Why We Invested in Climate X

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Why We Invested in Climate X

Jess Clemans
April 13, 2022

Our climate is changing rapidly, and its effect on the built world is becoming increasingly evident. In 2021 we saw a cold snap in Texas shut down the electrical grid, flooding in Germany engulf homes, and wildfires incinerate over 25,000 dwellings in California. According to the European Environmental Agency, climate-related extreme weather accounted for EUR 487 billion in damages between 1980 and 2020.

With these extreme weather events becoming ever more frequent, understanding the risks posed to real estate and infrastructure is critical to effective planning and underwriting. By quantifying climate risk, we can generate actionable insights to inform where and what we build - ultimately leading to a more resilient economy.

In addition to internal use cases, public disclosures of climate risk are becoming mandatory. The UK has announcedcompulsory climate-related financial risk disclosure for companies with more than 250 employees, starting on the 6th April 2022. The U.S. SEC is lagging to the UK but has now published proposals for climate disclosures based on the TCFD framework. To comply with this regulation, companies are attempting to quantify their exposure to climate risks which is challenging for internal teams but enabled by dedicated platforms like Climate X.

Understanding the potential impact of climate risks and how to build resilience is a vital component of A/O’s mission of decarbonizing the built world. Quantifying risk has long been a grey area for companies in a wide array of industries, from financial services to real estate, making Climate X an essential addition to A/O’s current ecosystem of climate solutions.

That’s why we are proud to be backing Climate X, a climate risk analytics platform that helps companies understand and build resilience to the physical risks brought upon by climate change. Their product, Spectra, creates a digital twin of earth using a variety of data sources, then calculates the probability and intensity of extreme climate events and maps this to physical assets. Using a digital twin methodology Climate X can pinpoint the effect of extreme weather events on locations and provide a more accurate picture of risk to stakeholders.

Having spent a significant amount of time looking at climate risk platforms, we knew Lukky and Kamil were onto something special from our first call with them. Climate X impressed us with their deep understanding of customer needs and regulatory requirements, which stems from their many years of experience working in the space. This is critical for any founding team, but particularly for novel product categories which force customers to adapt existing workflows.

Aside from the superstar team, we identified a number of factors which bolstered our conviction in the business. Firstly, by taking a glass box approach, Climate X outputs results that are explainable, which is key for decision-makers as well as regulatory compliance. Furthermore, Climate X has built models for more types of climate risk data than any other player; including flooding, sea level rises, extreme heat and cold, freeze, landslide, subsidence and coastal erosion. Finally, taking a physics-based approach to modelling rather than AI, produces more accurate results to reduce vulnerability.

Gregory Dewerpe, founder of A/O PropTech, said: “Accurately quantifying exposure to climate risk is now an economic, statutory, and moral necessity. Without concerted action, extreme weather events have the potential to cost trillions of dollars to the global economy. The built world will bear the brunt of this. Climate X’s platform gives a range of actors across many industries the tools they need to understand, assess, predict and report the exposure of their physical assets to ecological challenges – and in doing so enable them to start planning and investing accordingly to reduce future losses and pain.”

About the author
Jess Clemans

Jess is an Investor at A/O where he focuses on due diligence, research and investment analysis. He brings a broad knowledge base, ranging from real estate investment to biology and machine learning which allows him to focus on deeply technical problems and technologies across deep technology, hardware and AI.

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