Why I invested in Climate X
Climate X announced its £4.1M seed round to further its mission to help society adapt to climate change. I met Lukky, Climate X’s co-founder and CEO, about 6 months ago and have been following their progress all along. I found a clear match of an under-served massive challenge with a tenacious and talented team with a clear product vision so thought I’d share a few thoughts.
It’s going to get worse before it gets better
I remember when I was an intern at the National Oceanic and Atmospheric Administration back in 2000 when I first heard scientists discuss “climate change”. I was working on modelling drought and water poverty in the Colorado River Basin. There were heated discussions about the confusion surrounding the term “global warming” because it failed to tell the full picture of what was going to happen. It was a sharp learning curve and I gained two insights that would direct a lot of my thinking on climate: A) climate change is going to drive increasing volatility and unpredictability that in itself is a big challenge, and B) its going to get a lot worse before it gets better… no matter what we do.
Better signals
Severe events caused by climate change have now become a common occurrence. In fact it’s so common that many events don’t even make headlines. These events have helped raise awareness of the dynamics and consequences of climate change. These are signals that are helping to drive human adaptation to our changing habitat. Unfortunately these signals have immediate and serious consequences for people’s lives and our economy. We need better proactive signals that shift human behavior before such events happen so we can avoid these impacts as much as possible and thereby build a more resilient and sustainable economy that can support livelihoods and protect our natural environment.
Unfortunately, as I’ve seen in my 20 years in the climate space, the data and tools to assess and manage climate risk are limited and fall short of the accessibility, usability and effectiveness. Despite the many data-driven advances in software we still remain comparatively limited when it comes to utilizing climate data for decision making. And this is where Climate X comes in to providing an on-demand risk data analytics platform and API with location-specific risk ratings. It enables customers to fulfill regulatory obligations incorporate risk intelligence into business strategy and investment decisions.
Market size is… the market
Every aspect of our economy will need to adapt and to adapt effectively we need data to make decisions. Businesses of all sorts and their partners including insurers and financiers are quickly waking up to this new reality and searching for solutions. Climate risk considerations will begin to infuse every business decision whether its sourcing, logistics, asset management and more.
In a way the total market for these solutions is… well the market. My point is not that every business is going to buy a solution like Climate X but I’m pretty certain the entire market will be impacted in some way.
There are a range of other companies in this space and some of them have raised more money than Climate X. I’m not too worried about that here. This is both a talented team and a huge potential market that will have room for many winners — and in fact I hope a great many of them do win as we need it.
Paying attention and paying
Regulators and insurers are stepping up action in this area. Earlier this week the SEC announced plans to require all public companies to disclose climate risks. The insurance industry is also shifting into high gear to adapt to these changing risks. A recent Deloitte survey found “insurance regulators expect all types of insurance companies’ climate change risks to increase over the medium to long term” and “more than half of the regulators indicated that climate change was likely to have a high impact or an extremely high impact on coverage availability and underwriting assumptions.” As a result we’re seeing the accelerated exploration, experimentation, and adoption of solutions in this space which has been typically slower than other industries.
Team work
I’ve been inspired by the Climate X team’s dedication to their mission and the care they’ve taken to create a positive culture needed to go the distance. This won’t be an easy industry, and its not an easy mission. But it’s clear that nobody here was looking for “easy” but instead deeply aligned with their mission and impact. They have also been able to surround themselves with a esteemed group of venture investors including Pale Blue Dot, Commerz Ventures, A/O Proptech, and Deloitte.
As I look forward over the next 20 years while I know things will get worse before they get better I’m confident solutions like Climate X will be ever more necessary and will help mitigate that impact on the way by providing the signals we need to adapt to climate change. I’m delighted to back the Climate X team and play a small role in helping them pursue this important mission.
