their next facility.
Speaker 3 (37:28):
Well, let's you know, our ability just in the past
couple of months, our forecast skill is degraded. You know,
we're not launching the weather balloons that constrain the models anymore.
And as you mentioned before, we're getting in a hurricane
season and you know, the National Weather Service is under
Noah and Noah's under commerce. Noah's charges protect lives in
the economy, and we've degraded our ability to do that.
(37:50):
And you know people will say, well, I can get
my weather from Acuweather accu Weather gets their data from
the National Weather Service. The analogy is, well, I don't
need farmers can get my food at the supermarket, right,
And you know the cost to fund the National Weather
Service is six dollars a year per adult in the
(38:10):
United States. I think that is a reasonable cost, and
feel free to argue with me about that. I think
that is a reasonable cost for what we get in return.
Are the forecast perfect?
Speaker 1 (38:20):
No?
Speaker 3 (38:20):
The joke is, well, wish I had a job where
I could be wrong half the time. But going into
hurricane season, to try to forecast a hurricane ten days out,
like to land within fifty miles, right, that's a huge problem.
Massive infrastructure computers to try to protect people. And you know,
(38:42):
tornado season is longer, tornado alley is shifting, Our hurricanes
are retaining more energy further inland, and people can't conceive
of that. You can say, oh, you prepare for twelve
inches of rain, and if you don't know what that's like,
you think, you know, you need to put some buckets
out or something like that, until it happened and then
it's reasonable. You know, they they can see this, But
(39:04):
how do you train models for things that we never
thought were possible before. You know, if you're looking at
the past, you're looking at a world that doesn't exist.
And we're trying to understand where we're headed in the future,
and that takes a lot of time and effort and
energy from a lot of people. Uh, and we're again
we're degrading those capabilities. And I'm really concerned as we're
going into hurricane season, but also drought season and wildfire season.
Speaker 1 (39:28):
Yeah, I totally agree. We're gonna we're gonna wind things
down a little bit here as we're getting towards the
end of our chat. Any kind of parting words, Cliff,
to your students, how about how about to your students
shout out, you know, in terms of what what what
this was about in and any thoughts you had.
Speaker 2 (39:45):
Yeah, I think it's important when students, particularly in my school. Right,
it's a business school, and I look at you know,
what what we do here is trying to get them
ready for great jobs at terrific companies. And one of
the areas that they need to be aware of, right.
Climate risk is whether you call it climate risk or
(40:05):
if that's too polarizing, call it natural hazard risk, environmental risk.
Pick you pick. Your words right at the end of
the day, and again, I'm a professional risk manager by training.
I feel that it's it's an incumbent upon me and
all of us within the business community to try and
better understand the nature of those risks and how they
(40:26):
affect business, how they affect society, how government can actually
be used in partnership with private companies to be able
to kind of help as Tim was talking about before,
protect lies most importantly, but also protect commerce and the
functioning of our markets. The last thing I'll say is
that that last piece, you only have to look as
far as the mortgage market and see that in the
(40:47):
next five to ten years, homeowners insurance costs that are
rising or outsized are very unaffordable. If you can get
it across different communities, is going to become anm crisis.
I believe in the housing market. We have to figure
out ways to be able to address that. How do
you do that unless you're taking courses like what we're
(41:08):
offering and starting to learn about these.
Speaker 1 (41:10):
Things, great, Tim a need parting shots.
Speaker 3 (41:13):
Well, what I'm trying to convey to the students that
you know, these are real problems, they need real solutions.
Thoughtful solutions that are effective. Obviously, we can't just say well,
no one can use fossil fuels, nobody can drive to work,
nobody can take hot showers anymore. That's that's I'm out.
I have to take hot showers. I keep going. I
was told this at a meeting one time. Well, people
(41:34):
need to stop taking hot showers. Not going to happen,
you know, Like we have to be reasonable to hear.
But as we've seen, with their quality, we can solve problems.
Or with the ozone hole, like I've started out studying
the ozone layer, we can solve these problems in ways
that can also benefit the economy. But for these students
in the business school, we need their voices. I ask
(41:56):
my students here. I'm easy to ignore, right, The scientific
community is easy to ignore just one of those nerds, right.
But we need other advocates saying no, this is a
huge problem. We need our partners and the scientific community
to provide us the information so we know how to
protect our companies. We need to know how to protect
(42:18):
our citizens, our infrastructure. We're all in this together, and
it's unfortunately it's taken so long for people like Cliff
and I to get together and start talking about like,
you know, we've got a lot more in common than
we thought we'd talked about. Like you know, if I
Cliffs kind enough to let me hang around with him
in some of his meetings and I hear these people
talking about the problems with machine learning, I close my
eyes and it sounds like I'm back in my own
(42:39):
building because the problems they're talking about the same problems
and concerns we have. And so we really need to
kind of bridge this gap, and we need I think
the students to kind of guide that, to kind of
be conversing in both fields to help us better make
these connections. That's that's my opinion.
