Startup Series: Cervest
Today's guest is Iggy Bassi, Founder & CEO of Cervest.
Cervest offers cloud-based Climate Intelligence (CI) to enable organizations to manage and adapt to climate risk at an asset level. Its on-demand, AI-powered platform delivers a standardized, science-based view of climate risk – simultaneously analyzing millions of global assets across multiple time horizons and risk categories. EarthScan, the first product on the platform, helps enterprises and governments baseline, monitor, and forecast climate risk. Through its open-access platform, Cervest incentivizes everyone to share and integrate Climate Intelligence into everyday decisions – protecting the world's critical assets – including our greatest asset, the planet. Cervest is a Certified B Corporation.
Iggy is a serial entrepreneur with extensive experience in both emerged and emerging markets. Driven by a relentless passion for world-changing innovations that tackle global challenges, he's the Founder/CEO, and driving force behind Cervest. He has advised Fortune 500, sovereigns, and entrepreneurs on competitiveness, sustainability, and resource security.
In this episode, Iggy explains Cervest and his motivations for founding the startup. He outlines how climate risk is defined and the existing landscape for climate risk platforms. We also dive into a discussion about balancing a quality product and scalability, why Cervest is working to democratize climate risk data, and the company's approach for various sectors across the climate industry. Iggy is a great guest, and it was exciting to learn more about Cervest.
Enjoy the show!
You can find me on twitter @jjacobs22 or @mcjpod and email at info@myclimatejourney.co, where I encourage you to share your feedback on episodes and suggestions for future topics or guests.
Episode recorded October 7th, 2021
In Today's episode, we cover:
Overview of Cervest and what led Iggy to found the company
Iggy's climate journey
If there is a standard definition of climate risk or whether it varies between different stakeholders
Cervest's definition of climate risk and how the startup thinks about staging and phasing
How to balance delivery of a quality product and being able to scale the company
Data's importance in Cervest's success and if the company has had any resistance when it comes to data collection
Democratizing data and how Cervest ensures inclusionary practices
Cervest's value proposition for customers
The approach Cervest takes across the climate industry and if the asset class and risk type changes as you move across different vectors
How Cervest ensures accuracy in its modeling
The climate risk landscape and the difference between vertical and horizontal companies
How to balance mission alignment with profitability
What the next 12 months look like for Cervest
Links to topics discussed in this episode:
Cervest: https://cervest.earth/
Iggy is at COP26 right now! Check out twitter for live updates
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Hello everyone. This is Jason Jacobs and welcome to My Climate Journey. This show follows my journey to interview a wide range of guests to better understand and make sense of the formidable problem of climate change and try to figure out how people like you and I can help. Today's guest is Iggy Bassi, founder and CEO of Cervest. Cervest creates climate intelligence for every person, asset, and decision. Climate intelligence transforms how we build, manage, and de-risk our most valuable assets.
I was excited for this one because climate risk is such an important topic and one that I've heard again and again is not anywhere close to as factored into the global economy as it should be. We cover a lot in this episode including the origin story for Cervest, the work that they do, Iggy's view on climate risk in general, where we are, where we need to go, and some of the barriers holding us back. We talk about Cervest approach, their progress to date, their long vision, and some of the barriers and hurdles that are holding them back. And we also talk about the theory of change, both for Cervest and for Iggy personally that will lead to a rapidly decarbonized global economy. Iggy, welcome to the show.
Iggy Bassi: Thank you very much, Jason.
Jason Jacobs: Thanks so much for making the time. It- it's been a while since we last caught up and it seems like you and your team have been quite busy.
Iggy Bassi: Well, I think that's right. Uh, I think the last time we spoke was early part of last year, and since then we closed the [inaudible 00:03:17], made some fairly significant progress on the product, on the market. I do think more than anything the market's moved on, which is wonderful to see. I- I've never seen this much interest in climates. And I'm also glad to see that the structural movements in the market as well. So whether it's finance, new disclosure laws, COP26, it feels structural this time, which I think is great.
Jason Jacobs: I agree. I, I mean, I don't have the benefit of, of working in this space for a long time, but even in the three years that I've been here, I mean, the landscape is far different today than it was in late 2018 when I first started heading down this path.
Iggy Bassi: Absolutely.
Jason Jacobs: Well, what is Cervest? Let's just take it from the top.
Iggy Bassi: Yes, yeah. So Cervest is a what we call a climate intelligence company. What that really means is we help governments, companies, NGOs just better manage, mitigate, and find opportunities within climate risk as well. So not only do we help you manage your risk, we help you think about, well, how do you adapt to new types of risk? I think we very much focused on physical risks. That's been our mainstay for the last three or four, four years. So we help companies think about how do you quantify risk? How do you think about risk over time? How do you think about the historic risk that's happened to your assets?
We always go down to an asset, Jason. I actually started this journey several years ago, about five years ago. Prior to that I was in a farming business where we saw a huge amount of damage to the farm from what they call freak events or acts of Gods. I said surely there has to be a better way we can use science to get a better signal so we can actually be just be a little more precise about, well, what's going to happen to my asset, right? Uh, that... those assets could be processing plants, it could be crops, it could be fields, it could be the local forestry. In many ways we're asking people to address this incredible problem that we have called climate, but do we have decision-ready tools? And most of the world's climate science doesn't come in a decision-ready format for people like you and me to make everyday business decisions.
