11 August 2022

What is climate intelligence and why do businesses and governments need it?


By Cervest

What is climate intelligence and why do businesses and governments need it?

As climate change accelerates, organizations need to understand how it affects their assets and operations, now and in the future. Yet understanding exactly what, where and when the risks are, and how to mitigate them, has been a challenge for decision-makers – until now. Thanks to leaps in technology, machine learning (ML) and climate science, we now have this critical capability at our fingertips. At Cervest, we call this climate intelligence (CI), and it’s essential for any organization looking to build resilience, stay competitive and protect their bottom line.

In this article, we’ll explain:

  • Exactly what climate intelligence is, why you need it, and why Cervest’s CI is uniquely placed to empower business decision making

  • How climate intelligence helps businesses and governments make informed decisions to adapt with climate change

  • The cutting-edge science and technology that powers Cervest’s climate intelligence

What is climate intelligence?

‘Climate intelligence’ is best described as business intelligence for managing asset-level climate risk – and opportunity. The World Economic Forum (WEF) explains it as “historical, current and predictive information on our natural and built systems used to power insights for climate mitigation and adaptation”. It’s a broad term that captures a variety of climate analysis services, at various levels of detail and sophistication.

Our climate is changing, impacting the way we live and work. These changes will only intensify over time, and in ways that will challenge every industry and economy. In 2021 alone, weather- and climate-related events cost the global economy USD$329 billion. European floods were the continent’s most expensive disaster, costing insurance firms almost USD$13 billion. Extreme winter weather, including winter storms and extreme cold temperatures, caused losses of USD$17 billion, the highest ever costs for this combined physical hazard. A report by CDP found that 69 percent of listed equities are exposed to climate-related water risks, such as drought or flooding, that ‘could generate a substantive change in their business’ – with US$225 billion at risk.

"Climate intelligence will help companies standardize climate risk assessment, spur new conversations, and foster an open and common dialogue on shared asset-centric risk and opportunities to drive action." - Iggy Bassi, Founder and CEO of Cervest.

Decision-makers must make CI a “strategic priority”, says IDC in its Market Perspective - Climate intelligence now and in the future. “Companies and governments need climate intelligence and insight to not only manage climate-related risk to their most important assets but also to help them adapt to future risk and find new opportunities as a result”.

How is Cervest’s climate intelligence different?

The climate intelligence developed by Cervest is the most advanced – and business-useful – available today. It provides asset-centric insights on climate risk to inform prioritization and adaptation decisions. By mapping climate risk to specific assets such as offices, hotels and factories, decision-makers can access unprecedented science-backed, granular and personalized insights into how climate change is already affecting assets, and how this will change in future.

Cervest’s CI is dynamic, using advanced science and technology to continuously update its insights. It is standardized, enabling a shared view of climate risk that unifies multiple teams, regions and departments to drive collective action. And it is quantified, enabling any asset to be baselined, benchmarked and tracked against any other asset, sector or geography. Equipped with this new form of intelligence, businesses and governments can adapt with climate change and protect assets, lives and livelihoods.

Cervest provides climate intelligence through our CI Platform which powers our product, EarthScan™. EarthScan offers an unified, comprehensive picture of climate-related risk to assets, creating full visibility of multiple climate hazards. Insights are provided on hazards, such as flooding, drought and extreme temperatures, across multiple climate scenarios, backwards in time to 1970 and ahead to 2100. This ability to zoom in and out across multiple scales, time-frames, hazards and geographies provides CI that is relevant and decision-useful at both asset- and portfolio-level.

How does climate intelligence help businesses?

As our climate becomes increasingly volatile, CI is fundamental to managing business performance, compliance and staying competitive. Until recently it’s been out of reach of all but a handful of well-resourced companies with dedicated in-house climate data analysts, or budgets to commission one-off ESG impact and climate risk reports.

In previous years , climate risk would never have appeared on a board meeting agenda. But accelerating climate events and pending climate-related financial disclosure regulations has changed this dramatically. However decision-makers struggled to get a clear, actionable understanding of their climate-related physical risk. Climate data only provided information on what had already happened, was too complex to interpret, and tended to be siloed. Climate analytics offered limited modeling and heat map-style analysis that was too generalized to be relevant to specific assets or portfolios.

Cervest’s climate intelligence helps businesses to make climate-aligned decisions that protect their assets, employees, and supply chains. By monitoring their exposure to climate risk more accurately, businesses can incorporate its insights into strategic, operational and financial decisions that boost their top and bottom lines.

