EIT Climate-KIC’s Carbon Delta takes on climate disclosures project with the UN

Carbon Delta, the climate risk analysis company supported by EIT Climate-KIC, has raised €1.5m (1.7m Swiss Fr) to expand its team, ahead of a major climate-related financial disclosures project with the UN Environmental Program Finance Initiative (UNEP FI).

The Swiss-based company, which went through EIT Climate-KIC’s Accelerator programme in 2015-2016, is working with 13 major asset management companies including Nordea Investment Management, Norges Bank Investment Management and Rockefeller Asset Management to develop a climate risk tool and online portal with functionalities that will support the work of the Task Force on Climate-related Financial Disclosures (TCFD).

An availability of forward-looking climate change assessments

The project, with UNEP FI — the global partnership between the United Nations Environment Program (UNEP) and the financial sector to implement sustainability principles into financial institutions — kicked off last month (June 2018) and will conclude early next year. The results of the work, detailing the process to help achieve initial forward-looking climate change assessments, will be then made available to all financial institutions.

“This should help move the industry closer to the transparent disclosure of climate change related risks and opportunities of equities, corporate bonds and real estate within investment portfolios,” said David Lunsford, Co-founder and Project Manager, Carbon Delta.

At the same time, Carbon Delta is planning to plough its recent investment into building out its team to include more software engineers and client advisers, according to Oliver Marchand, Co-founder and CEO, Carbon Delta. Additionally, the company is looking to establish a subsidiary in Potsdam, with this branch working mostly on software development and physical risk modelling.

Climate considerations can be mainstreamed into financial decision-making through comprehensive models that reveal climate risks and opportunities for investors, according to Carbon Delta. Currently, professional investing doesn’t adequately factor in climate change. Climate change risks aren’t properly accounted for, nor are the gains of climate-smart investment. This is due to the broad scope of climate change as well a lack of awareness in the financial industry, ultimately resulting in a shortage of data.

Every transaction should account for climate

To address this, Carbon Delta’s analysis of more than 20,000 publicly-listed companies aims to translate the climate change risks and opportunities into costs and profits, before projecting the potential price changes of stocks and bonds for investors.

“Although we are all invested in capital markets through our pension funds, often, we know very little about the details of investments that are made with this money. This gap presents a fantastic opportunity for fundamental change. Every financial transaction should take climate change into account. In total, that’s a very broad spectrum of opportunities,” said Marchand.

“We are starting to see the financial sector integrating climate change into their investment activities, which we see as a huge lever towards achieving the goals of the Paris Agreement. Ultimately, we would like to see the long-term costs of climate change to be properly priced in capital markets. This would be beneficial for investors and the public alike,” added Marchand.

2016 Venture Competition winner

Carbon Delta participated in both stage one and stage two of EIT Climate-KIC’s Accelerator programme. During stage two, it won EIT Climate-KIC’s 2016 Venture Comptetition and was awarded an additional €80,000 in prize money. EIT Climate-KIC supports Carbon Delta as part of its work to mainstream climate in financial markets.