So that's what really Cervest is really about, helping you decipher, translate, and then take some actionable decisions, well, are largely to protect your assets, understand where the risks are coming from. But then think about adaptation. I think for us the narrative of the last couple of years has been very focused on decarbonization, and we think that's absolutely fundamental. But physical risk is locked into the system, so we've done enough damage to that system. And now that our systems are basically responding with greater frequency, greater severity, so in many ways even we if we win the net zero race, we also have to think about the manifestation of physical risks: heatwaves, floods, droughts. These are locked into the [inaudible 00:06:00] system. So these will get played out in the next three or four decades.
All right, so we're very keen for people to understand, okay, well, what about implications for your assets? What about implications for your economies, for human security, asset security? What does it mean for your earnings? What does it mean for new economic growth? What does it mean for migration, for instance? So in many ways we often say that climate intelligence will be the new superpower to help you navigate the complexities of climate risk for the 21st Century.
But we also need everyone to have it, Jason. So in many ways we wanted to marketize this superpower. So whether you're a person or you're a farmer in Ghana, you're my neighbor in Brazil, or you're a billion-dollar company, we all need to become climate intelligent over time. And that's essentially what we empower. So fundamentally believe in that, open democratized intelligence is core to the offering at Cervest, and it's actually one of our guiding principles as a mission-driven company as well.
Jason Jacobs: And how did all this come about, Iggy? What does your journey look like and what led you down the path of starting Cervest in the first place?
Iggy Bassi: So I think like most people, you know, you go to university, you end up in sort of professional services. I was in investment banking and management consulting. I actually dabbled in software many years ago. I think I got to a point in my career to say, well, how can I use my professional skills in ways that can actually benefit mankind as well?
So about 12-13 years ago, we did a piece of work for a very large US foundation. I decided to commercialize, uh, one branch of that research and set up a farming business in Ghana. And that was looking at sustainable agriculture. How could we transfer low-cost technologies, not the seed, but the seed replication technologies into West Africa to really improve the food to secure the situation? Particularly domestic foods security for Ghana.
But it's actually doing that business it took me about five years to build that business up, Jason. It was a complex business. But at one stage I thought it was an infrastructure company because we're digging, we're building canals. We're trying to figure out, you know, what is the best way to optimize yield here. And that worked with the local community so we folded in several thousand local farmers and we built an integrated food chain. But it was really during that business we saw shocks to the system. We saw things that weren't picked up by climate models, weather systems. We said surely there has to be a better way we can mathematically uncode this risk so we can all benefit from this.
So in 2015 when I sold that business, I moved back to London and that led me to have some conversations rather with some mathematicians that I happened to know and they helped me think through this whole issue of climate risk. And what we realized is that the world's climate scientists actually work pretty well, but they're all siloed and they're never really at asset level so they can't tell us what's going to happen to the specific asset.
And I think the discourse on climate had moved on. I think people quite fatigued by hearing, well, we need change. The climate's a big problem. We said, well, can we use science in a way to personalize the climate risk down to Jason's asset so he can understand what's going to happen to his asset? And also then he can understand what he needs to do to his asset over time.
So in 2016, '17, it was largely just relearning research, we're fusing different models together, we're really asking ourselves, you know, can we get a effective signal? And we trained a lot on agricultural data first because of my background. We had great access to data from some partners. But I see in 2018 I said, "Why are we just looking at the food and agricultural sector?"
This is a problem for everybody, whether you're in the banking sector, insurance sector, industrial sector, uh, tax sector as well. Is there a way, and I asked my scientists one night, and I said, "Hey, listen. Go away, think about a problem, the problem that my task for this this week is to say can we use algorithms that we've developed for forecasting, you know, change of state on crops, change of state over the long term, onto physical assets? Build environments, cities, not just biological assets like crops? And my chief scientist at the time, Dr. [Van Calder 00:09:59], had came back and said, "Yes, I think we can apply this and it's highly transferable to both, both classes of assets," which is wonderful.
So in 2018 we took in some additional capital which started looking at things beyond crops. We started looking at buildings, started looking at physical assets in different parts of the world to say can we get a really good signal to say what's already happened to this asset? Can we backcast? Can we go and test our algorithm in very robust ways?
Basically, it wasn't until 2019, Jason, that I realized, you know what? If you want mass adoption, if we want to stay within a Paris-aligned world, we probably have about 10 years maximum. Like, if you want to stay in that emission level that everybody agrees is probably the safety zone that humans can operate in. I said we have to make this intelligence open. I need to be able to see Jason's asset and he needs to see my asset. So why not adopt a platform model which is open to everybody?
So I said, "Well, that's great," to my scientist, but then we need to prepopulate that with assets. So let's go populate the platform with the world's built environment assets, natural assets, and what we call linear assets, things like pipelines and railroad networks and telecoms networks. So really we've been engineering for the last couple of years, from 2019 to where we are today. We've spent a long time gathering the world's assets. And the real challenge is the world's assets are not well-labeled, Jason, as you probably know from other [inaudible 00:11:24] in conversations. It all comes in various quality of data, different labels, different spatial temporal resolutions for certain signals. So that just required a huge amount of harmonization.
