Dive Brief:
- Bloomberg and Riskthinking.AI launched an artificial intelligence data tool last Thursday they say can help businesses predict their financial exposure to the physical risks of climate change under every climate scenario laid out by the Intergovernmental Panel on Climate Change.
- The tool was developed keeping in mind the frequency and severity of drastic weather events and a growing list of international regulators and standards setters with their sights on climate disclosures, according to the announcement.
- Users will be given data insights that align with the European Union’s new climate disclosure rule, as well as the Task Force on Climate-Related Financial Disclosures recommendation and the International Finance Reporting Standards Foundation’s newest sustainability standards.
Dive Insight:
Bloomberg launched the product with climate risk and data analytics firm Riskthinking.AI — which the financial data and media company is also an equity investor in — using Bloomberg’s data from almost 50,000 companies and Riskthinking.AI’s climate change modeling technology. It adds to a growing list of companies that have begun using artificial intelligence to capture, report and analyze ESG data.
Both companies say the tool will give businesses a physical risk exposure level from 0 to 100, with low, moderate and high classifications, and projections based on the IPCC scenarios that stretch to 2050.
“Achieving reliable assessment of exposure to physical hazards relies on large amounts of geospatial and climate data to effectively account for the uncertainty inherent in future projections,” Patricia Torres, Bloomberg’s global head of sustainable finance solutions, said in the release.
Torres said that by combining of Riskthinking.AI’s climate tech and Bloomberg’s physical asset data, the two companies “can help investors and companies to better navigate the increasingly complex financial and regulatory environment regarding physical risk.”
Bloomberg announced it was investing an equity stake in Riskthinking.AI in April 2022, calling it a “strategic partnership to explore climate financial risk modeling.” Ron Dembo, the founder and CEO of the data and technology company, said the partnership would help address the market’s lack of universal metrics and hopes it will push future climate risk assessments forward.
“It is of critical importance to make sure assets are valued appropriately on the financial markets,” Dembo said last year.
Companies keeping an eye on disclosure requirements in the pipeline by international regulators or just actively looking to track and disclose their sustainability metrics have increasingly turned to AI for help. Experts have said the technology could prove particularly useful for data collection and insights as businesses are required to disclose a larger volume of more complex data.
There’s also a belief that AI can help companies navigate coming mandatory disclosures from the Securities and Exchange Commission, Europe's recently passed law and any others from jurisdictions companies operate within, Jessica Kipper, Schneider Electric’s senior director of software product management previously told ESG Dive. The data’s alignment with the Europe’s Corporate Sustainability Reporting Directive, TCFD’s recommendations and IFRS’s S1 and S2 sustainability frameworks, from the International Sustainability Standards Board, could help provide another data point for that hypothesis.
The EU recently delayed implementation of CSRD reporting requirements for companies headquartered outside the European bloc until 2026, when more than 3,000 U.S. companies will be required to comply, according to an estimate by Deloitte. The TCFD recently disbanded after releasing a final report indicating 19 jurisdictions that account for 60% of the global GDP have either proposed or finalized disclosure requirements that align with the group’s recommendations.
ISSB — who absorbed TCFD’s recommendations into its inaugural standards — will assume oversight of the task force’s reporting companies and has shown progress in getting governments to adopt or align their standards with the S1 and S2 frameworks. There’s a “high degree of alignment” with the CSRD, and other governments — including Japan, United Kingdom and Canada — have also signaled they’ll align their regulations broadly with ISSB’s standards.
In the U.S., all eyes are still on the SEC and Chair Gary Gensler. The agency announced earlier this year it would release a final climate disclosure rule in October, but there’s been no updated timeline for its publication. Gensler recently told the U.S. Chamber of Commerce that investors were largely supportive of including scope 3 emissions in the rule during the public comment period, but he and the agency are being careful not to overreach their authority with the rule.
“Our remit is about investors making investment decisions,” Gensler told the chamber last week. “We're not a climate regulator.”