Speaker 1 (42:56):
That's great. Well, I'm gonna say thank you so much
you guys. Really a great conversation. Really enjoyed a Cliff
and Tim look forward to hopefully continue the conversation. You
can find more information on topics like climate damages and
impacts by going to the Bloomberg function BI Carbon and
then the Climate Damages tracker on the Bloomberg terminal. If
(43:18):
you have an ESG quandary or burning question you would
like to ask bi's expert analysts, please send us an
email at a Stevenson seventy eight at Bloomberg dot com
or ESG Currents at Bloomberg dot net. Thank you very much,
Welcome to ESG Currents, your guide to navigating the evolving
ESG space, one topic at a time. Brought to you
by Bloomberg Intelligence, part of Bloomberg's research department, with five
hundred analysts and strategists working across all world markets. Our
coverage includes over two thousand equities and credits, as well
(00:27):
as outlooks on more than ninety industries and one hundred
market industries, currencies, and commodities. I am Andy Stevenson, Senior
ESG Analyst for Climate, and I am your host today
for today's episode. I am joined today by Cliff Rossi
and Tim Canty, both of which are University of Maryland
focused on Both professors focused on teaching sustainability to their students.
(00:52):
Welcome guys, Thanks for having us, Thank you. Sure so,
I just wanted to kick off the conversation with the
students perspective and then we can go into a whole
host of things about how the world is ever changing
and how we need to kind of navigate it from
a teaching and practical perspective, especially with respect to you know,
(01:15):
the physical physical risks that we're experiencing obviously from climate
and when President Trump takes away something. What does it mean,
you know, in terms of how it's from FEMA's perspective
or whatever. How is that going to make us less
prepared and not ideally prepared, etc. Right, So, but let's
(01:35):
start with the student's perspective. Both of you are professors,
and I just want to get, you know, just a
short understanding of what you think your students are looking
for when they sign up for your classes.
Speaker 2 (01:48):
So Tim and I come at it from completely opposite
ends of the spectrum.
Speaker 1 (01:52):
Right.
Speaker 2 (01:52):
I'm a finance professor. Risk management was my industry for
twenty five years. Tim comes at it from being an
atmosphere scientists really, as I call them, a real climate scientist.
And so from our perspective, what we've done in kind
of banding together of the last couple of years is
to put together educational programs, primarily coursework if we're talking
(02:18):
about our students in the area of climate models and
analytical tools, because that intersection right now is particularly problematic
for many folks in the industry that are trying to
get their arms around understanding, Okay, we've got these physical
models that we use to understand how climate is affecting,
you know, the Earth's system, and then those of us
(02:38):
that were in industry, you know, have to take the
outputs of those models and then feed them into our
financial risk models. So we teach out of the business
school on that Tim teaches out of the other college
that actually does the science part of this, but the
course itself is actually taught in our Robert A. Smith's
School of Business program. We have a track at our
Master's of Finance program. All where will students get the
(03:02):
kind of training to have them understand these intersections between
science and business.
Speaker 1 (03:07):
That's what we provide.
Speaker 3 (03:08):
Yeah, and coming from the science side, you know, I
recognize that most of these students don't all pretty much
all of them don't have the background. So it's kind
of incumbent upon me to distill fairly complicated research topics
into not necessarily actionable for the class, but understandable and usable.
(03:29):
And you know, that's that's a challenge for the scientific community,
but particularly in a situation like this, but necessary. You know,
I can't go in and start writing down differential equations
and spouting acronyms because that defeats the purpose of the class.
We're trying to get these students up to speed, not
to be experts. It's hard enough for me to get
a job. I don't need the competition from these really
(03:50):
bright students, but to be conversant. So when they go
into the room they can they can almost be the
ambassadors from the science side. They can they can help
explain and translate.
Speaker 2 (04:01):
To pick up on that. One of the other things
that we do is we have these exponential learning projects.
Think of those as capstone and capstone courses in our
Masters of Quantity of Finance and Masters of Finance programs.
And what we do is we seek out corporate sponsors
to support the work that we're doing and climate risk.
And in this case, we've done a number of projects
(04:21):
like that where we take let's say four or five
hundred thousand mortgage loans and all the characteristics of that
along with data from FEMA's National Risk Index and other areas,
and we build tools to say what kind of impact
would this type of natural hazard have on loan modern
(04:43):
income barbers, And then we try and understand what kind
of associated mitigation strategies could be brought in to kind
of help address that. And what we found is that
the companies find that extremely interesting. The students have a
leg up on their competition and looking for jobs because
they're already familiar with this kind of information and how
(05:05):
to actually use it to kind of make these business decisions.
Speaker 1 (05:09):
Yeah, and it goes beyond just you know, pricing insurance.
You know, like this is not this is affects spending habits,
It affects the welfare of those communities, It affects the
tax space. It's a very broad swath of like problems
associated with this. Right, It's not just you know, the
pricing of insurance. We found out every year whether they
(05:31):
made money or lost money. Right, so it's like you
can it's especially at Bloomberg, we do a lot of
analysis around what we call net premiums after loss to
understand is the industry making any money at this in
a state like Florida or a state like Texas or
state like California, you know, and you don't want that
to go below the red the turn into a negative
(05:53):
number on a regular basis, because what that implies is,
in simple terms, is that the price of the insurance
was too you know, like so you know, going forward,
they're going to have to raise it just to break even.
And you know, no business is in business to break even, right,
So it's a it's a kind of a complicated thing.