I think at the very heart of Cervest we've also built a super-interesting mathematical framework that allows us to take different spatial temporal resolutions, different approaches, different time periods, fuse it all together. Synthesize all the various different aspects of risk like fire, drought, extreme participation, but in ways that can unify mathematically to give an overall rating of an asset. Because I'm not sure there's a much signal.
I was very fortunate enough early in my journey I spoke to some very senior bankers, and they said, "Iggy, we like what you're doing, but you better tell us multiple variables of an asset. Don't just tell me it's fire or flood risk or drought risk. Give me seven, eight different variables, tie them together, and then go benchmark them against other assets. Then we are more likely to listen to that intelligence, use it in our financing decisions, insurance decisions, credit decisions as well, over time."
So in many ways that's essentially was great guidance for me and that's the challenge that I posed to the scientific community, how do we fuse all these different sciences and physics that's together in a way that can speak mathematically, right?
So where we are today, Jason? We've just onboarded 34 different large enterprises to say, "Listen, we are going to release this next year. This is an open intelligence platform. Others will be able to see your assets. We're giving you a sneak preview of what the world's going to look like with open intelligence."
Obviously, we're also learning about what they find useful, what they don't find useful, because climate is unlike any other discipline that they know. They don't... We have a pattern of understanding or interpreting or using or consuming climate data, but they don't know climate departments. But if you read the material, I'll do matrix of large companies, climate feature's pretty high, but there's no dedicated department. There's no understanding, and it's not really their fault because there's never really been a need to institutionalize climate risk either as a department or as codified records inside of large companies.
So these are the core companies that are bringing on their asset portfolios, so we've allowed them a couple hundred assets each to come and look at their assets. Examine what does it look like to take, let's say, a hotel asset or a factory back 50 years, forward 80 years under different emission scenarios. So that's been quite revealing for us, because assets that where they thought the risks were really high, accu-... in some cases it's been fairly moderate. Where they thought they had very safe assets, we're telling them that the hazards are going to change substantially over the next couple of decades.
So it's been quite surprising for them, because I think there's been a big gap between perceptions of risk and actual risk, which is a tough thing, but we will continue with that program. It's called an early access program. We're going to take that up to probably 50 large enterprises, and it's roughly 50% in the States, 50% in Europe right now, and I think about 75% of them are listed companies.
Also what we tell us... tell them is, listen, the regulators will be asking for this information. New disclosure laws are coming into place in Europe, UK, Australia and New Zealand, Singapore, Hong Kong. The Biden effect has kicked in, as you know. If, if the SCC pushes forward with their disclosure at the end of the year, which is what we expect them to do, you're probably going to have in the region of 20,000 to 22,000 listed companies in the world scratching their heads trying to figure out how do we codify this risk? How do we quantify this risk? What tools do we have? And how do we look into multiple jurisdictions to figure out what's going to happen to different assets over time? And h-, but then how do we bring that together mathematically to say, okay, this is my overall rating, and this is the action that we can take over time?
So we're looking TCFD fairly closely. That's a task force for climate-related financial disclosures to allow companies to start building portfolios and start then using the platform to quantify their physical risks. And then they have to figure out their transition risk as well, which will probably come some time next year to say how much carbon... how much will carbon affect them as they transition towards the low-carbon economy? Get that quantified and automated in a way that's also shareable.
My biggest disappointment to date with regulators is they haven't really harmonized the standards yet, Jason. Now we're hoping that, you know, they can understand that if you have a large company like General Electric or IBM, you're going to have physical assets in multiple geographies, right? So if those multiple geographies are not unifying their standards, it's going to be very difficult for those companies to provide a unified picture of climate risk, physical risk, transitional risk, carbon risk, in a way that's actually decision-useful for investors, for pension funds, for asset managers, for insurance companies, to look at the risk and compare apples with apples.
We haven't quite got there yet, so we're trying to exert pressure onto various regulators to say it's in your interest if you genuinely want to measure systemic risk, you need harmonization of standards across multiple geographies, because companies operate in multiple geographies. Capital flows in every geography. So if you truly want to understand climate risk, you have to think about harmonization. I'm not sure we're going to see that in COP26 [laughs] in the next couple of weeks. I think people are waiting for the outcome of SCC at the end of the year.
Jason Jacobs: Iggy, do you feel like there's a standard definition of climate risk? Or does it vary greatly across the different stakeholders?
Iggy Bassi: In moments variability, Jason. I think to some people climate risk is all about carbon. For others it's about the physical risk. We take a different view. We said you need to look at both sides of the coin, because in many ways emission reductions are absolutely necessary, but they're insufficient by themselves. We have so much locked-in heat for the next three or four decades. We have to look at, we have to quantify physical risk and we have to think about adaptation.
So you got this broad spectrum of people who understand everything from, you know, well, we just need to reach net zero, everything's fine, all the way through to companies who understand my assets are getting physically affected. So even if I reach net zero, I'm still going to be subject to physical risk.
So it's as different, and there's no universal standard, of course, right? So what is classed as risk in one part of the world could be... could mean something else in a different part of the world. We don't have any universal standards. And this, again, it's really incumbent upon the policymakers to start determining this, or at least give us better guidance than they have to date to say what does risk mean? So consumers, retail investors, institution investors, can start comparing properly apples and apples.
