Climate Risk Podcast

Hear from Ron Dembo, Founder and CEO of riskthinking.ai, as we apply stochastic thinking to the challenge of climate scenario analysis.

One of the most difficult aspects of managing climate risk is its inherent uncertainty. Because we can't know with absolute confidence what our future climate, economy or society will look like, we therefore can't know exactly when, where, or how intensely climate risks will manifest.

A technique commonly applied to this problem is scenario analysis. By building a picture of what the future might look like, firms can formulate risk management strategies appropriate for that scenario.

However, today's guest believes we're only scratching the surface of what scenario analysis can do for our financial institutions. In today's episode, we'll home in on the idea of stochastic scenario analysis; what it is, how it works, and what makes it different to the traditional approach to scenario analysis. We'll explore:

· The difference between deterministic and stochastic scenario analysis;

· The advantages of using large sets of scenarios generated by expert judgment; and

· What stochastic scenario analysis means for risk professionals.

To find out more about the Sustainability and Climate Risk (SCR®) Certificate, follow this link: https://www.garp.org/scr

For more information on climate risk, visit GARP's Global Sustainability and Climate Risk Resource Center: https://www.garp.org/sustainability-climate

If you have any questions, thoughts, or feedback regarding this podcast series, we would love to hear from you at: [email protected]

Links from today's discussion:

· https://riskthinking.ai/

Ron Dembo, Founder and CEO, riskthinking.ai

Ron is an academic, author, entrepreneur, and consultant to the some of the world's largest corporations and banks. He has had a distinguished academic career as a professor at Yale University and as visiting professor at MIT. He is a Lifetime Fellow of The Fields Institute for Research in Mathematical Sciences, and has received numerous awards for his work in mathematical optimization, finance, and climate change.

Ron was previously the Founder and CEO of Algorithmics, an enterprise risk management software provider with over 70% of the world's top 100 banks as clients. After Algorithmics was acquired by Fitch Group, Ron later founded riskthinking.ai, a company pioneering the use of stochastic analysis to accurately price climate risk into the financial markets.

Hear from Jane Stevensen of JS Global Advisory, as we examine the overall progress of the global energy transition.

We always knew that the transition to net-zero wasn't going to be smooth. Political realities must be considered, especially during a period of increased concern over energy security. A good recent example of political backsliding is the UK government's controversial decision to grant over a hundred new oil and gas licenses in the North Sea, despite a legally binding commitment to reach net zero by 2050. Although the UK is not alone, there are some encouraging signs of progress in other policy domains. It's a matter of where the balance lies.

That's why in this episode, we explore some solutions needed to manage the risks during this uncertain transition, such as:

• Abandoning short-term thinking in favour of long-term strategies that align with our net-zero and socio-economic goals;
• Using ESG reporting frameworks as a tool for developing resilient business strategies, rather than as an annual chore; and
• Leveraging the information from reporting frameworks to ensure decision-makers are held accountable for their actions.

To find out more about the Sustainability and Climate Risk (SCR®) Certificate, follow this link: https://www.garp.org/scr

For more information on climate risk, visit GARP's Global Sustainability and Climate Risk Resource Center: https://www.garp.org/sustainability-climate

If you have any questions, thoughts, or feedback regarding this podcast series, we would love to hear from you at: [email protected] Links from today's discussion:

- UK Government's press release regarding the new North Sea oil and gas licenses – https://www.gov.uk/government/news/hundreds-of-new-north-sea-oil-and-gas-licences-to-boost-british-energy-independence-and-grow-the-economy-31-july-2023

- JS Global Advisory homepage - https://www.jsglobaladvisory.com/

- International Energy Agency's Net-Zero by 2050 report - https://www.iea.org/reports/net-zero-by-2050

- Climate Change Committee's letter to Rishi Sunak – https://www.theccc.org.uk/publication/letter-2023-progress-report-to-parliament-to-rt-hon-prime-minister/

- Top ten countries currently developing the most oil and gas fields - https://www.energymonitor.ai/industry/top-ten-countries-developing-the-most-oil-gas-fields/

- International Sustainability Standards Board's inaugural standards - https://www.ifrs.org/news-and-events/news/2023/06/issb-issues-ifrs-s1-ifrs-s2/

Jane Stevensen, Founding Partner, JS Global Advisory

Jane has over 20 years' experience advising businesses on sustainability strategy and the implementation of TCFD, ISSB and other ESG reporting frameworks. Prior to founding JS Global Advisory, she held a number of senior positions, including leading Grant Thornton's Sustainability practice, and as Managing Director of the Climate Disclosure Standards Board. She holds an MBA from INSEAD and is a graduate of the Cambridge Institute for Sustainability Leadership.

