The Space4Climate Climate Risk Disclosure (CRD) Task Group has been exploring how satellite-derived climate data can help the finance sector in making climate informed disclosures and decisions.

Initial discussions have revealed a wide range of possibilities where climate data derived from satellites used together with in situ data and related models could help to inform the finance sector about climate risk. For example, long global records of environmental parameters such as temperature, precipitation, wind power, and sea level can be correlated with damage and insurance losses and used to help understand changes and trends. Satellite datasets offer improved spatial and temporal granularity of the datasets needed to monitor climate related risks, such as flooding, sea level rise, drought, and soil health.

Space-enabled climate services

The use of high spatial and temporal resolution satellite-derived climate datasets, combined with other spatial data and climate scenario modelling, could aid assessments and decision making in the following areas.

  • Task Force on Climate-related Financial Disclosures (TCFD) climate risk disclosures
  • Statement of Investment Principles for climate risk
  • Supply chain risks and exposure to climate change for food and manufacturing
  • Insurance risk and exposure
  • Sustainable investment requirements under the EU Taxonomy for the certification of Post-CAP Green Finance (such as a Sovereign Green Bond)
  • Environmental considerations for Environmental, Social, and Governance (ESG) criteria to climate change mitigation and adaptation
  • Contribution of investments to global UN 2030 Agenda and Sustainable Development Goals (SDGs)
  • Financial innovation such as FinTech.

The development of new climate risk metrics, standards and tools could unlock new financial solutions and help the UK position itself as the global leader on climate change risk, resilience and adaptation for the finance sector.

Services to inform and support climate action

The Space4Climate CRD Task Group has expertise in developing tools that bring spatial data and knowledge together in problem-focused spatial Policy Support Systems (PSS) to assess and manage environmental risk and to perform environmental SWOT analysis that considers environment, water, energy, food, economy and population. They are straightforward to use and allow a rapid assessment of environmental risk metrics such as flood risk under current conditions and under IPCC scenarios for climate change to build resilience and understand adaptation and mitigation pathways. The tools operate with global satellite data that allows global portfolios to be assessed and compared.

The Task Group has produced a demonstrator to showcase the wide range of high-quality, open access climate data and the variety of bespoke data-derived products and services available to inform and support climate action.

The demonstrator provides an overview of baseline climate satellite data, extremes and climate risk indexes with examples of data analytics and decision support services. Climate data from space can be combined with other data and mathematical models to enhance their usefulness in making climate-informed financial decisions including:

  • Stress-testing of investments
  • Climate risk disclosure
  • Green investment and nature-based solutions (such as renewable energy, infrastructure, agriculture, natural flood management, water and food security)
  • Investment in climate action.

It also features examples of European and global tools providing historical analysis and enabling stress-testing under the IPCC (Intergovernmental Panel on Climate Change) climate change scenarios.

The demonstrator has been designed with and for users in the financial sector regardless of whether they have technical knowledge of Earth observation (EO). It can be used to access data on a global, continental, national or even local scale relating to many of the 54 parameters (known as Essential Climate Variables – ECVs) that are used to monitor our climate system.

The platform explores how a combination of satellite data, in situ and modelled open (free to access) data, reanalyses, multi-hazard exposure, vulnerability and risk modelling can provide new, reliable information for the financial services community, including actuaries. This includes climate indexes that reveal information on the changing frequency and magnitude of extreme weather events including temperature, precipitation, wind power, sea level and agricultural conditions in specific regions or globally over long periods of time and in a consistent manner.