Jason Jacobs: And how does Cervest define climate risk? And a related question, how do you think about staging and, and phasing it? And I ask because, I mean, what I'm hearing is that we focus on all kinds of climate risk and we focus on democratizing that information for everybody and those are big, bold proclamations. But how do you, how do you make sure along the way that you're delivering things of value to specific audiences of people early on such that you earn the right to then expand to more over time?
Iggy Bassi: That's great. So this is why working with large integrated companies early on makes a huge amount of sense for us, because we're not only telling them, okay, we have a quantification engine. We can look at your assets, give you a physical risk metric and we can put a dollar sign over that. Also, we also know that they need to fundamentally re-wire their business processes over time. So it's funny, in the 34 or 35 companies that we have now, I think eight or nine of them have given us brand new use cases we just haven't heard of, Jason, right? We said, "Oh, that's interesting. You could use climate intelligence for this and this rather than just a conventional risk metric, reporting metric." They say, "No, no. Actually can I add this into my M&A decisions, my growth decisions, into my new location decisions, for instance?" Right?
One even came to us recently and said, "Oh, could I use climate intelligence to think about climate litigation," for instance. So the use cases are huge, and we don't claim to know every use case and we don't want to solve every use case. We want to generate the intelligence that feeds into idiosyncratic use cases, standard use cases, company-specific use cases over time.
Underneath our system though, Jason, we're also learning what best advice can we give on things like adaptation over time? So we are building a recommendation engine and there'll be different grades of recommendations we'll be releasing from next year through to probably two or three years' time where we can get very specific about assets to say listen, Jason. These are your risks on your 10 assets, but these two assets require some sort of remediation. It could be fortification. It could be flood defenses. It could be different material composition. We may even tell you that this particular asset may need retiring early because you're not going to get your full useful economic life on this asset.
So in many ways we will travel with our users because they are... I always say that they're billion-dollar companies, but they're climate inference today. We will travel with them. This is a climate journey. In many ways we want every enterprise, every organization, every government to become climate intelligent. I think it's the only way they're going to survive these risks over the next couple of decades. 'Cause it's not just a physical risk. 'Cause it's also mainstream attitudes to climate of change. Consumers are changing, even employees.
I heard from one of the customers recently that they're interviewing people and they want to know how climate resilient the actual company is. What's their plan for the next decade, right? So even like the inflow of new talent, it's shifting perceptions. And I think we've had a, a real shift within societies across the world.
I recall a opinion poll at the height of COVID. Something like two-thirds of the world, citizens, still saw climate risk was a higher risk than COVID, at the height of COVID, right? And that's significant, Jason, because that means now you have the capital, you have the world, and also you have a big willing audience of stakeholders saying, yes, we have to change, right?
So I don't know a politician today who doesn't talk about climate for the first time. I think... I tell you the Paris agreement, I still think there were many skeptics. I still I think we have far fewer skeptics today. This is why I often say to my teams, "Listen, we can talk about climate all day long, but unless you can personalize it and put a price tag on it and make it personal to Jason, he's not going to listen."
Jason Jacobs: [Laughs]
Iggy Bassi: As crude as that sounds, Jason, I think that's probably the reality.
Jason Jacobs: And when it comes to getting the data which it sounds like it's so fundamental to your success, are you encountering any resistance from companies to give the data to you? Or more importantly, to give the data to you knowing that it will be made available to everybody else?
Iggy Bassi: That's a good question. I think if you take the power of exponential technologies, whether it's through satellites, NL computing power, radical transparency is here and it's only going to get better in the next two, three, four, five, six years in many ways. So we've had companies who are saying, "Well, listen. These are our assets. You can't add them on to your platform." We only take assets of public companies and governments, and I think that's important for us us because that's where the bulk of the emission, that's where the bulk of the climate risk, that's where the bulk of the GDP really resides, right? The public sector, unlisted companies, make a significant amount of the risk equation for climate.
So there's a level of data that we collect from open sources, whether that's satellite feeds, it's labor data, or we have to pay for that data, things like asset ownership data. Progressively, though, behind the firewall we want users to bring more privileged data or things like that, depreciation cycles, their material composition. What's their goals plans over time and can we help them optimize their decisions?
So I think a lot of large companies, there's only 34 companies that have joined the program so far, they understand that the world is changing. And they al- also understand that the stakeholders are demanding greater penetration of risk understanding for these assets. So I think, I think two or three of them have said they're going to share the data with the insurance company to get ahead of other people. Some of them have sh-, have shared with it with their board. Some of them have shared it with their banks, for instance.
So I think we just need to reach a stage where we need to take out the [inaudible 00:23:55]. It's no point one profit getting stronger, getting privileged information and their counterpart is just becoming weaker. It doesn't help you if I become weak in climate change. You don't become stronger. We, we all lose, right? This is either a win-win, or it's a lose-lose for all. So we take the view that the power of open intelligence it's what's going to help drive the rapid change that we need over the next decade.
Jason Jacobs: And you talked about democratizing and making this available... this data, rather, available to everybody. If you're only going after the public companies with the largest asset footprints, isn't that by definition exclusionary?
Iggy Bassi: No. So a ton of people can bring their individual assets in a private domain and use the quantification engines to find out what's going to happen to their home, to their assets. Certainly for public and for large listed companies, that would be open. But we also would then want people to benefit from this, right, because what you don't want is the bank turning around and just repricing their mortgage or just pulling their mortgage or your insurance premium changing over time, but you're not really knowing why.
