Wall Street’s big appetite for climate data leaves the rest of us out

Big rating agencies such as Moody’s and S&P Global, along with other financial firms, are vacuuming companies specializing in physical climate risk modeling.

Driving the news: The latest consolidation in the “climate intelligence” space arrived this week with Acquisition of The Climate Service by S&P, a climate risk consultancy firm. The Climate Service analyzes physical climate risks, including extreme temperatures, coastal flooding and water stress, as well as so-called transition risks, including changing regulatory and market conditions.

Thought bubble: The spatial consolidation of climate intelligence threatens to lead to asymmetry in access to information. If you are a high net worth investor or a large real estate company, you can pay to find out which businesses or regions will be the most sheltered from the vagaries of the weather and make sound investment decisions.

  • However, ordinary homeowners, such as those in suburban Denver who faced a horrific, climate-fueled December wildfire on December 30, may find themselves with fewer no-cost or low-cost options. for detailed information on their increasing risk exposure.
  • That is unless consolidation also leads to an expansion of affordable, consumer-oriented climate risk forecasting services, which has yet to materialize, experts told Axios.
  • The services and strategies of these companies differ somewhat, but overall they all perform climate risk analysis, which is critically important as climate disasters multiply, affecting more Americans, many of whom did not realize they were in dangerous areas.

The big picture: Two companies in particular have vacuumed companies specializing in climate risk modeling, Moody’s and S&P Global Inc.

  • They do this to fuel their environmental, social and governance (ESG) investment business sectors.
  • By integrating climate risk analysis into their ratings of companies, sovereign wealth funds, etc., Moody’s and S&P are responding to the growing market demand for ESG funds.
  • They also seek to report any systemic risk to the financial system related to climate change.

Inventory: In August last year, Moody’s paid $ 2 billion to buy one of the leading risk modeling firms, RMS, based in London.

  • Moody’s has launched a variety of climatic products for institutional investors, banks, private equity firms and individuals looking to invest in companies prepared for a more low-carbon world.
  • He bought a majority stake in climate intelligence company 427 in July 2019, and a majority stake in an ESG analysis company, VE, in April 2019.
  • S&P also has a broad ESG practice and has invested in companies that have strengthened its offer, in particular Measurable and TealBook, and took a significant stake in Novata.
  • “These investments and acquisitions are part of our ESG strategy in action – being at the forefront of the ESG climate and space to meet the changing needs of our clients,” said Christopher Bennett, Global Head of ESG Strategy at S&P, in a press release. .

The context: It’s not just the rating agencies that recognize the need to add climate risk expertise to stay ahead of upcoming regulations and increasingly severe weather and climate events.

  • Last month, International Exchange, Inc., a provider of data for investment decision making, bought risQ ​​and Level 11 Analytics, which map weather data on municipal bonds, mortgage and real estate markets, according to a declaration.

Threat level: Concentrating climate modeling expertise among a small group of companies can have significant drawbacks, according to Matthew Eby, founder and executive director of First Street Foundation.

  • First Street is a non-profit organization that provides property-specific climate change flood risk information directly to consumers, and also pursues climate-adjusted forest fire risk modeling.
  • “This data needs to be available. We don’t want there to be any more asymmetry of knowledge, but that’s exactly what we’re seeing,” Eby told Axios.
  • “Everyone with all the money now gets all the advanced data analytics, so they can make the smartest decisions before anyone else,” Eby said.

The plot: Getting into climate risk modeling is complicated because each system has its own scenarios and assumptions. Splicing the models risks causing a “Frankenstein” approach, says Eby, which could make predictions less reliable.

The other side: Rich Sorkin, CEO of Jupiter Intelligence, one of the last independent climate intelligence companies, wonders if many ordinary people have the knowledge and the time to access and interpret climate risk information correctly.

  • Jupiter currently serves the banking, power, insurance, and national security industries.
  • His company is trying to bridge some of the disparities in the availability of climate data by providing underserved communities at home and abroad with access to Jupiter’s services at little or no cost.
  • “If we help an underserved community in Louisiana, it’s not going to hurt the rest of the business,” he said, adding that it’s a motivator for Jupiter employees to know that they benefit those on the front lines of the climate. crisis.

What we are looking at: As the private sector consolidates, the government has an opportunity to step in and provide more specific climate risk tools to Americans. However, this is a tall order, given that there are 13 agencies involved in climate research and communication.

About Kristopher Harris

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