Author(s):
Alice Saunders
Climate risk digital solutions: a $4 billion market by 2027
Source(s):
Verdantix
The global market for climate risk digital solutions will grow from around $880 million in 2021 (our baseline year) to more than $4 billion in 2027, according to the Verdantix Climate Risk Digital Solutions Market Size & Forecast. Our research projects a 30% CAGR in climate risk digital solutions spending from 2021 to 2027. To build our market size and forecast model, Verdantix analyzed macroeconomic factors, such as the recent volatility of energy prices and the high rate of inflation, alongside disclosed revenue data and global corporate survey data.
The climate risk digital solutions market will see increased spend because:
- TCFD-aligned disclosures continue to come into force across the world, with compliance required this year in Brazil, Japan, Singapore and the UK. The CSRD in the EU and the SEC corporate disclosures in the US will particularly scale up climate disclosures due to the number of firms they will impact. 49,000 firms in the EU will need to submit climate disclosures, as well as additional details on transition plans, financial risks and stranded assets. Although the SEC climate disclosures have seen delays, they will likely come into effect around 2025 and apply to over 6,600 firms.
- Financial losses from extreme weather events escalate. US authorities estimated that around $150 million was lost in the US due to extreme temperatures and weather events in 2021. The increasing severity and frequency of weather events is compounded by the rising cost of insurance premiums. Firms will conduct their own climate risk analysis and undertake asset-level mitigation work to reduce their exposure to extreme weather events, and show insurers that their assets are insurable.
- Finally, firms will invest in climate risk digital solutions to stay on top of policy risks. In Australia, for example, after years of pro-coal policy, the new national government has passed emissions reduction targets for 2030 and 2050 and India has followed suit. Firms must assess their investments based on physical and transition risks to ensure they are not left with stranded assets.