So there's always the ability for anyone to log on, use a Google account, use other plans you like to log on to look at their assets so they can locate their [inaudible 00:25:10] and look like a... at a prepopulated. Or they can maybe use things like open street maps or Google maps to identify their asset. That doesn't need to be made public, but they can search for it themselves and query it.
Jason Jacobs: Uh-huh [affirmative]. And the 34 companies that have signed on, so are they paying customers?
Iggy Bassi: I think we, right now, we're more interested in adoption. We're more interested in showing them what the world's going to look like next year. So we actually moved away from paid engagements beginning of last year. It was a decision that we took with the board to say, listen, adoption matters first and then we'll figure out the monetization. This is a problem that's not going to go away any time soon, Jason.
So, uh, because also you have to remember there's no prior purchasing history with these companies. They don't really know what good looks like yet. So I'm hoping in, in the next year or so they can start understanding having a deeper asset level penetration with open intelligence makes the most sense.
So they have a free model, so anyone can use it for free for a certain amount of assets for up to 10 assets, beyond which you go onto a paid tier. So if it's all, what I think, all the way up to about 25,000 assets you can have on various portfolios. We allow you to build as many portfolios as you like, so there are some groups that we're working with that are building their portfolio for European hotels, US hotels, hotels of a certain age, hotels that are exposed to a different type of risk factor, for instance, right? Because that's how they think about making decisions. So we allow a huge amount of flexibility in the tool. So, yeah, excited to open this up to the world in early part of next year.
Jason Jacobs: And what is the value prop that you expect that as you are focused on more paying customers in the coming months and years that they will be paying for? What do they get?
Iggy Bassi: Yeah. So first of all they build their portfolios of various assets. They can analyze their risks. They can also then figure out, okay, how do I then think about adaptation? How do I think about changing course on my goals, my M&A decisions, my financing decisions, not knowing now that the bank and the regulators are asking for this type of information can they of course correct themselves. Can they think about faster decarbonization pathways? Can they think about where to reallocate their assets? They're also can I fortify my assets in new ways that I haven't thought about before? Where do they put their marginal dollar if they have 100 assets? We help them figure out, okay, where do you need to make that intervention first in order for you to protect your assets, or to strengthen your assets over time?
But ultimately what we want them to do, Jason, is to rewire their existing processes, right? So supply chain, can I get a better look at my supply chains, for instance? Now either I... they can see me and I can see them. How do I tell my supplier who's 25% of my critical supply, for instance, that, hey, what are the interventions you're taking, Jason, because you're such a critical component of my supply chain, which looks like you're going to have these risks on the next five, 10 years. Can we think about an investment plan together to help you fortify your asset, right?
So in many ways we want ultimately climate intelligence to help companies think about top line growth, bottom line growth, and protecting their assets and their shareholder value over time. But it must absolutely feed into core business processes and workflows. So there's an API that we are releasing next year. We are not going to optimize for everything. We want large consulting partners, systems integrators, cloud providers, BI providers, to take that intelligence. We can't possibly feed that into every large company. We got to work a ecosystem off large partners, so looking forward to announcing some partnerships very soon as well.
Jason Jacobs: And as you look across asset types, industries, and risk types, is the approach that you need to take from a product standpoint the same as you look across those areas? Or does it vary? And if it varies, how much does it vary and in which vectors?
Iggy Bassi: Excellent question. I think there's a commonality around assets. So if you think about a Lego set, our basic Lego set is a, is an asset, whether that's a factory natural asset or it's a housing block. Now the slightly different products depending on the audiences, we have a product called EarthScan, which is a premium product. It's open to everybody. It's going to be prepopulated by the time it goes to general availability and it'll be over half a billion assets in there across the world, heavily populated for USA and Europe first. Progressively we'll be adding more data to that.
Now that is going to be used by governments like enterprises to help them figure out what their risk is, baseline their risk, and then help them make better decisions on things like adaptation, investments, where do they need to really prioritize their investments?
The second product is largely ac-... pretty much exclusively built for capital markets. Now that I know the risk on that asset, how do I reprice my equity and my credit? How do I reallocate my portfolio, for instance? So larger banks, for instance, are looking at this to say, hmm, okay, I could then overlay this with my credit portfolio. Just say how much risk am I sitting on and how do I fundamentally reprice that risk? Because ultimately banks are also subject to disclosure laws and risk models, right? They want to optimize returns. They want to figure out am I sitting on too much high carbon, high physical risk assets? Can I fix that? Can I adjust that? Can I help my clients think about adaptation financing?
This is why it's core that we work with experts who can say, well, what is the best way to adapt this asset over time? So we can't answer every question on things like civil engineering, but other people can. Let them take the risk analytics and figure out with their clients what's the best intervention to protect assets as well? This is not just about optimizing for assets. This is also fundamental thinking about how to adapt to a different physical world, and then how do you also simultaneously drive towards net zero as well?
So we need to think about both sides of the... so what we call the climate risk equation, which is unified climate intelligence, which is managing a mind decognization both for thinking about my physical risk and my exposure.
Jason Jacobs: So what function within these organizations tends to be the decision-maker on this type of purchase? And is it existing budgets that they're pulling far more or are they required to find the money in other places that hadn't previously existed?
