While the impact of climate change is undeniable, it can be difficult to forecast exactly where and how the effects will be seen; predicting the future is difficult. Still, preemptive action is a key consideration for businesses both in reducing carbon emissions and in making adaptive changes.
Businesses will need to assess the impact that climate change will have on their physical assets and establish the return on investment (ROI) of taking that preemptive action. Doing so means using existing data to model future scenarios.
That is where Climate X comes in. The company, set up in 2020, presents a risk assessment model that uses a combination of a ‘Digital Twin’ of the Earth, physics and AI, underpinned by more than 500 trillion data points, including a proprietary library of 1.5 billion individual assets and 44 million miles of infrastructure.
Current± spoke to Kamil Kluza, Climate X’s chief operating officer, to find out more about mapping the future, data gathering and how to make an impact.
What inspired the launch of Climate X?
I spent 15 years in financial services and just got bored. I wanted to do a job with an impact and something that really mattered. [I was] frustrated with the climate mapping technology available and the low value of the data sets available, which just wasn’t fit for purpose.
Myself and Lukky Ahmed [CEO and co-founder of Climate X] were tired of the status quo. We saw the gap, and we wanted to make an impact—to do something good.
We used our own finances to hire a scientist – the first thing you need is good science -and from there, the company went to market, hoping to raise £5 million.
What impact does Climate X have?
There are a lot of firms looking at transition risk, how to prevent CO2 emissions, and what you are doing to the planet. What we look at is what the planet is going to do to you and what it will do for commercial real estate and residential real estate.
Spectra, which is our first product, is like Google Maps for climate change. Drop a pin anywhere and it will tell you how much money the business will lose as a result of climate change.
To be technical, Spectra provides location-specific physical risk ratings and climate-adjusted VaR (cVaR) forecasts between now and 2100.
We are trying to prevent a repetition of 2008 and 2009 when the risk of liquidity in the system caused everything to collapse, making the poorest in society suffer the most. Mitigation is super important, as is climate adaptation, which is what our second product, Adapt will bring.
Adapt looks at how much you can pay as an asset owner or as a government or local government to enable some of the adaptive measures i.e. flood defences and so on, to prevent that loss from happening in the first place.
Regardless of government targets, things like net zero by, say, 2050, we have already overshot the target of cooling down. So what we can do is minimise the impact.
More often than not, if you invest a little money, the return is much higher in terms of the damage that you will prevent.
Why is (good) data so important?
Without good data, it is impossible to accurately project outcomes. Data availability is really critical too – these are adjacent problems we solve as part of our workflow.
Banks take into account credit and and market risk, and then the propensity of a customer to default on, say, a mortgage. Now, we need to take into account climate, but the bank doesn’t know what the assets of the company are that might be affected by climate, if it [the company] even knows itself. They are also not necessarily inclined to share that data with with the bank.
We address the need for data to be packaged in a certain way within financial services. This has workflow implications, impacting upstream, downstream, and midstream.
Basically, banks want to assess a company’s revenue and the impact of climate on the customer, because of the fact that the climate might prevent the customer being able to make money. We know what the challenge is upfront – what climate risk is.
What scale has Climate X operated at so far?
We work with some of the biggest banks and asset managers in the world. To name a few: CBRE, Goldman Sachs, and Deloitte. We operate truly business-to-enterprise.
Location makes the product more popular in places most impacted by warming. City infrastructure in Hong Kong and Singapore, for example, is not going to fare very well.
What comes next?
Having just secured £14.2 million funding, led by Google Ventures, we are looking to scale up and expand our teams. We are all currently based in the UK—our analysts and scientists are all here—but we want to move out to the US.
We will move out to that market as a kind of trial before a global expansion.
