Should climate-risk intelligence be a public good? We may be asking the wrong question.

Climate-risk analytics have never been better. So why aren't we more resilient?

Two recent pieces ask whether climate-risk assessment should be treated as a public good. Jean-François Mercure and Jesse Abrams focus on conflicts of interest and “risk-washing” in commercial climate-risk assessment. Jakob Thomä pushes back, pointing to the innovation commercial providers have delivered and raising the practical question of who pays to build, maintain and improve sophisticated climate-risk capabilities.

Both raise important issues. But public versus commercial is the wrong question to start with.

The question that worries me more is: is the climate-risk industry actually delivering on its promise?

I don't think it is. We are optimising the industry around the value it can capture today, rather than the much greater value climate-risk intelligence could create.

We have increasingly sophisticated models, increasingly granular risk metrics and an industry that has become very good at serving regulatory, disclosure and risk-management demand. But ever better estimates of climate risk are not the promise.

The promise is that better understanding of climate risk enables greater resilience: better decisions are made, capital is directed towards the right investments, future losses are reduced, and economies and societies are better prepared. On that measure, we are not moving the needle at anything like the scale required.

If we start with conflicts of interest, funding or commercial sustainability, we risk designing around the market we already have. Start instead with the outcome we need and the value we are trying to create.

Start there, and the questions of what should be public, what should remain commercial and who should pay look very different.

The gap between need and market

Louie Woodall has contrasted the Total Addressable Market for adaptation with what he calls its much larger “Total Addressable Need”. Karl Mallon has described a related dynamic from inside the physical climate-risk industry, with increasingly sophisticated providers competing for a pool of paying customers that has not expanded as quickly as many expected.

But Total Addressable Need does not automatically translate into demand. More universal access to decision-useful climate-risk intelligence can help make that need visible, quantifiable and actionable, unlocking demand for resilience investment, finance, engineering, insurance and technology, as well as for deeper and more specialised climate-risk analytics. A stronger open-access layer could therefore expand the commercial market around it, not diminish it.

Are we optimising for the wrong market?

The current climate-risk industry has strong incentives to optimise around the customers who already pay and the products they already buy. That is rational at the firm level, but collectively it can produce a short-sighted market: more sophisticated analytics serving a relatively narrow demand base, while failing to unlock the much larger resilience economy those analytics could enable.

If better intelligence leads a city to prioritise a flood intervention, value may show up in avoided losses, more reliable infrastructure, lower credit or insurance risk and new engineering or financing activity. That value accrues across many actors.

The total value created can therefore be much greater than the amount any single actor has an incentive to pay for the information that helped create it.

Markets invest more readily where value can be captured by a buyer and seller. Where value is distributed across many actors, the market may underinvest in the intelligence that enables it. That is the economic case for an open-access layer.

GPS provides a useful analogy. Developed and funded by the US government for military purposes, its civilian signal was deliberately degraded for years. In 2000, that degradation was removed, dramatically improving civilian accuracy while the government continued funding the underlying infrastructure.

What followed was not a collapse in commercial value. More useful access helped enable navigation, logistics, precision agriculture, surveying, location-based services and businesses that did not need to build their own positioning infrastructure before they could innovate.

The lesson is that GPS became far more valuable as shared infrastructure when the publicly available capability became good enough for others to build on.

The same could be true for climate-risk intelligence. Cities could better direct scarce capital; banks could identify financing opportunities that reduce portfolio risk; engineers, investors and insurers could develop new solutions and products; and more actors might ultimately demand deeper, specialised climate-risk analytics.

That is a hypothesis. But it is one worth testing.

There is an uncomfortable implication. Moving more useful capability into an open-access layer could challenge business models that currently depend on paid access to that capability. Providers may reasonably argue that this risks weakening the revenues that fund continued innovation.

But that is precisely why purpose matters. The objective should not be to preserve the current point in the value chain at which revenues are captured. It should be to maximise the overall value created while maintaining strong incentives to innovate.

The zombie portal problem

But open access alone is not enough.

Anyone who has worked in climate analytics knows the ritual. A new mapping tool or climate portal is launched with great aplomb, followed by a drinks reception where everyone celebrates, while quietly wondering whether anyone will still be using it in three years.

Some disappear when the funding ends. Others become zombies: outdated, poorly maintained and rarely used by people making real decisions.

But the more interesting question is what drives that zombification. Initial public or philanthropic funding is rarely intended to last forever. The expectation is that the capability will create enough value to attract continued investment or develop other sources of revenue.

Too often, the open-access layer has been the low-resolution, low-sophistication version of the useful stuff. We have no shortage of public climate maps, portals and datasets, but much of what is publicly accessible remains too coarse, generic or decontextualised to support real decisions.

If the open-access layer stops short of being useful enough to change a decision, reveal an opportunity or give someone else something worth building on, we should not be surprised when it fails to create lasting value.

Funding the shared layer

But commercial-grade, decision-useful climate-risk intelligence is expensive to build and must continually improve. Whether the customer or the taxpayer, someone has to pay.

Public and philanthropic capital can help fund capabilities whose wider value the market cannot readily monetise, without replacing commercial markets.

In sustainable finance we talk constantly about blended finance. The same logic may be useful here: public and philanthropic funding for foundational intelligence, combined with commercial revenues from bespoke analytics, applications, APIs and services.

The important distinction is not public versus commercial. It is which source of capital is best suited to fund which type of value creation.

Public and philanthropic capital can also play a catalytic role beyond funding the capability itself. It can support pilots that demonstrate its value in real decisions, enabling policy that embeds climate-risk intelligence into those decisions, and the ecosystem of enabling actors needed to translate it into investment and action. Building the capability and catalysing the market around it need to go hand in hand. Otherwise we risk recreating the zombie portals we started with.

Start with purpose

Where broad access to climate-risk intelligence creates greater value through better decisions, coordination, demand and innovation than can be captured by restricting access to it, there is a strong case for putting that capability into the open-access layer.

Where additional sophistication creates identifiable value for individual users, commercial providers should have room to compete, innovate and charge for it.

There is also another source of value that is easy to miss: coordination. Climate risk may be measured institution by institution, but resilience has to be built across systems and places. A factory depends on the grid, roads, water, telecommunications and workforce around it — systems owned, financed and governed by different actors.

They do not need identical analytics, but they need enough common intelligence to understand shared risks, dependencies and priorities. Coordination becomes much harder when everyone is working from a different picture of the problem.

That strengthens the case for a common layer of climate-risk intelligence, even if it does not tell us exactly where the boundary should sit.

Applied to the market we have today, I think that points in one direction: we need to invest seriously in moving the open-access boundary substantially further into commercial-grade, high-resolution, decision-useful climate-risk intelligence.

The wager is that the value created by making high-quality climate-risk intelligence broadly accessible will be far greater than the value we can capture by restricting access to it.

Thomä invited the conversation about where the boundary should sit. I don't have a neat answer to exactly where that line should be drawn, but I think we should start by moving it.

And while the Climate Week cocktail receptions may be over, virtual coffees are always welcome.

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