Iggy Bassi: I think it varies massively. I think Europe generally has more budget available for things like climate assessments, climate risk. I think a lot because it's such a sea level issue there are new budgets being opened up at the very senior levels. Because this is a reporting, this is a liability. This is a disclosure issue for boards. So we are seeing new budgets being created, but we take the general trend line. Do we believe that climate is going to be a larger expense item in the next four or five, six, 10 years? Absolutely, to the extent that they can start incorporating climate intelligence into their decisions. That we expect that budget to come from operations, the ESG budget, the sustainability budget, the risk management at the CFO's office because now they also need to start understanding what are the financial impacts to these types of physical risks over my assets, my access to financing, for instance?
Banks are obviously a different class. They will have budgets for these types of tools. And also they're under pressure. They're under the same pressure to understand where does this risk lie? But fundamentally how can I build new products? How do I green my finance? How do I think about spot bonds which are then linked to climate outcomes, right? So I think budgets are becoming available, to the extent I don't know [laughs]. Um, I think that, that has to be planned out over the next couple of years.
Jason Jacobs: Uh-huh [affirmative]. And obviously the accuracy of your modeling is paramount. So where are your blind spots and which are the ones that are within your control versus outside of your control? And relatively, how and when will you know and be able to validate that your product does what it's advertised to do effectively?
Iggy Bassi: So I think there's a broader question around accuracy of how do you forecast a complex dynamic systems? And it is inherently very difficult. Now can we pull a signal from what's happened in the past? Yes, there's some signal, but the way climate is behaving and the way climate does behave, it's, it's too chaotic to say we're going to know perfectly what's going to happen in 15-20 years' time. But we can assign probabilities. So we use a bunch of mathematics called ways and statistics that allows us to constantly update our beliefs based on evidence, based on events that happened.
We're constantly updating our forecast, but we do go back in time as well, Jason. So it's for every single asset that we put out there, we ensure that all of our signals or has had signals can go back 50 years. So we can o- only show the trendlines. It's remarkable when you show companies a trendline of what's already happened. Because we often ask them, "Where do you think the risk has changed the most?" And actually there's no recall for that. If you say, "Oh, have you seen twice as much precipitation over the last couple of decades?" They can't answer these questions.
So we do go back in time and show the trend analysis, but it's not enough. And it's you have to be able to then do some pretty interesting machine learning around fusing things like physics models, science models into your statistical models to give the best outcome. But it's also incumbent upon us to make sure we quantify the uncertainty, right?
I just hired somebody from the, uh, US intelligence sector and she said something to me not too long ago, she said, "You know, when we make decisions in some military searcher, we never have complete information. But that doesn't prevent us from making decisions." I think the scientific consensus is overwhelming. We are going to see physical risk. They are going to get played out. We need to make decisions. That's not the best available tools, probabilities, methodologies available to us to give us the best estimates of what's going to happen, right?
If I make a 20-year forecast today, we won't know what 20 years what's going to happen. So a better question is are we deploying the best methodologies that are available to what we call look at multi-variant risk, because we can't rely on single variables. We can't just look at fire risk. We need to look at the way climate is getting played out. We've seen compounded and multiple events getting played out at the same time. How do you model three or four different hazards together mathematically?
That's where I think we... our approach to [inaudible 00:36:02] and statistics is fairly unique, but I also would think it's cutting edge in the sense that it can give us a better uncertainty range that just looking at single models.
Jason Jacobs: So we've seen some other companies that are focused on the same broader market and some of them might focus on a specific vertical, say ag. Others might focus on a specific risk type, say fire or flooding. How do you see this landscape evolving, whether it be many successful companies? Is it, is it winner take all? Will the vertical companies or the ones on a specific risk be competitive to the ones that are more horizontal, uh, like a Cervest? Will they be partners? Do you know? How, how do you think about that?
Iggy Bassi: I think today the landscape is fairly nascent. There's a lot of people... First of all, let's just go back. Science, we've had great science for decades looking at fire risk, flood risks. It's just got better and better and better. I think what's really converged over the last couple of years is computing power, machine learning, exponential power to look at risk, make every asset observable from the climate point of view for the first time. So if it's observable and we have digital technology and infrastructure, we can share that risk data now for the first time as speeds that we haven't see before.
So I think we welcome everybody trying to solve the climate problem, but I think over time there's... there'll be greater collaboration, so we work with scientific partners. We work with the universities. We as a single company cannot see all the best science. It's not feasible, right? So we take a open-science approach in the sense that we want to work with people who build the best models, have the best data sets, collaborate. We have a research program with several universities. But I think of the question of does a winner take all? Why not benefit, why not think about do systems collectively benefit everybody, right? Because we are never going to be experts in let's say fire risk or wildfire, but we can synthesize the best models mathematically to make them beneficial.
So think about this as a s-, as a sort of a value chain. You have people who do deep science, then you have people who synthesize that science for business decisions. And then you have people who then take that to say I'm going to deploy capital next to that. Is a single platform going to do all those things at a time? Highly unlikely, Jason. I think this is a question of which value chains will emerge over the next three, four, five, six years? Where is the man coming from, from the marketplace? I mean, obviously, there's competition in, in some parts, but there's also this huge amount of collaboration as well. That's what I'm finding.