I wanted to go back to something that Tim spoke
(06:13):
about earlier, which is this idea of communicating effectively kind
of business impacts from science, you know, and the I've
been at this for a very long time and as
you guys may may or may not have, but that
is always difficult because the ambassadors with the most knowledge
(06:36):
are rarely the ambassadors with the best ability to convey
that information, you know, like they I used to work
with the MIT Air and Aviation Group and frighteningly brilliant people,
some of the smartest people in the world. And as
you know, these calculating how the wind the wind blows
for lack of a better description of it with respect
(06:57):
to air pollution or whatever, is in incredibly exhausting from
a data perspective. I mean, those models run for months,
you know in some cases to try to figure out
these problems, and they end up with results, but then
communicating it to not only to students but just to
the business community. What this means is a skill that
unfortunately is sort of in short supply. Well the science
(07:21):
talk about that a little bit.
Speaker 3 (07:22):
Scientists are never trained for this. We're trained to We've
always been told just do good science and let the
science speak for itself. Well, science doesn't speak for itself,
and now no one's listening anyway. And so I professionally,
I'm an air quality policy scientist. So to be effective
in helping write effective policy, I have to be able
(07:44):
to communicate very challenging scientific concepts to policy makers who
are very limited time, right, And we just got to
get the point across. And so I've had to acquire
this skill. But even internally within the sciences, I've sat
through many seminars that are really look forward to from
brilliant scientists and like, oh my god, I can't understand
what the hell they're saying, you know, So it's so frustrating.
(08:07):
And that's that's a problem that really truly is a problem.
And I'll put this on the scientific community. I don't
think over the years we've focused enough on building the
skill sets to communicate important science to people outside of
the scientific community. We're never trained for it. It's not
part of our curriculum. But that has to change. That really,
really truly has to change. And for the jobs of
(08:29):
the future. I keep pushing our students to look at
the business sector. You know, you can be a good
scientist and work for a company and probably make a
lot more money and and and do good work right
and and help inform people. But it's this is a
relatively recent push within the scientific community. We relied on
(08:51):
Bill Nye and Neil de grass Tyson, but all of
us really should be better ambassadors for the field.
Speaker 1 (08:56):
Yeah, and even they, I would say, are not business oriented,
you know, like they really aren't there there they communicated
to people and you know, just to super simplify what
you do, tim and then this is oversimplifying it probably
in your mind and everyone else's mind. But from a
business perspective, what does more air pollution mean? More air
pollution means your hospitals have to are going to have
(09:18):
higher expenses that you can't control, you know, like that
that's that's like the punchline that that a congressman wants
to hear and how much you know, like that that
this not putting a scrubber on top of the smoke
stack is costing us whatever, five million dollars a year
at three hospitals, because that's that's the net impact, you know,
(09:41):
like of pulmonary disease going up. You know, like that's
just what the costs are, whether.
Speaker 3 (09:46):
It's air quality or climate. I don't think we've fully
follow through in the cascade of impacts. We look at
the initial but then what's the cascade of impacts after
that and and the cost of that. We just published
a study and work with epidemiology. It's tuny Buffalo showing
the increased risk of NIQUE admission based on air pollution
exposure the month before birth. So I can create plots
(10:10):
of pollution. I can create plots of increased risk. What
I want then is a nice color contour plot of
dollar signs, because what motivates people, especially maybe this audience,
more than anything else, it's the dollar signs. Out of
pocket expenses for a NIQU admission. Medium cost is five grand,
So where you live impacts your ability to have a
(10:30):
healthy child, which has a huge economic impact and further
drain on already stressed out resources.
Speaker 1 (10:37):
It will follow the local community to pay for in
some cases because poor people are more exposed.
Speaker 3 (10:43):
So you end up with with this problem and we're
not allowed to talk about that any.
Speaker 1 (10:46):
Yeah, yeah, exactly, But I mean it's a dollars. Thing
is dollars like it's a dollar. It's the translation is
air pollution is bad. Yes, air pollution is bad because
it costs my tax based money. You know what I'm saying.
Like that is the that is like the full sentence
if you want to go that way.
Speaker 3 (11:05):
Initial costs of niek you But then what about missed
work or reduce worker productivity? It's the other cast a
miss school. Sure the cascade of impacts that we need
to do that full cost accounting somehow, And I'm not
sure we have the tools for help, you know, for
air quality or Cliff and I've been focusing on for climate.
Speaker 1 (11:22):
Yeah, let's go back to maybe Cliff on this in
terms of your ability to translate what you're hearing from
the tims of the world and or the femas of
the world. How are you finding your ability to and
your students. I mean, let's face it, you know, as
smart as your students are, there's just no education that
(11:43):
they could have prepared themselves for to understand this stuff
in five minutes. You know, it's a very challenging thing
that you've taken taken you years to do, taking me
years to do, taking tim years to do. So how
do they absorb this and how do you communicate with it.
Let's there's two audiences I'm going to ask you about, Cliff.
The first is the audience of your classroom, which is,
(12:06):
how are you communicating this in a way that resonates
with them? And then the second question is you are
obviously trying to get donors and you're also a fundraising
but you're also trying to highlight the fact that this
matters to business, you know, and obviously you have to
communicate that in a business language. So can I may
(12:26):
maybe if you could ask answer on you know, from
the the young pup perspective and the you know, guy
that really doesn't want to listen to you unless there's
a dollar sign attached to it perspective.
