🧭 Carbon credit insurance & AI-driven climate solutions

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Last week, we covered COP29’s $120 billion climate finance pledge, the rise of female-led climate fintechs achieving funding parity, and global green financing taxonomy expansion. This week, we’re spotlighting breakthroughs in carbon credit insurance, AI-driven climate risk models, and the monumental growth of GSS bond issuance.

At the BIG Risk Navigator, we bring you cutting-edge insights on sustainability, climate finance, and tech innovation, empowering decision-makers to create resilient and forward-thinking businesses.

Now, let’s get into the news.

• Verra to Support Carbon Markets in Amazonas: Verra, a global leader in reducing greenhouse gas (GHG) emissions, has collaborated with the state of Amazonas in Brazil to strengthen its carbon markets.

• NatureFinance launches tool enabling investors, banks to assess portfolio nature impact: Green finance-focused not-for-profit organization NatureFinance announced the launch of NatureAlign.

• Nearly two-thirds of companies not yet reporting climate-related financial impact on financial statements: EY: EY analyzed the public disclosures of approximately 1,400 companies across 51 countries and 13 sectors.

• Normative acquires carbon accounting solution provider Eivee: Normative’s system lets companies track their carbon footprint via mapping their business activities.

• 73% of insurers see AI models as key to managing climate risks: It highlights a significant rise in AI usage for evaluating specific climate risks.

🎯 Artio secures funding to pioneer insurance for early carbon credits

Artio, a London-based climate InsurTech startup, has successfully raised £550k in a seed funding round led by Lifetime Ventures. The investment will be used to develop innovative insurance solutions for early-stage carbon removal projects, aiming to mitigate investment risks and accelerate the growth of the carbon credit market.

The company's proprietary risk modeling platform is designed to assess the potential risks associated with carbon removal projects, enabling investors to make informed decisions and support high-quality initiatives. By providing insurance coverage, Artio aims to increase the supply of reliable carbon credits, which are crucial for achieving global climate goals.

Why it matters for climate fintech: Artio's innovative approach to insuring carbon removal projects highlights the growing importance of climate fintech in addressing climate change. By leveraging technology to quantify and manage climate-related risks, climate fintech companies can unlock capital flows and accelerate the transition to a low-carbon economy.

This development is significant for the climate fintech industry as it demonstrates the increasing demand for solutions that can mitigate the risks associated with climate change mitigation projects. As the carbon market continues to evolve, climate fintech startups can play a crucial role in developing innovative financial products and services to support the transition to a sustainable future.

Key implications for startups: Artio's success underscores several key implications for climate fintech startups:

• Focus on climate risk: Climate fintech startups can identify and address climate-related risks, such as physical and transition risks, to create innovative financial products.

• Leverage technology: By leveraging advanced technologies like AI and machine learning, startups can develop sophisticated risk modeling and analytics tools.

• Partner with traditional financial institutions: Collaborating with banks, insurers, and other financial institutions can help startups scale their solutions and access new markets.

• Prioritize sustainability: Integrating sustainability into the core business model can attract impact investors and environmentally conscious customers.

🎯 Delos Insurance Solutions attracts $9m in Series A to tackle wildfire risks

Delos Insurance Solutions, a California-based insurtech startup, has successfully raised $9 million in a Series A funding round led by HSBC Asset Management. The company’s innovative approach to property insurance, leveraging satellite imagery and AI to assess wildfire risk, has attracted significant investor interest.

Delos aims to address the growing challenge of insuring properties in wildfire-prone areas. Traditional insurers have often retreated from these regions due to increasing risks, leaving homeowners vulnerable. By utilizing advanced technology, Delos can provide more accurate risk assessments and offer affordable insurance coverage.

Why it matters for climate fintech: The increasing frequency and intensity of wildfires, driven by climate change, highlight the need for innovative insurance solutions. Climate fintech companies can play a crucial role in developing risk assessment models, pricing strategies, and insurance products that address the unique challenges posed by climate-related risks.

Delos's success demonstrates the potential for climate fintech startups to disrupt the traditional insurance industry and provide much-needed coverage to vulnerable communities. By leveraging technology and data analytics, these startups can help mitigate the financial impact of climate-related disasters.

Key implications for startups: Climate fintech startups can learn from Delos's success and apply the following strategies:

• Focus on underinsured markets: Target underserved markets, such as regions prone to natural disasters, to address unmet needs.

• Prioritize data and analytics: Invest in data science and analytics to improve risk assessment and pricing models.

• Adapt to evolving climate risks: Stay ahead of the curve by continuously monitoring climate trends and adjusting insurance products accordingly.

🎯 Green, social and sustainability bond issuance surpasses $5trn

The Green, Social, and Sustainability (GSS) bond market has reached a significant milestone, surpassing $5 trillion in cumulative issuance. This surge in activity underscores the growing global demand for sustainable finance and the increasing role of GSS bonds in financing the transition to a low-carbon economy.

The first half of 2024 witnessed a record-breaking $356 billion in green bond issuance, with Europe continuing to dominate the market. This trend is driven by a combination of factors, including stringent environmental regulations, increasing investor interest in sustainable investments, and the need to finance climate-related projects.

Why it matters for climate fintech: The growth of the GSS bond market has significant implications for the climate fintech industry. As investors seek to allocate capital to sustainable projects, there is a growing demand for innovative financial solutions to facilitate the issuance, trading, and management of GSS bonds.

Climate fintech startups can play a crucial role in this market by developing technologies to:

• Enhance transparency and traceability: Track the impact of GSS bond investments and ensure funds are used for intended purposes.