We will want to use our platform for academics to go and use and run experiments because we've harmonized so much data and so many hazards. Let them come and run experiments. If someone has a better way of figuring out more accurate risks or better risks or new approaches to risk, we're very open to talking with them or they can certainly use the platform. So I don't know the landscape, Jason. I think it's too early to say and I'd be foolish to speculate who the winners will be in three, four... I'm just glad to see so much great talent solving the climate problem, or at least applying their skills to solving the climate problem.
Jason Jacobs: How do you think about insurance and reinsurance? Does that fit into the Cervest vision and, and plans in any way?
Iggy Bassi: Yeah, so that's for the capital markets product next year. We have a product called EarthCap. We'll be releasing that... I mean, we're talking to a few companies now to say how can a multi-variant risk model help you price premium better, and also develop new products to allow people to take insurance to have over time?
Insurance companies are remarkably good at risk modeling, particularly for individual variables. I think where they struggle most is around multi-variant risks, for instance. So this is where I would think we can add advantage or we can help certainly borrow lots of what we call transfer learning from millions and millions of different assets to say what's the probability of these events happening over sort of individual assets?
So we're keen to work with the insurance sector and also the reinsurance sector as well. Um, but also I think they're also keen and open for how do we think about partnering across new innovations or new methods to understand risk.
Jason Jacobs: Uh-huh [affirmative]. And so you've got the 34 enterprises involved now and you're not too monetization focused. You're focused on getting the data and building out the models and providing value and you've got this other product that's coming. Maybe talk a little bit about staging and phasing and then specifically what the key goals are for the company, say over the next 12 months.
Iggy Bassi: Yeah. So the first big goal is to finish the EAP program towards the end of the year. So we're still hearing many new things... To every marginal client that we've been going we're still hearing new ideas for product, for product improvement, data, data organization, data transfer, data security. So we're still learning. I think probably 50-60 clients is probably where we're going to get to by the end of the year. And that's probably enough for us to say, okay, fine. Let's turn on the lights and just make this generally available to everybody.
So by sometime in quarter one next year, we will go for a general availability release. And then the same time we'll be releasing the first, first modules for our EarthCap product as well. But that's going to be in private mode and that's not an open-access product. That's just going to be for banks who are interested in understanding and repricing their risk. And then we have an API coming probably towards halfway next year, and that's largely going to be for large systems, integrators, BI integrators, or people looking at automation.
And then beyond that, Jason, we just want to drive as much adoption as possible. We have a carbon module sometime in quarter two next year, I believe. So also allow people to understand how do I measure asset level carbon risk as well? The work I'm most excited about next year will come in the form of... We have a natural capital module as well that we've been working on for the last couple years. That's going to help us and help companies overlay natural capital, understanding natural capital over their assets. Things like water tables, pollination services, for instance, so, and that's going to start giving us very unified climate intelligence. Because over time we also need to use nature in ways that can protect assets.
And so I think nature-based solutions is an area that we are tremendously excited about and we've hired some fantastic talent to help us and sync through how do you overlay major based solutions and natural capital quantification at an asset level for the first time? So let's say you have a hot tree. What intervention can you make around that asset? If you know you can have a certain physical exposure to sudden risks, how can we use nature to help you protect against those risks over time, right? So very excited about that.
And then generally I think the algorithms are just deepening. They're getting better. We're pulling out more signal. And then US expansion is a big part of our goals, so we just set up a US office not too long ago. Just had a wonderful CLO. We have a team of three or four people there now. I think the bulk of our hires next year are probably going to come stateside, right?
So it just goes after that, Jason, of just getting people to understand why it's important to interject climate intelligence into their everyday decisions, not into their once-every-five-year decisions, right [laughs]? We want this to be dynamic intelligence with an API feeding the M&A decisions, feeding the new growth decisions, looking at the supply chains in new ways, thinking about green infrastructure.
So it just grows, just platform grows like any other platform. We want to grow aggressively, but we're always going to keep it open. We're also going to have a premium model we want because, again, we fundamentally view the climate problem's only get solved if we have this contact of I see what you see. And if we take that away, I think it's going to be very problematic. We do care about justice. We care about access to this type of information and because it can be very damaging, this type of information all the time. It's better to release it to everybody so everybody can start understanding what can happen to their assets over time.
Jason Jacobs: You talk loud about mission. Are there situations that have come up or can you envision situations that could come up where companies want to use the data in ways that are not mission-aligned? And if so, it would be great to understand what those situations were or what they could be in the future and how you think about that as a company?
Iggy Bassi: Yeah. I mean, we... it's, it's not... Our very first academic paper was around the ethics of climate intelligence, and we had some very rigorous conversations internally with some of the board members, some of the investors, around should we release this information? If I'm going to tell Jason that something's going to happen to his asset in five, 10, 15 years' time, is it better for him to know today so he can take an action on that asset? Or is it better not to put that into the public domain? I think we keep coming back to it makes sense for people to understand so they can think about adaptation early. They can think about planning early in the same way that the UN uses data to think about flooding in certain islands, right? Phase migration is a lot better than panic over time, right?
So we fundamentally take the view that if you're going to put it out there, you should put it out there and make it accessible for everybody over time. Don't just give it to a few hedge funds or a few banks or a few super corporations. No, make it equally accessible to everybody because ultimately you need to drive behavior across billions of people, not just to optimize strategies just for a few people, right? Because, you know, Jason, we still need to grow. We still need to think about human security, economic growth, migration patterns.
