We enable the world’s financial markets to properly price climate risk.
Photo courtesy of Edward Burtynsky
Photo courtesy of Edward Burtynsky
Riskthinking™ has developed advanced, truly forward-looking, algorithmic scenario generation methods based on decades of pioneering research on risk management. A key outstanding problem associated with the Task Force on Climate-related Financial Disclosures (TCFD) - and the Network of Central Bankers Greening the Financial System (NGFS) is the generation of scenarios. Our science-based methodology solves this problem by creating multi-factor scenarios that include financial and non-financial factors. Our patent pending algorithms allow us to measure risk and uncertainty in a consistent manner across all market sectors and link physical and transitional risk. With this, diverse companies can be properly benchmarked.
Riskthinking’s methodology is generic and may be applied to stress testing in areas other than climate risk.
Photo courtesy of Edward Burtynsky
Photo courtesy of Edward Burtynsky
There is no way we can measure climate risk without using climate science. The methods that have been largely proposed for measuring climate risk and, in particular, for TCFD, ignore climate science. There are many papers that have been proposed in which actuarial science, statistics or economics form the entire basis for computing climate risk. These are doomed to failure. What sets Riskthinking apart is that we integrate climate science in our algorithm in two ways. First, we use current scientific thought to model the uncertainty in future values of macro climate risk factors – think, future world average sea level rise. Second, to model how macro factors influence micro, geographic risk factors – think, the uncertainty in future sea levels in Miami.
Photo courtesy of Edward Burtynsky
Our market is Central Banks, Banks, Municipalities, Large Corporations and Large Fund Managers. Our initial focus is the organizations that have signed on the TCFD and to NGFS - the Network of Central Bankers Greening the Financial System.. Ultimately, if Riskthinking becomes an integral part of the system regulating, measuring and managing the world’s transformation to a climate friendly one, the markets will drive change. We see no choice. The world’s economy is heading into uncharted and potentially very dangerous waters. There is no small chance that runaway climate change will occur, causing systemic shocks to financial systems, the world’s economies and social stability.
Photo courtesy of Edward Burtynsky
There is an immediate need now to adapt to the existing climate changes and the ones to come. Adaptation will require budget allocation – nations and regions do not have infinite money to spend on mitigating the climate effects on everything and everyone. Where should funds be allocated on a priority basis? do we allocate money first? Consistent climate scenarios must be generated so funding trade-offs may be assessed.
The major financial organizations of the world, the International Monetary Fund, The European Central Bank, The Bank of England, The Banque de France have all indicated that regulation is on the way. Some have declared 2020 as the year it will start, and others talk about 2022.
"Firms ignoring climate crisis will go bankrupt"
- Mark Carney, former Governor of the Bank of England, UN Special Envoy on Climate Action and Finance
"No institution or individual can stand on the sidelines in the fight against climate change"
- Kristalina Georgieva, Managing Director of the International Monetary Fund
"The ECB uses models to forecast how the eurozone economy will work. These models need to incorporate the risk of climate change.”
- Christine Lagarde, President of the European Central Bank
"We must push for the development of comprehensive climate stress tests in order to build a forward-looking approach of the impacts of climate risks"
- François Villeroy de Galhau, Governor of the Banque de France
We use curated Machine Learning to combine data we source from the best science available, and from Expert Elicitation, with data that you own, with insights that you have, to generate powerful scenarios.
A typical client engagement is:
Discovery - getting to know your organization and its data / analytical assets and people;
Define project, scope, deliverables;
Identify your specific climate risk factors and uncertainties and planning horizon;
Generate the data for assessing these risk factors at the horizon using the latest science and market sentiment.
Generate multi factor scenarios at the horizon using our proprietary, patent pending algorithms.
Work with you to value the positive and negative impacts to your institution under the scenarios.
Help you develop a mitigation strategy using the scenarios.
Keeping your Climate Data up to date.
We have more than three decades of experience in both scenario generation for risk management and climate change. Our founder was the founder and CEO of one of the world’s most successful enterprise risk software companies, Algorithmics Incorporated, with over 70% of the World’s Top 100 Banks as clients. Our team includes a former Governor of the Bank of Canada, former senior executives from Goldman Sachs, Scotiabank, AIG, JP Morgan, Climate Experts, a Strategic Foresight expert and a former Chief Sustainability Officer of Nestle, We are associated with researchers in a number of the most prestigious AI/Machine Learning and Mathematics Institutes.
Founder & CEO, Ron Dembo’s, Selected Ted Talks
Photo courtesy of Edward Burtynsky
A Central Bank Measuring Systemic Risks due to Climate Change
Photo courtesy of Edward Burtynsky
A Large Bank Stress Testing Hedge Funds
Photo courtesy of Edward Burtynsky
Accounting for Climate Risk to Guide Strategy for Electrical Distribution Planning