Hear from Bob Buhr of the Imperial College Business School, as we explore ways of organizing the risks from climate change.

A risk taxonomy is a key underpinning of enterprise risk management. Used by firms to create a common risk language, it underpins a range of activities, such as risk identification, risk appetite setting and risk horizon scanning. But when it comes to the risks arising from climate change, there has been a bit of a vacuum. Some firms have chosen to use 'green' taxonomies. But these were set up for a different purpose – that is to classify the sectoral investment opportunities from the transition to a net zero or 'green' economy.

That's why in today's episode, we'll be looking at how firms can overcome this gap, by examining a taxonomy that has been set up specifically to classify potential firm-specific climate risks. We'll explore:

• The challenges facing firms from a lack of suitable risk taxonomies;
• What the key categories within a climate risk taxonomy ought to be; and
• Why and how biodiversity loss and natural capital risks should be incorporated.

To find out more about the Sustainability and Climate Risk (SCR®) Certificate, follow this link: https://www.garp.org/scr

For more information on climate risk, visit GARP's Global Sustainability and Climate Risk Resource Center: https://www.garp.org/sustainability-climate

If you have any questions, thoughts, or feedback regarding this podcast series, we would love to hear from you at: [email protected] Links from today's discussion:

• Bob's latest book, "Climate Risks: An Investor's Field Guide to Identification and Assessment" - https://www.wiley.com/en-gb/Climate+Risks%3A+An+Investor%27s+Field+Guide+to+Identification+and+Assessment-p-9781394187355
• Eila Kreivi on the GARP Climate Risk Podcast – https://www.garp.org/podcast/eu-taxonomy-sustainable-finances-cr-220616
• UNEP FI's annual climate adaptation gap reports – https://www.unep.org/resources/adaptation-gap-report-2022
• Jo Handelsman on the GARP Climate Risk Podcast – https://www.garp.org/podcast/soil-crisis-opportunity-cr-041323
• McKinsey's report on natural capital - https://www.mckinsey.com/capabilities/sustainability/our-insights/nature-in-the-balance-what-companies-can-do-to-restore-natural-capital

Bob Buhr, Honorary Research Fellow, Centre for Climate Finance and Investment, Imperial College Business School

Over a 30-year career, Bob has worked at major rating agencies, asset managers, hedge funds and banks, and was often cited as a top-ranked bond analyst in various investor polls. He has published ESG and climate-related reports and written on environmental risks for years and has engaged with a variety of NGOs on climate and natural capital-related issues. He is the author of Climate Risks: An Investor's Field Guide to Identification and Assessment. Bob holds a bachelor's degree from Ithaca College, and a Ph.D. from Brown University.

Hear from Rohan Hamden, Co-Founder and CEO of XDI, as we examine how climate-related impacts are exceeding our models and why the need for adaptation has never been greater.

Despite our best efforts to measure and model the physical risks from climate change, the impacts continue to outpace our expectations. Consequently, we are left dangerously unprepared for extreme weather events both now and in the future. This highlights the critical need for robust adaptation measures, as we move into decades of unprecedented physical risk. The recent wildfires in California and flooding in Europe serve as stark reminders of the risks that extreme events pose.

Although governments and financial institutions are gradually getting to grips with these issues, we're still on the back-foot in the race against climate change, and swift action is needed to regain control over our transition to a resilient, net-zero society. That's why in today's episode, we'll explore some of the major gaps in our global response to climate change, including:

• Why the physical risks from climate change continue to exceed our predictions;
• How adaptation planning is being undermined by conservative risk modelling and short-term thinking; and
• The dangers of normalizing extreme weather events, which are becoming all too frequent.