Speaker 2 (12:38):
Sure, So what we do is we spend a lot
of time on applications, we go through concepts, and what
Tim and I basically do is we tag team this
this this climate models and analytics course. Because at the
end of the day, one of the things that I
realized was that if you're on deck at let's say
a financial institution, a big bank or whatever, and you're
(12:59):
having it some sort of climate scenario you're very used
to doing, you know, to taking financial information and running
it through your your models. Right, It's a whole other
set of kettle or fish when you're taking you know,
physical outputs from very complicated climate models and integrated assessment
models and then having to run them through. So we
(13:20):
go through this very methodically, but as I said, with
a lot of with a lot of examples, a lot
of case studies. We also one of the things that
we spend a fair amount of time on is critical
thinking about about the models that.
Speaker 3 (13:34):
Are being used and deployed.
Speaker 2 (13:36):
Because one of the things that we find is that
you know, all models are wrong, some are useful comes
up a lot, particularly in the case of these climate models,
and so having an understanding of the strengths and limitations
of these models where they can be deployed is quite critical,
and having them think about other ways in which these
models can be adapted and applied in other ways to
(13:59):
help to gate climate issues down the road. So we
do a spend we do spend a fair amount of
time that way. In the applications. I'll say on the
second question, we've been involved, for example, Tim and I
uh with with organizations where they'll bring us in, uh
to kick the tires, so to speak, on if they're
(14:21):
looking at various climate vendors. Right there are all these
purveyors of these of these climate models, and so we
can come in and help give them our insights as
to what questions to ask when they're bringing in these
great presentations. Right but don't want to fully disclose with
behind the secret sauce right now, I get that I've
been down that path before. So those are some of
(14:43):
the things that we're doing in addition to you know,
doing analysis again apply to analysis. You can hear what
Tim is talking about in some of the research that
he's doing both at the state level and federal level.
I spend most of my time oriented more toward business
in terms of the kind of applied analytics that maybe
they could find you. So one of the tools, for example,
(15:04):
that we're going to be deploying next week is called
our Smith Enterprise Risk Consortium, which sir Mortgage Climate Risk
Analyzer tool that basically takes all of the loans that
were originated in twenty twenty three with all the characteristics
that are provided on the Home Order's Disclosure Act data,
which who knows if that'll still be around next year,
(15:25):
and we integrate that with two different sets of indices.
We have a FEMA's National Risk Index we'll see if
that's still around there next year, and then a composite
forward looking NASA index from twenty forty to forty nine.
And what we do in that is we can we
built a tableau based tool that allows industry users. This
(15:47):
will wind up actually on one of the Trade Association's
website next week where they can come in and do benchmarking.
And so what they'll do is be able to toggle
and say, I want to look at my portfolio of
mortgage loans in this area in terms of loan moderate
income barwers or minority bars or however you want to
define financial capacity constrain borrowers and benchmark that against what
(16:11):
I have, and then maybe I make some adjustments to
my portfolio or whatever, and we come in and can
help guide companies.
Speaker 3 (16:18):
With that kind of analysis.
Speaker 1 (16:21):
Yeah, that makes sense just for me, just to give
you a sense of how we look at it at Bloomberg,
we actually, I mean, we have models that go out
into the future and there is a lot of work
that's you know, I think we just absorbed a company
that does that, just like forecast models and stuff like that.
But the work that I do doesn't rely on any
forecasting at all. It just measures all the damages that
(16:43):
we're seeing in the economy on a rolling basis. It's
running at about a trillion dollars a year right now,
about three point two percent of usg three point three
percent of us GDP. And then understanding the context of
that at the state level, at the county level. And
the idea is similar to what I mean I came
from kind of the hedge fund world, is something like
(17:04):
a stress loss. You know, like the idea is how
bad can it get? And you multiply that by two,
you know, for lack of a you know, simplify things.
You think about a place like Asheville, North Carolina that
would not have shown up on any climate model as
being a train wreck candidate. Right, So you have to
look at, you know, kind of forensically, what does that mean,
(17:27):
you know, what percentage of those because it's underinsured, A
huge percentage of those losses were just you know, out
of someone's pocketbook. And that's a bigger deal. You know,
Like one of the things that I have learned anyway,
is that if everything was insured, we wouldn't have a problem.
You know what I'm saying, Like it would be an
expense and to be part of your life, and it
(17:48):
may be a very highly volatile expense, like it could
move up, you know, twenty percent a year. It has,
it does happen. But at least it would be a
self contained thing because the all the losses would be eventually,
you know, like they'd be recovered in your wallet by
the mechanism of insurance. Well, when you go into areas
(18:09):
where there's low insurance penetration, and the United States in particular,
like again Asheville was only twenty five percent insured or something,
all the losses and the infrastructure wasn't prepared for it either.
You end up with these multiplier effects that affect mortgages
and everything else home, you know, like your ability to
pay back student loans, all these things. The first thing
(18:30):
that happens historically is people stop paying that stuff or whatever,
take a little mini holiday from paying it because sometimes
they get relief from interest rates and stuff like that,
and they have other things to spend money on. But
it's really hard from a you know, it's harder to
it's easier to understand the context of examples like that
(18:52):
if that makes sense. You know, like here's a situation
that happened to a community with low insurance penetration, and
you know there was a seventy billion dollars of day
and only twenty billion was insured, and things like that,
and how that how does that affect outcomes financial outcomes
in those parts of the country. So that's that's sort
of the way that we are attacking the problem, at
(19:12):
least at Bloomberg Intelligence is looking at it the costs,
and you don't have to look very far because these
things are huge, you know, Like you think what happened
in the La wildfires is a lot of a lot
of lost income took place, as well as damages to homes.