We have to talking to quite a few policymakers now to say how can you... In fact, so some of the safer companies are actually public entities, because they also need to understand what's going to happen to critical infrastructure. How do we plan better? How do we adapt if we know we're going to see an extra one-and-a-half degree heat in a certain geography, what does that do to think like the health system's critical, the infrastructure, response rates, right?
So climate is going to permeate pretty much all decisions in the 21st Century because humans haven't lived through this type of change before. We haven't seen these types of temperatures. We haven't seen these types of changes, right? It's the first time we're going to be living through this as a, as a species in so many ways.
So for us it's better to work with the best experts, make this publicly available so people can take the decisions that they need to make. Governments can take decisions. Insurance companies can make decisions. And we can think about how do we collectively adapt, Jason? We can't privatize this information into individual models for individual companies. We don't think that's the right strategy.
Jason Jacobs: I mean, to that point it seems like some of the people and parts of the world that are most vulnerable to the changing climate are also the ones with the least budget. So how do you think about that? Is that, is that someone else's problem and, and you'll focus on the big budget and then, and then there'll be some nonprofit that provides similar to developing countries? Or like how do we make sure that they have access to the same caliber of data and information for their planning?
Iggy Bassi: So this is why we have a free model. At the heart of what we do it's absolutely free for everybody, whether you're a policymaker in London or Ghana or in Brazil, you can have the same intelligence. So all of our signals are global in the sense that when we're looking at fire risk, we're looking at it globally. When we're looking at extreme precipitation, we're looking at it globally. So we then link that back to the platform. Anybody who wants to go and find assets in their locale can then mobilize and then, you know, rewire that science towards calculating the risk in their location.
I think also this is why it's important to get financial markets to understand how to price risk in various geographies. I think we spend about a, a four to five percent of GDP in low-to-medium income countries. Even if they spent another two or three percent to make it more climate resilient, it could have significant compound effects in terms of human security, infrastructure security, GDP growth over time.
So we'll be working with the world bank. We'll be working with UN agencies. We'll be working with large corporates who also have assets in emerging markets, right? Say how do you think about including climate intelligence to make your assets more robust over time? Because you're still going to be looking for growth. And actually a lot of our growth in the next four decades will be coming from emerging markets. Most of the infrastructure going up in the world is not going up in New York City and London. It's going up in places like [inaudible 00:48:51], Bombay. So we've got to be smart about how we distribute this intelligence.
Jason Jacobs: Iggy, who do you want to hear from in terms of listeners? Where do you need help?
Iggy Bassi: I think policymakers, regulators who need to understand why climate intelligence needs to be encoded into their thinking, into their plans, into their resilience plans, into their health plans, into their national infrastructure. [Laughs] So I think from an investor point of view we got a huge amount of interest. Again I think this massive appetite for investors to understand, you know. I think they like the approach we're taking, like segmenting the world's risk down to a physical asset so people can then openly see that risk and start taking action, whether it's financing, it's adaptation. Investors are finally working on it. We've seen it, a huge amount of funds this year.
I'm kind of wondering, Jason, where they're going to put all this money [laughs]. It's just a significant amount of climate tech capital that's being raised this year. We have to up... just hope that it's longterm, it's, it's going to be deployed wisely. Who do I want to hear from, Jason? CEOs [laughs] of large companies. We've had some pretty interesting CEOs investing in the business recently as well.
So policymakers would be my number one choice because we need to think about smarter approaches to carbon and carbon pricing regulation disclosure, for instance. They all have to be tightened, but at least the conversations are happening, Jason, right? Seven, eight, nine years ago when I started thinking about climate and farming, these conversations were not happening at the same pace that they're happening today. So I can just seen some incredible structural shifts in the way we think about this. But also we- we've experienced so much pain. Just reflect back this year. I think one in three Americans has suffered from or been subject to some extreme event that they haven't see before, right? That's a significant number, right?
So there's a recency that sort of people have to these types of exposures, right? And the heat dome was fairly significant in the States. We've had flooding in Germany in the summertime, right? So events are popping up all over the world and it's forcing the conversation. It's keeping it real. It's keeping it alive to people, but they need better tools. They don't really understand climate and climate science and statistical tables. We want tools for people that can understand simply what's happening, directionally what's happening, and start encoding that into their everyday decisions.
Jason Jacobs: Well, that, that seems like a great point to end on, Iggy. Anything I didn't ask that I should have? Or any additional parting words for listeners?
Iggy Bassi: Get climate literate [laughs]. It's my, it's my basic advice to folks. Think about climate intelligence. It's something that everybody needs, will need, and will be useful for people to help them protect their assets and think about how we build collective security for the 21st Century.
Jason Jacobs: Sounds great. Well, thanks so much for coming on the show and best of luck to you and to the whole team at Cervest.
Iggy Bassi: Thank you very much, Jason. Pleasure talking to you.
Jason Jacobs: Hey everyone, Jason here. Thanks again for joining me on My Climate Journey. If you'd like to learn more about the journey, you can visit us at MyClimateJourney.co. Note, that is .co, not .com. Someday we'll get to .com, but right now .co. You can also find me on Twitter at JJacobs22, where I would encourage you to share your feedback on the episode, or suggestions for future guests you'd like to hear. And before I let you go if you enjoyed the show, please share an episode with a friend or consider leaving a review on iTunes. The lawyers made me say that. Thank you.
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