To find out more about the Sustainability and Climate Risk (SCR®) Certificate, follow this link: https://www.garp.org/scr

For more information on climate risk, visit GARP's Global Sustainability and Climate Risk Resource Center: https://www.garp.org/sustainability-climate

If you have any questions, thoughts, or feedback regarding this podcast series, we would love to hear from you at: [email protected] Links from today's discussion:

• XDI Homepage - https://xdi.systems/
• XDI Article: Uninsurable Future - https://xdi.systems/uninsurable-future/
• Intergovernmental Panel on Climate Change (IPCC) AR6 Synthesis Report – https://www.ipcc.ch/report/sixth-assessment-report-cycle/
• Tim Lenton on the GARP Climate Risk Podcast - https://www.garp.org/podcast/complexities-climate-risks-cr-201102
• Julie Pullen on the GARP Climate Risk Podcast - https://www.garp.org/podcast/ocean-climate-finances-cr-220505

Rohan Hamden, Co-Founder and CEO of XDI: Cross Dependency Initiative

XDI, the Cross Dependency Initiative, is an international data and analytics organisation specialising in the modelling and analysis of asset level physical climate risk. In 2017, Rohan co-founded XDI with a vision of mainstreaming climate information into infrastructure and financial decision making.

Rohan began his career as a fire fighter before working in the Australian government for nearly 15 years. During that time Rohan held a number of sustainability and climate related roles, culminating in the directorship of the Climate Adaptation Program for South Australia, where he designed and led the implementation of the State's multi-award-winning climate change adaptation program. Rohan has advised various state and national governments on their climate adaptation programs in Australia, Canada, the US and the UK.

Hear from Mike Azlen, Founder and CEO of Carbon Cap Management, as we explore the ever-changing carbon markets and the future of emissions trading.

The carbon markets can be very confusing. Between offsets, credits, permits, and allowances, it can be hard to understand the many ways emissions can be traded, as well as the different mechanisms for pricing them. Furthermore, as these markets and their participants mature, different strategies are emerging for how firms can transition to net-zero in a safe and responsible way.

In today's episode, we'll explain the fundamentals of the compliance and voluntary carbon markets, but also explore some key emerging trends, including:

· The proliferation of emissions trading schemes across the world;

· How firms are navigating the challenges of the voluntary carbon market; and

· The advent of carbon as a fully-fledged asset class.

To find out more about the Sustainability and Climate Risk (SCR®) Certificate, follow this link: https://www.garp.org/scr

For more information on climate risk, visit GARP's Global Sustainability and Climate Risk Resource Center: https://www.garp.org/sustainability-climate

If you have any questions, thoughts, or feedback regarding this podcast series, we would love to hear from you at: [email protected] Links from today's discussion:

• Carbon Cap Management's (CCM) World Carbon Fund - https://www.carbon-cap.com/world-carbon-fund
• CCM's research paper - Carbon as an Emerging Asset Class - https://www.cfainstitute.org/-/media/documents/article/industry-research/climate-change-analyis.ashx#page=36
• CCM's educational videos on carbon markets, carbon trading, and climate change - https://www.carbon-cap.com/educational-videos
• International Carbon Action Partnership (ICAP) ETS Map - https://icapcarbonaction.com/en/ets
• Climeworks' direct air capture technology - https://climeworks.com/direct-air-capture
• JP Morgan's recent purchase of carbon removal credits - https://www.reuters.com/sustainability/jpmorgan-chase-spend-200-mln-carbon-dioxide-removals-2023-05-23/

Mike Azlen, Founder and CEO, Carbon Cap Management

Mike is a senior investment professional with 25 years of industry experience. After a 15-year career spanning two Canadian banks and several alternative asset management companies, Mike founded Frontier Investment Management in 2005 and grew the business to profitability before selling the business to a public company in 2013 and completing his earnout in 2016.

Mike formed Carbon Cap Management LLP in 2018 as an environmental asset manager focused on climate change and launched the World Carbon Fund in February 2020. The fund invests into multiple liquid and regulated carbon markets and aims to generate strong uncorrelated returns and a direct impact on carbon emissions. Carbon Cap's mission is to raise awareness about climate change and to provide solutions directly related to the capping and reduction of carbon dioxide emissions.

Mike holds a Sloan Masters Degree in Leadership and Strategy from London Business School and is a Chartered Alternative Investment Analyst (CAIA) and has completed the LSE's Economics and Governance of Climate Change course. Mike is a regular speaker at investment conferences and has been a guest lecturer on the graduate degree programs at London Business School for more than 15 years.