You know, I did want to spend a little time
since we have Tim on the line talking about air
(19:33):
pollution because with the wildfires that we've seen in Canada
and in general, obviously adding to the toxic soup that
we could ingest every day that we call air and
the fact that we may see regulations start to get
rolled back in certain areas. What I mean, we've had
(19:53):
this remarkable downward trajectory in air air pollution in the
United States since the seventies, going back to the First
Clean Air Act, like really remarkable progress in terms of
our air. People just used to die of air, you
know in America, Like that was like some crazy percentage
of the reason why people died in sixty five their
(20:15):
lungs just gave out because of the air quality. Cigarettes
obviously wasn't helping. My understanding from recent research is that
that is starting to kind of pick up again and
turn the other direction. Maybe talk a little bit about
first of all, is that happening. How are wildfires specifically
informing that? And you know, how what does it mean?
(20:38):
You know, like what if you can laymen us an
answer to that, that would be wonderful.
Speaker 3 (20:44):
You're right at least like here in Maryland, twenty twenty
two was the cleanest year on record, and we're at
the point thinking, well, we're done, I'm going to move
on to something else now, and then we had the
twenty twenty three wildfires in and so we are kind
of seeing a shift from ozone related air quality exceedance
(21:05):
system more particulate matter. And what people people don't realize
is that smoke travels and only takes a couple of
days to go from California or Western Canada to get here.
You know, it gets up near the stratosphere and that
it plops back down again. It's not just local. And
so as we're seeing in many places drier conditions and
(21:28):
less snowpack, less snowfall. You know, it might be lightning,
it might be a person starting the fire, but the
conditions seem to be ripe, and this seems to be
increasing for more wildfires. And so yeah, we're we're trending
back up in terms of ozone exceedances and particulate matter.
The PM standard recently came down, and so as the
(21:50):
standards get constrained, more more people are in exceedance. So
it's it's a struggle because for a state, you know
legally has to be an attainment, but then you have
to apply for an exceptional event because you say, well,
it's a wildfire in California. You know, I think globally
four hundred thousand people died from mozone exposure, but eight
million people died from particulate matters. So this is these
(22:12):
are big numbers. But the problem is it's not like
a whole bunch of people in one space at once.
It's an older person, it's a sick person, and so
it's it's not like a it's not like an aircraft disaster, right,
it's just people here, here, and here. But when you
add up and up the numbers, it's it's stunning. And
so we've we've made a lot of gains over the years,
hard won gains to improve air quality. And I get
(22:36):
pushback when I say air quality is a lot cleaner
and people say, no, the air is filthy. I'm like, oh,
go back to the seventies when people wear gas masks
in Los Angeles or like.
Speaker 1 (22:46):
Any movie in the seventies that showcases New York City.
I mean, you can't. It's not the Grany film, Yeah,
the Grany air. It's the air have to worry about.
Speaker 3 (22:56):
Right, Even nowadays, if you fly into Los Angeles at night,
it kind of of glows when you get over the
hills and you're breathing that soup. And so there has
been some gutting of the Clean Air Act. The Good
Neighbor policy is almost from my perspective, unenforceable now. So
as long as a state is entertainment, they can pretty
(23:18):
much emit whatever they want and as it goes downwind
and the government has shut down a number of air
quality sites and national parks, and these are kind of
the pristine background sites that help us track air quality.
The EPA develops the emissions inventories that we modelers need
to use to run the regulatory air quality models, and
(23:39):
there's been some question of their ability to continue doing
that and developing the national emissions inventories that we need
to use, maintaining the models themselves, providing some of the
benchmarking of the models, and the regional consortative states. In Maryland,
we're part of the Northeast state, so it was on
Transport Commission discussion of how regionally we can try to
(24:02):
do some of this on our own. But it's it's expensive, sure,
you know, it's in time consuming and we you know,
we need our EPA partners as part of this, and
there's just a lot of question. Well, they have the personnel.
They're the Office of oa QPS Office of Air Quality,
I can remember the acronym, but that's a plan to
(24:23):
be shut down. A couple of other agencies within EPA
that focus on air quality and climate are our schedule
to be shut down, and so you were losing our
tools that we need to study these problems. We're losing
the data we need to track these problems. And the
partners at the federal the federal leadership that we've had
for so long, and their ability to bring all of
(24:45):
the states together on things like air quality and climate
as well, we're just losing that capacity. And there's just
a lot of fear of how we move forward trying
to solve these problems that have such a profound economic impact.
Speaker 1 (25:00):
I mean, air quality is an interesting thing. It's almost
like heat in some way affects the very young and
the very old very disproportionately to the rest of us. Right,
So it's right, it's not you're you do not want
to be near, you know, toxic air around at an infant,
because it's just infinitely worse because they're they're they're trying
(25:20):
to their bodies growing and they're trying to adapt, and
and you're you're, you know, putting a smoke plume in
the way of of kind of a normal development of
their lung capacity, which.
