Climate risk analytics attempts to outperform legacy numerical weather prediction (NWP) models with next generation AI driven predictive analytics tools, among other technologies. Advancements in AI and data sciences have made it possible to identify more granular and hyperlocal patterns in weather data, enabling more accurate and longer term climate risk forecasts for up to 80 years into the future in some cases. This is against a backdrop where even a seven day legacy forecast is considered only 50% accurate.
The increasing incidence of natural disasters and related losses as well as regulatory pressure on climate risk disclosures have been key drivers for the industry. AgriTech and InsureTech have been early adopters of climate risk analytics solutions.
Startups in the industry operate across six distinct segments. The most common as at November 2022 were short- and long-term next-generation weather analytics startups using AI/ML models. The majority of the startups in this industry as at November 2022 were at a seed or early stage, with only a handful of startups in the growth stage. Most technologies are still emerging and at pilot scales.
Incumbent activity was predominantly seen across the long-term climate risk analytics: AI/ML segment, with notable in-house developments undertaken by NVIDIA, IBM, and PwC.
Most incumbents offer long-term climate risk analytics solutions by leveraging AI/ML models to develop their own climate modeling solutions. This includes NVIDIA’s digital twin of Earth known as Earth-2, which is under development, IBM’s AI-powered Environmental Intelligence Suite, and PwC’s Physical Climate Analytics tool powered by Jupiter Intelligence. Google’s AI-subsidiary DeepMind has developed a rain prediction model–to derive short-term weather analytics–called “Nowcast.”
A vast majority of incumbent partnerships and M&A activity are also in the long-term climate analytics: AI/ML segment, with disruptive climate intelligence startups such as RMS (acquired by Moody’s) and Four Twenty Four (also acquired by Moody’s) being acquired by larger consultancy companies.