The clearest view of climate risk threatening your assets

Every business owns, manages, or depends on built assets such as warehouses, factories, offices, stores or data centers, which are certain to face a variety of climate risks, like flooding, storms, or extreme temperatures. The kinds of climate hazards an asset faces, and how they will be impacted, varies significantly depending on the location and nature of the asset.

That’s why CI offers an asset-centric perspective: it’s highly personalized and actionable. EarthScan’s science-backed and standardized insights allow ESG, sustainability and risk management leaders, asset managers and other stakeholders to compare assets and portfolios, prioritize areas most at risk, and use globally comparable EarthScan Ratings™ to benchmark assets and portfolios.

Driving climate intelligent decisions

Climate intelligence goes beyond traditional climate analytics. It is dynamic intelligence designed to sync with real-world decision-making. It’s actionable by design, allowing businesses to prioritize which actions to take, and decide where and when to invest, divest, adapt or relocate assets to enhance business resilience. When used to inform business strategy, it improves business continuity, protects reputations, and – used early in developing adaptation strategies – prevents the future costs of dealing with damage and disruption.

A UK-based infrastructure investment specialist responsible for €4 billion in capital is using EarthScan's extreme temperature metric to stress test the operation of assets. It’s also enabling them to identify where investment is required for adaptive measures that will improve resilience, reduce risk and protect client returns. For infrastructure owners and investors, adaptation insights are especially important given their long holding periods, and fixed physical locations.

Meanwhile, manufacturers are finding CI invaluable in strengthening supply chains that are overstretched and underprepared for climate-related disruption. More than half of organizations are yet to consider a potential supplier’s climate risk before entering into a new contract, says the BCI.

One European manufacturer with a turnover in excess of €5.4 billion is already using Cervest’s CI to build supply chain resilience after their production plant was destroyed by rain-driven flooding in Germany. To prevent such disruption recurring, the company is now using CI as part of their supplier onboarding process, identifying suppliers with preferential climate-related risk. They also plan to use CI to guide future merger and acquisition (M&A) activities, and to understand and mitigate climate risk at their current operational sites.

As physical and transition risks (the risks involved in changing our actions and embracing strategies, policies and and investments that are less reliant on carbon) materialize, corporations will become increasingly vulnerable to value erosion that could undermine their credit status. McKinsey & Company’s analysis of portfolios at 46 European banks showed that, at any one time, around 15% of them carry increased risk from climate change. As a consequence, commercial imperatives for better climate-risk management are also increasing. This is where climate intelligence plays a role; helping to inform adaptation and target investment – essentially preventing asset loss.

Importantly, CI drives organizational alignment. It offers a single source of quantified, science-backed truth about climate risk that can be accessed and shared by all stakeholders such as investors and board members. Once all involved parties share the same clear view of risk and consequences of inaction, the business case is clear for prioritizing action and allocating resources to mitigate it.

Adding physical risk into climate risk reporting

As countries increasingly require companies to publicly report their climate-related financial risk, climate intelligence is a vital resource for credible, accurate and scalable reporting.

Cervest’s survey of more than 800 decision-makers found a gap between reporting awareness and readiness. Nearly 90 percent of respondents were aware of pending disclosure requirements in the UK and US, but several barriers stood in their way:

  • A lack of real-time and actionable intelligence (43 percent)

  • Insufficient understanding of what the data means (38 percent)

  • The complexity of aggregating data (46 percent)

CI bridges this gap. By turning complex, time-consuming and costly climate analysis into decision-useful insights, organizations can screen assets in minutes and share these insights with colleagues, boards, stakeholders, investors and other shareholders. The insights can be used to vet suppliers, in M&A and D&D reporting, and across every decision related to an asset’s lifecycle.

Increasing numbers of companies are now reporting on their climate risk, including the 1,300 companies in the UK already subject to mandatory disclosure laws. Following the United States Securities and Exchange Commission (SEC) submitting a proposed framework that heavily leverages that put forward by the TCFD, US companies may need to disclose their climate-related risks as early as 2023. With the ability to quickly assess climate risk over multiple risk categories and three IPCC-aligned climate scenarios, EarthScan helps users strengthen their external disclosures– automatically identifying material climate-related issues for specific time horizons between 1970 and 2100.

How does climate intelligence help governments?

Governments at every level, from local to regional to national, face escalating risks from our increasingly volatile climate. Climate intelligence can inform the urgent, targeted and effective actions governments must take to protect lives, communities, infrastructure and assets.

