By Spatial Finance Initiative - July 3rd, 2020
Blog » News » Eyes in the sky: Investors reach for new tools to gauge climate change risk

Article by Matthew Green, Karin Strohecker and Simon Jessop

Editing by Crispian Balmer​

LONDON (Reuters) – In the twilight years of past civilisations, astrologers would scour the heavens for signs of impending calamity. In an era where climate change is eroding age-old certainties, a new cast of characters is searching for answers in the sky.

A small but growing network of asset managers, academics, start-up entrepreneurs and campaigners are working to harness an armada of recently deployed satellites to better predict the economic impact of global warming.

While climate scientists caution that the discipline is in its infancy, advocates say the early findings have one over-riding virtue: dynamiting any remaining complacency about the scale of the disruption that lies in store.

“This is the missing piece of the jigsaw,” said Michael Hugman, a portfolio manager at London-based asset manager Ninety One, where the fixed-income team runs $44.3 billion of mostly emerging market debt.

“What we can now do is concretely put hard numbers on what climate change means for countries over the next 30 years. This is a whole different way of thinking about risk and return.”

While investors have long used satellites to track specific metrics such as activity in shopping mall car parks or iron ore shipments, the new approach — known as “spatial finance” — is far more sweeping in scope.

It works like this: analysts acquire satellite imagery and other datasets, filter them using algorithms and use the results to project how climate change could affect anything from a single factory to an entire economy.

Unlike standard risk models largely based on historical data, spatial finance aims to anticipate how rising heat could usher in a radically different future.

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