Speaker 3 (25:31):
Is well and it's a lifelong problem.
Speaker 1 (25:34):
Yeah, exactly, you know, and so it's.
Speaker 3 (25:36):
Not just oh my baby's sick and they got healed
from it. You know, often lung damage is cumulative. And
so now you have condemned someone the families to costs
and then that individual lifetime of costs. And again those
are people who are kind of blind to that or
they say, oh, well it's a cost of living in
a modern society, and well who's paying that cost?
Speaker 1 (25:59):
Right? Yeah? Absolutely, I mean, as you say, the premature
lungs or a lifetime, it's the life sentence of that, right.
So it's a it's not free, you know, like a
lot of the stuff that the assumption is that you know,
it's it's kind of painless in a sense. But of
course that's not true because a lot of this is
just medical. It falls on the on the healthcare system, right,
(26:20):
So it's a one of those things. Maybe I'll turn
since we're on these cheery topics, I'll turn to Cliff
here and talk about some of the let's just let's
reset the conversation a little bit about what President Trump
and this administration is doing in terms of removing tools.
I mean, I Tim did a good job of kind
of articulating how that's affecting his work, and obviously I mean,
(26:44):
he was gonna mentioned before the call about Booiz and
maybe we can the cliff you could talk about that
too in terms of how, you know, we need these
tools to be able to give people the one week
notices or two week notices on where the heck these
things are headed, right, I mean, the the last thing
we want is for hurricanes to turn to tornadoes, which is,
you know, tornadoes, you have almost no clue as to
(27:07):
when they're going to pop up. You know, you have
very very short time windows to to be prepared, and
every every bit of data helps. But maybe if clip
talk about how you know we're seeing in an evolution
in the support that the federal government is giving towards
understanding the problem, maybe it's the best way to see.
Speaker 2 (27:26):
Yeah, it's it's what we're seeing is quite unfortunate on
the on the data side, on the research side, all
of the you know, the recisions of grants that have
already been approved on quite critical research that should be
going on.
Speaker 1 (27:41):
Can you like pick pick two that you think are
particularly like we need that you know, like it's not
this is not someone's intellectual curiosity at work, this is
like stuff that society really needs you just kind of
highlight maybe one or two that you think of it.
Speaker 2 (27:57):
I you know, and again some of this hasn't been
decided at this point, but I like and I know
it has limitations because it's not forward looking. But I
do like what FEMA has done around the National Risk Index,
the data that they've collected at the census track and
county level and looking at things on a social vulnerability,
(28:19):
a community resiliency, and looking also at expected annual loss
spaces to form that risk index. It is quite important
across eighteen different natural hazards, right, So if you want
to toggle in there and look at what the top
risks are, if you're a emergency manager and State of Florida,
you can do that. I'm sure you're sitting on top
(28:40):
of other data, but that information is critical as a
forward looking, right early warning type of exercise to have
you say, well, I have to get my communities ready.
Without that kind of information, I think we're going to
find yourself in a very sorry state here very soon.
The only thing I'd say, too, is that we have
(29:00):
seen the policy pendulum shift hard, right. We saw it
shift hard in one direction. I think what we're seeing
in this administration is a shift completely hard to the
other direction, and that's most unfortunate in the sense that
balance and equilibrium is kind of what we need here,
and that data and that research that Noah, NASA, EPA,
(29:21):
all these these agencies have been providing are quite critical.
And Tim, I know you can talk even at a
higher level about some of the things that you're seeing
going away.
Speaker 1 (29:32):
Yeah, I just want to introject one thing before what
he does. But like, for it's not just critical for
those communities to understand, it's critical from a what's the
best use of funding dollars? Yeah, you know, like because
you're you, you want to obviously, if you're going to
provide some kind of support for these communities at the
federal level or some kind of structural way, you want
(29:54):
to rank order what's going to do the most good, right,
I mean, at the end of the day, you can't
give everybody fire money. You know, some people are in
Tampa or no, sorry not. Yeah, Tampa is a good example.
There's not a lot of fire risk there. So it's
like it's important to be able to identify what is
most helpful to those communities in you know, for just
(30:15):
for resilience, this is just to make sure their local
economies keep running like they run like that's the whole goal.
It's not. This is not a way of upscaling their lifestyle.
This is a This is a way of just making
sure that the businesses that are operating today enjoy the
same business environment that they enjoy tomorrow.
Speaker 2 (30:35):
Right maybe, And the booty network you talk about is
a good example of this early warning system that without that,
how do we even know what's what's happening?
Speaker 1 (30:46):
So so so, Tim.
Speaker 2 (30:47):
I don't know. You work more on the hydronet side
of this on the Bay, and I think that's that's
very interesting because you've got cities like Annapolis and cities
on the eastern Shore over here that are you know, right,
you know, concerned about the blood risk and putting up
sea walls on all these things. And it's like, how
do they know if they don't have the data to
be able to anticipate what's coming at them.
Speaker 3 (31:10):
We've been working with Chrisfield, Maryland, and it's not even
a flood risk. It's flood happening, you know, almost on
a weekly basis, sunny day flooding. You know, their hospital
is maybe a foot couple of feet above sea level
and the bridge to get to the hospital is right
at sea level. So this is a real thing. This
isn't a theoretical and is a research scientist. It's not
(31:30):
like I say, day dream, Oh, I have an idea,
give me a million dollars to study this. This will
be fun. You know, the grand process is highly competitive.