The most comprehensive picture of climate risk at all levels

In the wake of climate change, governments have a critical role to play in both reducing greenhouse gas emissions (GHG), and building resilience into the assets communities, societies and economies rely on.

The task is complex: decisions must be made on specific assets, such as wastewater treatment plants, schools and recreational facilities, as well as across groups of assets, such as neighborhoods or transport networks. Many assets for which governments are responsible have critical interdependencies and multiple agency stakeholders. When considering the climate risk to a town, there’s the direct physical risk to consider, such as its vulnerability to flooding. There’s also the indirect risk, such as power outages caused by extreme weather, or capacity issues created by climate events such as heat waves. CI makes this complexity clear, actionable, and shareable.

Turbocharging government decision-making – and resilience

EarthScan climate intelligence makes the climate risk of any asset discoverable and shareable by teams, stakeholders and supply chains. This creates unprecedented visibility for all involved into their shared risk, incentivizing and supporting coordinated, effective action to plan, implement and finance resilience-building measures.

Take infrastructure: adapting it to withstand climate-related disruption is a pressing focus for governments. CI’s ability to see short-, mid- and long-term makes it an invaluable insights tool at every stage of an asset’s lifecycle. “Countries will be investing trillions of dollars a year repairing, replacing, and building infrastructure no matter what the future holds. Yet most current investments fail to take the impacts of climate change into account, even when they are made in areas highly exposed,” according to The Global Center on Adaptation.

"The infrastructure is aging, and if you think about the design of the infrastructure that fuels our cities, it's never really been designed for these new types of risks. In many ways these new risks are outperforming the engineering design." - Iggy Bassi, Cervest Founder and CEO.

Ensuring that infrastructure is suitable for the climate conditions it will endure throughout its long lifespan strengthens the case for investment (or divestment if appropriate), both in the asset, and in the economy it serves. When extreme weather occurs, the costs of direct damage are high, but the indirect costs of increasingly frequent and severe weather events are far higher, says The Global Center on Adaptation. Integrating CI within investment decisions for infrastructure, from planning to maintenance, helps attract investment, retain talent and maintain economic stability and growth.

London’s Thames Barrier is a clear example of the value of robust, long-range infrastructure planning. One of the largest movable flood barriers in the world, it protects 1.4 million people, £320 billion in property and infrastructure, and places of high cultural and historic value from flooding that could cost the city £50 billion of damage. It was designed to last at least 50 years from its opening in 1984, but, thanks to its rigorous design, informed by extensive climate change modeling, it should be fit for purpose until 2070. This kind of long-range insights, until now inaccessible to most organizations, is built into Cervest’s climate intelligence, putting it within the reach of any decision-maker – on-demand, whenever they need it.

The technology behind climate intelligence

Recent leaps in scientific knowledge and computational power have made dynamic, comprehensive climate intelligence available to decision makers for the first time. Cervest’s CI is powered by a proprietary fusion of advanced science, data modeling and machine learning (ML) technology. Our product EarthScan puts the power of Earth Science AI™ at our customers’ fingertips, enabling them to discover, analyze and act on physical climate risk at the asset-level.

Earth Science AI: the power behind Cervest’s climate intelligence

Built on five years of internal research and development by a team of world-leading, multidisciplinary experts, Earth Science AI translates complex, fragmented climate data into decision-useful climate intelligence.

It continuously draws in climate data from peer-reviewed global sources, including the European Space Agency, NASA and NOAA, and aggregates data on 230 million queryable built assets. It harmonizes and analyzes this data, and uses machine learning techniques to understand real-world outcomes at asset level. The resulting dynamic intelligence is then fed into our products.

Rate, report and manage your assets’ climate resilience with EarthScan

EarthScan equips businesses, governments and NGOs with the CI they need to make confident, informed decisions that enhance the resilience of their assets. It creates the most comprehensive picture possible of climate-related risk, incorporating:

Personalized EarthScan Ratings that provide a globally standardized and comparable measure of climate risk at the asset level

Climate Value at Risk (CVar) insights that show the financial cost of climate change at the asset and portfolio level

A unified view of physical risk across individual assets and entire portfolios, incorporating multiple climate hazards, timescales and emission scenarios

Report-ready climate risk insights that are downloadable, and shareable with internal and external stakeholders

Start putting climate intelligence at the core of your decision-making

Join our EarthScan Starter Program to find out how climate intelligence can help you build resiliency and strengthen decision-making across your organization. Putting climate intelligence at the core of decision making to build resilience not only protects a singular company or supply chain’s assets, but helps to protect our greatest shared asset - the planet.

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