As central banks and financial institutions come to terms with climate risks, they are increasingly seeking data and analysis from private providers that “may be operating outside the bounds of scientific merit,” according to Jesse Keenan, a climate risk and adaptation specialist at Harvard University.
In an article published Thursday in the journal Science, Keenan describes a brewing potential conflict-of-interest, between institutions responsible for the health of the financial system and a growing “climate services technology” industry that lacks transparency and is engaged in an “arms race” for market share.
These firms advise both public- and private-sector clients about vulnerabilities in everything from supply chains to individual pieces of infrastructure. Their recommendations may help direct enormous sums (many of them public) to infrastructure projects, Keenan writes. They don’t, however, always adhere to best-practices in science, which encourage openness and independent validation of data and models. Both government and companies “need standardized, consistent, and transparent access to data and assessment methodologies” to do their jobs, he writes.
That’s a big ask of firms who earn a living by generating data for clients using proprietary models.
Keenan puts forward a few possible solutions to the problem. The public sector needs to fully understand any contracts it’s considering with climate services providers “and push back on intellectual property imbalances,” such as when the firms may sell data that originated from public sources. Agencies might set up a confidential review of the climate-services “black boxes”—sophisticated models that non-experts have difficulty explaining—prior to selecting a firm. Or, he writes, governments can set up standards-development organizations and charge them with developing best practices for offering “products and services that affect critical infrastructure at the intersection of national security and public safety.”
Attention to climate risk among financial-system players is rising. The Climate Finance Leadership Initiative, a commission formed by Michael R. Bloomberg, who is the majority owner of Bloomberg LP, issued a 100-page report yesterday, titled Financing the Low-Carbon Future, that spells out climate risk and role of private finance in anticipating and responding to it.
The report partially echoes Keenan’s remarks in Science, arguing that many climate-tech services “are still evolving and often lack standardization across metrics, scenarios and scope.”
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