You know, maybe fifteen to twenty percent in my field,
at least fifteen to twenty percent chance of getting funded.
And that doesn't even provide you enough funding for a
full salary. So you're writing all these proposals just to
if you're a full research scientist, which I was for
(31:53):
many years, just to pay yourself a full salary. And
even as a tenured professor now the university pay seventy
five percent of my salary. So if I'm on summer money,
you know, I need to find that that kind of money.
And so we're really trying to find, you know, work
on projects that are impactful for our communities. And just
(32:13):
again speaking of Chrisfield, they had a brick grant for
thirty seven million dollars to build or something around that
order magnitude to build sea walls, to build kind of
marsh grasses to mitigate tidal flooding, and that was just cut.
Speaker 1 (32:29):
You know.
Speaker 3 (32:29):
They they this said, this is a this is an
extreme this is happening. It's not a theoretical it's happening now.
And we were putting in kind of low cost water
level functers to help support this, you know, this grant
they had. And now I feel like we're the only
thing they have and our funding for for even just
(32:50):
building this low cost sensor network around the bay and
and the estuaries, we're not I'm not even getting paid
for it. We're just we have money to buy sensors
right now that's in danger of being cut. We have
some seed money through the University of Maryland, we have
some grateful for our partners with Marracouse, the mid Atlantic
(33:10):
Regional Association, clost Lotion Observing Systems. It's a mouthful first thing,
you got to learn the acronyms. When you start working
with other people, you got to learn the acronyms. So
when Cliff and I started working together, I'm like, wait, wait,
what was that again? I don't you just naturally spout
them out? And so I tell my students, like write
down the acronyms first thing. And so you know, we're
trying to help help at a community level as best
(33:32):
we can. But and with pure research, it's hard because
what's the return on investment. I listened at NPR the
other day and I forgot I was like, thirty years ago,
this person got a grant at the time was three
hundred thousand dollars equivalent to a million dollars now, and
it laid the foundation for neural networking. You know, they
(33:53):
just want a Nobel Prize for that. It's how much
money is in the neural networking industry.
Speaker 1 (33:58):
If you will.
Speaker 3 (33:58):
Those tools started out with a three hundred thousand dollars
NSF grant, right, And so you don't know when you'll
get that return on investment. But you know, if you're
trying to protect communities, I like to think that's important,
and you know, we just we there's no capacity to
do that anymore. I just had a grant three days ago,
(34:20):
we had submitted a year ago, was supposed to be funded.
It was to develop the state of the art highest
resolution flood mapping capabilities. And you know, I'm biased because
this is my research, but we thought, hey, we have
an opportunity here to really help our communities to design
a tool that we can expand to other communities. And
we were just told form letter that this doesn't align
(34:41):
with administration priorities.
Speaker 1 (34:43):
Yeah, no, that's and I think the framing and again
this may be a science problem, or it may be
just a communication problem in general, but the framing is
almost all of this effort is just to ensure that
the economy keeps working as it's working, Like that's that
is the goal. It's like, you can't I mean the
(35:03):
example in South North Carolina with Ashville, they you know,
the government in the state there says we have a
forty billion dollar infrastructure hole because of what just happened.
If you don't fix sewers, it has an incredible impact
on the business community's ability to continue to operate as
they've operated period. You know, because you do have you're
(35:25):
going to end up with more days where the flood
streets are flooded and people don't go downtown. And that's
a commercial loss to you and the multi What's something
not to get too in the weeds on it. But
there's something called the money multiplier idea concept which is
if you put a dollar in what do you get
out of it? And the economic value of sewers is
very high because you are affecting the ability for people
(35:48):
sometimes three or four days of actually shopping. You know,
like it's a very practical A lot of what is
kind of being you know, taken away in a sense
terms of like pulled back on, let's say, in terms
of investment from the federal government. It will just you
don't have a choice. It's not like a luxury item.
(36:09):
It just will make you poor. You know, like at
the end of the day, our communities will be poor
for not having built this stuff because you needed to
just get through, you know, your commercial year, you know,
with some certainty. You know, like that's really what you're
building into this, some of these investments. And you know,
(36:30):
you talk about buoyes. Knowing what's going to happen and
having historical records of what has happened is the best
way we can to protect those communities. You know.
Speaker 2 (36:40):
So then there's also this, you know, businesses from a
supply chain disruption standpoint. You talk about North Carolina. You
go back a couple of years, Right Adviser had one
of their warehouses for some of their injectibles taken out
by a tornado and that recab it for that particular product.
That again health and safety issues right and without the
data sort of really understand the tracking. And Tim talks
(37:02):
about this all the time, about the shifts that are
going on right now in the various hazards, not just
the frequency and the severity increases of some of that
like a larger hail from conductive storms that are happening
across the country, but shifting. We need that data to
be able to or people like Tim need that data
to inform the business community of kind of what to
(37:23):
expect and how to figure out where they should be
citing their next facility.
Speaker 3 (37:28):
Well, let's you know, our ability just in the past
couple of months, our forecast skill is degraded. You know,
we're not launching the weather balloons that constrain the models anymore.
