In the business world, assessing risk is a common practice whether that risk is cyber, political, or financial. These days companies are adding another assessment area to the list: climate risk.
For many savvy investors and business tycoons, understanding an organization’s climate risk is integral to making sound financial and policy decisions. Enter The Climate Service, an NC startup focused on helping “investors, companies, and communities” understand risks from the changing climate and facilitate the transition to a low-carbon economy.
Using their own “Climanomics” Risk Analytics Platform, The Climate Service (TCS) helps businesses quantify their climate risk and report it to regulators and investors. TCS built its platform with an interdisciplinary team of climate scientists, technologists, economists, data scientists, and finance professionals – and its advisory board includes four IPCC Nobel Prize winners.
TCS couldn’t have come on the scene at a better time. Earlier this year, the administration called for companies to disclose their climate risk in the way that they would any other type of business risk. Most companies aren’t equipped to handle this kind of analysis in-house, so the demand for climate risk services is likely to increase. And with no government agencies currently focused on assessing climate risks, startups and other private sector companies are in a position to address this need.
“We’ve been scaling to prepare for this very moment,” said TCS co-founder and CEO James McMahon. “But most corporations don’t have climatologists on staff, let alone climate economists. [Climanomics] models the climate-related financial risk of assets anywhere on earth, from any time between now and the end of the century, for nearly any type of asset.”
The Climanomics platform allows users to easily generate reports that follow the recommendations of the Task Force on Climate-related Financial Disclosures. “There are so many potential risks and questions facing companies when it comes to climate change,” said McMahon. “The key is to focus on decision-useful questions to generate data that will be as impactful and strategic as possible.”
TCS already has an impressive roster of public and private sector clients, including Fortune 500 firms, and some of the world’s largest banks and real estate investors. They expect that list to grow, and they’re implementing strategies to meet the anticipated demand.
The startup has raised over $5 million from various investing rounds and expects to raise more in the near future. Their team has also quadrupled over the last year with 25 people now on staff, including two new additions to the research team, an atmospheric research scientist and a NASA senior scientist.
“From my point of view, the field is growing enormously, with regard to both demand and supply,” said McMahon.
Businesses and organizations of all sizes are now paying attention to the link between climate, sustainability, and risk management – and McMahon believes this trend is driven by three key factors. First, various industries are witnessing increased regulatory pressure on the federal level, such as the Biden administration’s recent executive order. Second, there’s growing pressure from investors and shareholders on this front, which prompted action from BlackRock CEO Larry Fink, who wrote in a letter to fellow CEOs last year that “climate risk is investment risk.” And then there’s the growing impact of climate on all sectors of the economy.
“We’re seeing it in the news every week,” said McMahon. “It’s just hard to escape the financial impacts of climate change at this point.”