Hear from Nicky Dee, Co-Founder of Carbon13, as we take a closer look at the climate startup ecosystem and how it's changing the way we decarbonize.

Many sectors, especially hard-to-abate ones such as steel and cement, are failing to align with a 1.5-degree world and still require fundamental change to become viable in a low carbon economy. Recognizing that there is no one-size-fits-all solution, we often turn to innovation as a way to find creative solutions to decarbonization challenges. Many entrepreneurs and innovators are turning their attention to climate and environmental issues, but given the scale and urgency of the challenges, more are always needed.

Building on what we learnt about startups in the previous episode of this podcast, this discussion will dive into the world of venture builders which specialize in incubating climate startups, harnessing the creative power of entrepreneurs to tackle the climate emergency. We explore some key aspects of climate venture building, including:

• The process of creating a startup;
• How to build a team of the right people; and
• How these startups can help catalyse the transition to net-zero.

For more information on climate risk, visit GARP's Global Sustainability and Climate Risk Resource Center: https://www.garp.org/sustainability-climate

If you have any questions, thoughts, or feedback regarding this podcast series, we would love to hear from you at: [email protected] Links from today's discussion:

• Carbon13 – https://carbonthirteen.com/C
• Cambridge Institute for Sustainability Leadership – https://www.cisl.cam.ac.uk/
• Entrepreneur First – https://www.joinef.com/
• Kita – carbon insurance– https://www.kita.earth/
• Kita CEO Natalia Dorfman on the Climate Risk Podcast - https://www.garp.org/podcast/powerful-risk-management-cr-050423
• Blue Methane – removing methane from water – https://www.bluemethane.com/
• Global Methane Pledge – https://www.globalmethanepledge.org/
• Naturebound – measuring and monitoring biodiversity - https://naturebound.ai/
• Preoptima – real-time carbon analysis for construction projects – https://www.preoptima.com/
• Biozeroc – carbon neutral construction materials – https://www.biozeroc.com/

Nicky Dee, Co-Founder and Chief Innovation and Sustainability Officer at Carbon13

Nicky has over 20 years' experience engaging with startups and a variety of stakeholders to promote sustainability. She co-founded Carbon13 to build and invest in companies to address the climate emergency. Over the last two years, this has included 46 pre-seed investments in cutting-edge net zero startups, including Kita, who's CEO Natalia Dorfman featured in the previous episode of this podcast.

Nicky has pioneered a range of activities including innovation prizes, low carbon investments, corporate engagement mechanisms and startup ecosystems. She has a PhD from the University of Cambridge, and is a Senior Associate with the Cambridge Institute for Sustainability Leadership.

Hear from Natalia Dorfman, CEO & Co-Founder of Kita, as we explore the potential role of insurance in boosting the integrity of the voluntary carbon market.

The voluntary carbon market will likely be an important tool in the transition to net-zero. Even if the world stopped emitting today, enormous amounts of greenhouse gas would still need to be removed from the atmosphere to limit warming to 1.5oC, which can only be achieved by carbon removal at scale.

However, in its current state, the voluntary carbon market is both too small and too risky. To meet this challenge, it needs to grow to the size of the oil and gas industry by 2050, and significantly improve the transparency and reliability of its carbon credits, which is currently deterring investment.

This is where carbon insurance comes in. By protecting investors from the financial and reputational risks associated with carbon credits, this insurance may have a significant role to play in both scaling-up and de-risking the voluntary carbon market. We'll investigate:

• The key barriers to investment facing the voluntary carbon market;
• The potential role for insurance in making this market more effective;
• And the benefits of a scaled-up and de-risked voluntary carbon market for fighting both climate change and biodiversity loss.

We'll also showcase the role of start-ups in this space, as they bring fresh perspectives, innovative products, and a willingness to take on big challenges to the issue of climate change.