And as you mentioned before, we're getting in a hurricane
season and you know, the National Weather Service is under
Noah and Noah's under commerce. Noah's charges protect lives in
the economy, and we've degraded our ability to do that.
(37:50):
And you know people will say, well, I can get
my weather from Acuweather accu Weather gets their data from
the National Weather Service. The analogy is, well, I don't
need farmers can get my food at the supermarket, right,
And you know the cost to fund the National Weather
Service is six dollars a year per adult in the
(38:10):
United States. I think that is a reasonable cost, and
feel free to argue with me about that. I think
that is a reasonable cost for what we get in return.
Are the forecast perfect?
Speaker 1 (38:20):
No?
Speaker 3 (38:20):
The joke is, well, wish I had a job where
I could be wrong half the time. But going into
hurricane season, to try to forecast a hurricane ten days out,
like to land within fifty miles, right, that's a huge problem.
Massive infrastructure computers to try to protect people. And you know,
(38:42):
tornado season is longer, tornado alley is shifting, Our hurricanes
are retaining more energy further inland, and people can't conceive
of that. You can say, oh, you prepare for twelve
inches of rain, and if you don't know what that's like,
you think, you know, you need to put some buckets
out or something like that, until it happened and then
it's reasonable. You know, they they can see this, But
(39:04):
how do you train models for things that we never
thought were possible before. You know, if you're looking at
the past, you're looking at a world that doesn't exist.
And we're trying to understand where we're headed in the future,
and that takes a lot of time and effort and
energy from a lot of people. Uh, and we're again
we're degrading those capabilities. And I'm really concerned as we're
going into hurricane season, but also drought season and wildfire season.
Speaker 1 (39:28):
Yeah, I totally agree. We're gonna we're gonna wind things
down a little bit here as we're getting towards the
end of our chat. Any kind of parting words, Cliff,
to your students, how about how about to your students
shout out, you know, in terms of what what what
this was about in and any thoughts you had.
Speaker 2 (39:45):
Yeah, I think it's important when students, particularly in my school. Right,
it's a business school, and I look at you know,
what what we do here is trying to get them
ready for great jobs at terrific companies. And one of
the areas that they need to be aware of, right.
Climate risk is whether you call it climate risk or
(40:05):
if that's too polarizing, call it natural hazard risk, environmental risk.
Pick you pick. Your words right at the end of
the day, and again, I'm a professional risk manager by training.
I feel that it's it's an incumbent upon me and
all of us within the business community to try and
better understand the nature of those risks and how they
(40:26):
affect business, how they affect society, how government can actually
be used in partnership with private companies to be able
to kind of help as Tim was talking about before,
protect lies most importantly, but also protect commerce and the
functioning of our markets. The last thing I'll say is
that that last piece, you only have to look as
far as the mortgage market and see that in the
(40:47):
next five to ten years, homeowners insurance costs that are
rising or outsized are very unaffordable. If you can get
it across different communities, is going to become anm crisis.
I believe in the housing market. We have to figure
out ways to be able to address that. How do
you do that unless you're taking courses like what we're
(41:08):
offering and starting to learn about these.
Speaker 1 (41:10):
Things, great, Tim a need parting shots.
Speaker 3 (41:13):
Well, what I'm trying to convey to the students that
you know, these are real problems, they need real solutions.
Thoughtful solutions that are effective. Obviously, we can't just say well,
no one can use fossil fuels, nobody can drive to work,
nobody can take hot showers anymore. That's that's I'm out.
I have to take hot showers. I keep going. I
was told this at a meeting one time. Well, people
(41:34):
need to stop taking hot showers. Not going to happen,
you know, Like we have to be reasonable to hear.
But as we've seen, with their quality, we can solve problems.
Or with the ozone hole, like I've started out studying
the ozone layer, we can solve these problems in ways
that can also benefit the economy. But for these students
in the business school, we need their voices. I ask
(41:56):
my students here. I'm easy to ignore, right, The scientific
community is easy to ignore just one of those nerds, right.
But we need other advocates saying no, this is a
huge problem. We need our partners and the scientific community
to provide us the information so we know how to
protect our companies. We need to know how to protect
(42:18):
our citizens, our infrastructure. We're all in this together, and
it's unfortunately it's taken so long for people like Cliff
and I to get together and start talking about like,
you know, we've got a lot more in common than
we thought we'd talked about. Like you know, if I
Cliffs kind enough to let me hang around with him
in some of his meetings and I hear these people
talking about the problems with machine learning, I close my
eyes and it sounds like I'm back in my own
(42:39):
building because the problems they're talking about the same problems
and concerns we have. And so we really need to
kind of bridge this gap, and we need I think
the students to kind of guide that, to kind of
be conversing in both fields to help us better make
these connections. That's that's my opinion.
Speaker 1 (42:56):
That's great. Well, I'm gonna say thank you so much
you guys. Really a great conversation. Really enjoyed a Cliff
and Tim look forward to hopefully continue the conversation. You
can find more information on topics like climate damages and
impacts by going to the Bloomberg function BI Carbon and
then the Climate Damages tracker on the Bloomberg terminal. If
(43:18):
you have an ESG quandary or burning question you would
like to ask bi's expert analysts, please send us an
email at a Stevenson seventy eight at Bloomberg dot com
or ESG Currents at Bloomberg dot net. Thank you very much,
Host
Eric Kane
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