As The Climate Warms, Companies Scramble To Calculate The Risk To Their Profits

Oct 16, 2019
Originally published on October 16, 2019 10:01 am

Every year, the company Ingredion buys millions of tons of corn and cassava from farmers and turns them into starches and sugars that go into foods such as soft drinks, yogurt and frozen meals.

Lots of things can go wrong along the way. Weather can destroy crops. Machinery can break.

Lately, though, Ingredion's top executives have been worried about a new kind of risk: what might happen on a hotter planet.

"That could be anything, [from] where climate change is impacting the crops we purchase, to water availability driven by climate change," says Brian Nash, Ingredion's head of sustainability.

Ingredion isn't alone. "Any publicly traded company, I think, is under increasing pressure from the investment community to articulate what we see as our upcoming climate risk," Nash says. That's partly because of prodding from an international organization called the Financial Stability Board, which set up a task force chaired by former New York City Mayor Michael Bloomberg to help companies voluntarily disclose such risks.

Shareholders worried that climate change could devalue their investments want reassurance, and companies, in turn, want advice from climate experts.

That's given rise to a field of "climate risk services." The Danish engineering firm Ramboll, which built its reputation designing bridges and ways to manage traffic, is one of many consulting companies that have sensed a business opportunity. "I just jumped at the chance to get back into doing this," says Susan Kemball-Cook, one of Ramboll's scientists.

Years ago, she was doing academic work with computer models of the global climate. "That feeling of being able to simulate something in the atmosphere, really seeing it unfold in front of you, it was thrilling," she says.

These simulations — climate models — are an important tool for climate scientists who are trying to chart the planet's future. But Kemball-Cook thinks they can be helpful for businesses, too.

To understand climate models, think of the computer-simulated weather used in TV forecasts, showing storms moving across a map. That's a weather model — a huge computer program that takes current weather conditions and then calculates how forces such as heat and air pressure will drive winds and temperatures over the next few hours or days.

Climate models are similar, but they're bigger and way more complicated. They cover the globe and factor in slow-moving forces such as rising levels of greenhouse gases, which trap more heat in the atmosphere, plus shifts in ocean currents and the effects of Arctic ice.

The models generally start with current weather conditions and then let mathematical equations take over, calculating a vision of weather decades into the future. "You see simulated weather systems, you see storms form at sea and come ashore over California," Kemball-Cook says.

Every time one of these models runs, starting from slightly different conditions, the future plays out differently. No model can predict the weather on a particular day 30 years from now.

But if you run them again and again and collect all of these possible versions of the future, you get a sense of "normal" weather in the future: normal highs and lows, normal rainfall — and how that differs from today.

Kemball-Cook and her colleagues at Ramboll are trying to take this information and boil it down to an estimate of particular risks in particular places, such as the risk of flooding at a specific shipping terminal or the likelihood that a specific farm will have trouble growing corn.

The tool they've built is called HazAtlas. Kaity Lieschke, a consultant at Ramboll who helped create it, says their sales pitch is pretty simple. "It's really easy to make the point that as our climate changes, we're getting increased damages from events like flooding and wildfire," she says. "This tool helps people prepare for that future."

But the HazAtlas team still has to convince businesses that the tool can deliver information that's specific and accurate enough to help those companies make decisions — and that might be more difficult.

The problem is, climate models paint the future with a very broad brush. They show general trends for the future planet, but they're not very good with specifics. Some models, for instance, show rainfall increasing in parts of the Midwestern corn belt; others show rainfall decreasing in the same areas.

Ingredion, the Illinois-based company that turns corn into food ingredients, worked with Ramboll to see what the models might reveal about risks to its supply of corn. So far, Ingredion says it hasn't found the information very useful.

But Ingredion's executives also say that if these tools for predicting climate risk become more specific and reliable, there will be a huge demand for them.

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RACHEL MARTIN, HOST:

The threat from climate change is so massive, so apocalyptic, it can be hard to wrap your head around. Companies are now trying to change that by pinpointing those risks. Some of them are turning to high-tech tools for answers. Here's NPR's Dan Charles.

DAN CHARLES, BYLINE: The company Ingredion makes, as you might guess, ingredients - starches and sugars and all kinds of manufactured food.

BRIAN NASH: From soft drinks to beers to frozen meals.

CHARLES: This is Brian Nash, Ingredion's director of sustainability. The company makes these products from special kinds of corn.

NASH: I mean, we use millions and millions of metric tons of corn around the globe.

CHARLES: Lots of things can go wrong in the supply chain - bad weather, broken machinery. But lately, Brian Nash's corporate bosses have been asking him to look at a new kind of risk - what might go wrong in a warmer planet.

NASH: And that could be anything where climate change is impacting the crops that we purchase to water availability driven by climate change.

CHARLES: He says lots of companies are doing the same thing because investors are worried.

NASH: Any publicly traded company, I think, is under increasing pressure from the investment community to articulate what we see as our upcoming climate risk.

CHARLES: Companies are now looking for experts to help them figure it out. And the Danish engineering firm Ramboll, which built its reputation designing bridges and ways to manage traffic, sensed an opportunity. And so did one of the firm's scientists, Sue Kemball-Cook.

SUE KEMBALL-COOK: I raised my hand because that jibed with my past experience, and I just jumped at the chance to get back into doing this.

CHARLES: Years ago, she'd been an academic researcher working on computer models of the global climate. She loved it.

KEMBALL-COOK: The feeling of being able to simulate something that's in the atmosphere and really seeing it unfold in front of you was thrilling.

CHARLES: These simulations, climate models, really can give businesses information about future risks, she says. Here's how they work.

KEMBALL-COOK: So a climate model in many ways is like a weather model.

CHARLES: A weather model is what generates those videos you see on TV weather forecasts - storms moving across the map. It's basically a computer program that takes current weather conditions and calculates how forces like heat or air pressure will drive winds and temperatures over the next few hours or days. Climate models are just bigger. They factor in forces, like rising levels of greenhouse gases which trap more heat or changing currents in the ocean. But still, you're starting with current conditions and just turning the model loose, letting mathematical equations calculate weather decades into the future.

KEMBALL-COOK: You know, you'll see storms form at sea and then come ashore over California.

CHARLES: Now, every time you run one of these models from a slightly different starting point, the weather plays out differently. But if you run them over and over, collecting all these possible versions of the future, you do get a sense of what's the new normal - normal highs and lows, normal rainfall - and how that's different from what we're used to now. Sue Kemball-Cook and her colleagues at Ramboll are trying to boil that down into estimates of particular risks in particular places - like, here you'll see more flooding; here you'll have trouble growing corn.

Katie Lieschke, a consultant at Ramboll, who helped create this tool called HazAtlas says the sales pitch is pretty simple.

KATIE LIESCHKE: It's really easy to make the point that, as our climate changes, we're getting increased damages from events like flooding and wildfire. This tool helps people prepare for that future.

CHARLES: But they still have to convince businesses that this tool can deliver information that's specific and accurate enough to help them make decisions. Ingredion, that company that makes food ingredients, is not yet convinced. The company worked with Ramboll to see what the models might say about Ingredion's supply of corn in the future. It decided the results were still too vague and uncertain, at least for now. But Ingredion's executives also say if these tools for predicting climate risk get better, there will be a huge demand for them.

Dan Charles, NPR News.

(SOUNDBITE OF NIFTY EARTH'S "AURA") Transcript provided by NPR, Copyright NPR.