For more information on climate risk, visit GARP's Global Sustainability and Climate Risk Resource Center: https://www.garp.org/sustainability-climate

If you have any questions, thoughts, or feedback regarding this podcast series, we would love to hear from you at: [email protected] Links from today's discussion:

• Kita - https://www.kita.earth/
• The Earthshot Prize - https://earthshotprize.org/
• Carbon13 - https://carbonthirteen.com/
• Verra - https://verra.org/
• Gold Standard - https://www.goldstandard.org/

Natalia Dorfman is the CEO and co-founder of Kita, a carbon insurance specialist. Kita's purpose is accelerating investment in high quality carbon sequestration projects with insurance that reduces transaction risk and safeguards the performance of carbon purchases. Kita's flagship insurance product is Carbon Purchase Protection Cover, protecting buyers of forward purchased carbon credits against under-delivery. In 2023, Kita was nominated for the Earthshot Prize in the category of Fix Our Climate.

Prior to founding Kita, Natalia spent 15 years as a business development and strategy specialist within the legal sector, including leading the Climate Risk practice strategy as Global Head of New Business at Clyde & Co LLP. Her experience with large corporations on their climate change-related challenges inspired her to help accelerate positive change through entrepreneurship. She was named among the "Top 100 Female Entrepreneurs to Watch" by NatWest and the Telegraph in November 2022.

Hear from Professor Jo Handelsman on the threats and opportunities that arise from soil – a vitally important resource that many of us take for granted and yet is at significant risk.

Humans depend on soil for 95% of global food production, yet it is eroding at unsustainable rates. Climate change is making this worse, for example as rainstorms are projected to become more frequent and intense with a warming planet. This poses severe risks to our ability to feed a growing population. Yet, soil is also the largest terrestrial repository for carbon, containing three times as much as the Earth's atmosphere and four times as much as all plants combined, meaning that it has the potential to be a significant mitigant in the fight to stop to climate change.

Given its critical importance to humanity, we wanted to use this episode to dive into the threats and opportunities that arise from soil. We'll discuss:

· Why and how soil is so vitally important for humanity;

· The scale of the risks from soil erosion and what can be done to stop this;

· And how the financial sector can respond to help address this 'silent crisis'.

For more information on climate risk, visit GARP's Global Sustainability and Climate Risk Resource Center: https://www.garp.org/sustainability-climate

If you have any questions, thoughts, or feedback regarding this podcast series, we would love to hear from you at: [email protected] Links from today's discussion:

• Wisconsin Institute for Discovery - https://wid.wisc.edu/
• White House Office of Science and Technology Policy - https://www.whitehouse.gov/ostp/
• A World Without Soil by Jo Handelsman - https://yalebooks.yale.edu/book/9780300271119/a-world-without-soil/
• GARP Climate Risk Podcast with Maggie Monast (Environmental Defense Fund) - https://www.garp.org/podcast/reduce-emission-resilience-cr-210617

Dr Jo Handelsman is the Director of the Wisconsin Institute for Discovery at University of Wisconsin–Madison. She is also a Vilas Research Professor and a Howard Hughes Medical Institute Professor. Dr. Handelsman was appointed by President Barack Obama as the Associate Director for Science at the White House Office of Science and Technology Policy, where she served for three years until January 2017. She has been editor-in-chief of various academic journals and is the author of many books, including the co-author of the recently published book 'A World Without Soil: the past, present and precarious future of the earth beneath our feet.'

She received the Presidential Award for Excellence in Science, Mathematics, and Engineering Mentoring from President Obama in 2011 and was inducted into the American Academy of Arts and Sciences in 2019.

Hear from Chris Howland and Lars Popken of Deutsche Bank, as we delve into the complexities of incorporating climate risk within financial institutions.

Measuring and managing the risks from climate change is often a challenge for many financial institutions, partly due to a lack of consistent data and analytical tools. As a result, many are still in the early stages of integrating climate within their day-to-day business and risk management processes. Beyond this, many have made net-zero commitments, which adds another layer of complexity to this challenge.

From their experience at Deutsche Bank, our guests will discuss the hurdles they've faced and share their expertise on how banks and other financial institutions can get to grips with climate risk. We'll cover a range of topics, including:

• Integrating climate into risk metrics and setting a climate risk appetite;
• Working with counterparties and preparing for a supervisory climate stress test; and
• The benefits of adopting a multidisciplinary approach to climate risk management.