• Optimize portfolio management: Develop tools to help investors select and manage GSS bond portfolios based on specific sustainability criteria.

• Facilitate green bond issuance: Streamline the issuance process and reduce costs for issuers.

• Provide data-driven insights: Analyze market trends, identify investment opportunities, and assess the creditworthiness of GSS bond issuers.

Key implications for startups: Climate fintech startups can capitalize on the growing GSS bond market by:

• Partnering with traditional financial institutions: Collaborating with banks, asset managers, and insurance companies to integrate green finance solutions.

• Focusing on niche markets: Targeting specific sectors, such as renewable energy, clean transportation, or sustainable agriculture, to develop specialized solutions.

• Building strong relationships with investors: Engaging with impact investors and ESG funds to secure funding and partnerships.

🎯 Verra to support carbon markets in Amazonas

✅ Key Insights

• The partnership helps secure financing for strengthening carbon markets.

• Amazonas has undertaken several measures to advance nature-based climate solutions within its jurisdiction.

Verra, a global leader in reducing greenhouse gas (GHG) emissions, has collaborated with the state of Amazonas in Brazil to strengthen its carbon markets. The two parties signed a Memorandum of Understanding (MOU) on the sidelines of the COP29 event in Baku, Azerbaijan. They will work together to reduce GHG emissions and strengthen the carbon markets in Amazonas.

Read more.

🎯 NatureFinance launches tool enabling investors, banks to assess portfolio nature impact

✅ Key Insights

• The first module of NatureAlign will help private financial institutions assess their baseline position with respect to environmental and sustainability issues.

• The tool allows financial institutions to input data on their investments and loans into a watchlist.

• The app also assesses the exposure of sectors within the watchlist to nature-related dependencies and impacts.

Green finance-focused not-for-profit organization NatureFinance announced the launch of NatureAlign, a new tool designed to help financial institutions assess and progress on their alignment with nature-positive outcomes through the lens of the Biodiversity Plan (formerly the Kunming-Montreal Global Biodiversity Framework (GBF)). The first module of NatureAlign will help private financial institutions, from asset managers to banks, assess their baseline position with respect to environmental and sustainability issues.

Read more.

🎯Nearly two-thirds of companies not yet reporting climate-related financial impact on financial statements: EY

✅ Key Insights

• Companies globally are only incrementally improving the quality of their climate-related disclosures.

• The study also found that to date, most companies’ climate action strategies are focused primarily on reducing emissions from their use of energy, or Scope 2.

• The report also found a disconnect between companies’ climate-related and financial reporting, with only 36% referencing the financial risks of climate change.

For the study, EY’s sixth annual Global Climate Action Barometer, EY analyzed the public disclosures of approximately 1,400 companies across 51 countries and 13 sectors, assessing factors including the link between companies’ climate disclosures and their transition-related actions, and the connectivity with financial disclosures on climate risk.

Read more.

🎯 Normative acquires carbon accounting solution provider Eivee

✅ Key Insights

• Normative’s system lets companies track their carbon footprint via mapping their business activities.

• The system continuously measures and reports CO2 reduction progress, ensuring compliance with regulations

• Acquisition of Eivee will significantly expand its market reach and enhance its ability to serve major corporations across Europe.

Normative, a Stockholm-based developer of carbon accounting software, announced today the acquisition of Denmark-based carbon accounting solution provider Eivee, enabling an expansion of sustainability accounting services throughout Europe. Founded in 2020, Copenhagen-based Eivee has developed software that calculates clients’ CO2 emissions across scope 1, 2 and 3 emissions. The system continuously measures and reports CO2 reduction progress, ensuring compliance with regulations and requirements for that reduction.

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🎯 73% of insurers see AI models as key to managing climate risks

✅ Key Insights

• The study, which surveyed 200 senior executives in Property & Casualty insurance.

• It highlights a significant rise in AI usage for evaluating specific climate risks.

• There is no consensus among industry leaders regarding the accuracy of different risk assessment models.

A recent survey by ZestyAI has revealed that 73% of insurers believe AI models are key to managing climate-related losses, as the insurance industry grapples with mounting losses from extreme weather. The study, which surveyed 200 senior executives in Property & Casualty insurance, found that one in four respondents now use artificial intelligence (AI) models to assess the risk of severe storms..

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Diligent's Keith Fenner on AI for Innovation and Compliance

Keith Fenner, SVP and GM International at Diligent, a leading governance, risk and compliance (GRC) software provider, asserts that as ESG and sustainability become increasingly important, the need for consistency and transparency in organizational reporting also rises.

✅ Highlights 

• What is the primary environmental concern associated with AI?

• What are the key ESG regulations that businesses need to be aware of, and how can AI help?

• What are the challenges and opportunities for businesses in balancing innovation with sustainability?

In this Q&A, he delves into the intricate relationship between AI and sustainability, discussing the necessity for regulation, the influence of shareholder activism and how AI can be leveraged to tackle urgent environmental challenges.

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How dMRV ensures precision and transparency in the carbon removal market

✅ Highlights 

• What is a dMRV?

• Why is dMRV critical for carbon credit buyers?

• Use case: Carbon Plus project in Malaysia

As the carbon removal market continues to grow, ensuring the quality and credibility of carbon credits is more important than ever. Projects that lack real-time monitoring and transparent verification are increasingly at risk of greenwashing and misreporting. This is why adopting a dMRV system isn’t just a best practice—it’s essential for success in the evolving carbon market.

Read more.

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