For more information on climate risk, visit GARP's Global Sustainability and Climate Risk Resource Center: https://www.garp.org/sustainability-climate

If you have any questions, thoughts, or feedback regarding this podcast series, we would love to hear from you at: [email protected] Links from today's discussion:

• Deutsche Bank's 2022 Non-Financial Report - https://investor-relations.db.com/files/documents/annual-reports/2023/Non-Financial-Report-2022.pdf
• Summary of the European Central Bank (ECB) 2022 Climate Risk Stress Test - https://www.bankingsupervision.europa.eu/ecb/pub/pdf/ssm.climate_stress_test_report.20220708~2e3cc0999f.en.pdf
• NGFS climate scenarios portal - https://www.ngfs.net/ngfs-scenarios-portal/
• IFRS 9 Financial Instruments - https://www.ifrs.org/issued-standards/list-of-standards/ifrs-9-financial-instruments/

Chris Howland, Head of Enterprise Risk Portfolio Management and ESG, Deutsche Bank

Chris has responsibility for portfolio risk strategies and appetite setting across multiple dimensions including sectoral and regional, the preparation of holistic risk reporting for senior management and emerging risk analysis and reviews. He is responsible for developing the Bank's holistic ESG risk management frameworks, working in close coordination with other Risk and Business divisions, with a particular focus on the tools and methodologies for measuring, monitoring, and controlling climate risk.

Prior to joining Deutsche Bank in 2008 Chris worked for the Bank of England. He holds an MSc in Economics and Finance from the University of York and an MA in English Literature from the University of Edinburgh.

Lars Popken, Global Head of Risk Methodology, Deutsche Bank

Lars focusses on model development activities which relate to Credit Risk Rating Methodologies, Interest Rate Risk in the Banking Book as well as Economic Capital and Stresstesting for DB Group. In the US, a specific focus area is CCAR for credit risk as well as pre-provisioning net revenues.

Prior to (re)joining Deutsche Bank in 2009, Lars worked for two years at the strategic consultancy firm Oliver Wyman. Lars holds a PhD in mathematics from the University of Kaiserslautern, Germany.

Hear from Dr. Nicola Ranger, Director of Climate and Environmental Analytics at the UK Centre for Greening Finance and Investment (CGFI), as we discuss the importance of climate adaptation.

When discussing humanity's response to climate change, we often draw a dividing line between the competing priorities of mitigation and adaptation. Simply put, mitigation measures are actions taken to reduce greenhouse gas emissions, while adaptation measures are based on reducing our vulnerability to the effects of climate change.

Looking back over the past three years of this podcast, whilst we have had many discussions about various mitigation efforts, we have had comparatively few conversations about adaptation. This imbalance between mitigation and adaptation is one that can be found throughout the financial sector. Despite its clear importance, and the often urgent adaptation efforts taking place outside of the financial domain, it continues to receive relatively little attention. This episode asks:

• Why is this the case?
• What would an appropriate balance between the mitigation and adaptation look like?
• And how can the financial sector drive progress on adaptation efforts?

For more information on climate risk, visit GARP's Global Sustainability and Climate Risk Resource Center: https://www.garp.org/sustainability-climate

If you have any questions, thoughts, or feedback regarding this podcast series, we would love to hear from you at: [email protected] Links from today's discussion:

- CGFI's Publications - https://www.cgfi.ac.uk/category/publications/

- Global Resilience Index Initiative - https://www.cgfi.ac.uk/2022/11/grii-launch-blog/

- Taskforce on Nature-related Financial Disclosures (TNFD) - https://tnfd.global/about/

Dr. Nicola Ranger, Director, Climate and Environmental Analytics at the UK Centre for Greening Finance and Investment (CGFI)

Nicola is currently Director of Climate and Environmental Analytics at the UK Centre for Greening Finance and Investment (CGFI), a national centre established to accelerate the adoption and use of climate and environmental data and analytics by financial institutions internationally.

She works at the intersection of science, risk analytics, finance, economics and policy and has almost two decades of experience in climate change, development, sustainable finance and crisis risk financing.

Before joining CGFI in 2021, Nicola has held senior roles spanning public policy, development finance, academia and within industry. She has also authored more than 30 book chapters and peer-reviewed articles, and contributed to major reports including the UK National Climate Change Risk Assessment, the IPCC Special Report on Managing Extreme Events, and the Stern Review on the Economics of Climate Change.