Deep dive: climate risk analytics & scenario modeling — the fastest-moving subsegments to watch (angle 6)

By 2025, global spending on climate risk analytics solutions reached $8.2 billion, with emerging markets accounting for 34% of new enterprise deployments—a threefold increase from 2022. This acceleration reflects a fundamental shift in how multinational corporations, development finance institutions, and sovereign wealth funds evaluate physical and transition risks in high-growth economies. The emergence of standardized buyer requirements, driven largely by the EU Corporate Sustainability Reporting Directive (CSRD) and its extraterritorial reach, is reshaping procurement decisions across Latin America, Southeast Asia, and Sub-Saharan Africa. For founders building in this space, understanding which subsegments are gaining traction—and why—can mean the difference between product-market fit and premature scaling.

Why It Matters

Climate risk analytics and scenario modeling have evolved from niche consulting services to mission-critical enterprise software categories. The Task Force on Climate-related Financial Disclosures (TCFD), now integrated into the International Sustainability Standards Board (ISSB) framework, mandates that companies quantify climate-related financial exposures across multiple time horizons. In 2024 alone, over 4,500 companies globally disclosed climate scenarios for the first time, with 62% of these disclosures originating from or referencing operations in emerging markets.

The stakes are particularly acute for emerging economies. The Network for Greening the Financial System (NGFS) estimates that unmitigated climate change could reduce GDP in South Asia by 10.8% and in Sub-Saharan Africa by 9.7% by 2050 under a "hot house world" scenario. These projections drive regulatory urgency: Brazil's Central Bank now requires climate stress testing for all financial institutions with assets exceeding R$100 billion, while Indonesia's Financial Services Authority (OJK) mandates climate risk integration into lending portfolios by 2026.

For multinational buyers, the CSRD represents a paradigm shift. Companies with >250 employees or >€40 million in EU revenues must report on Scope 3 emissions and supply chain climate risks, effectively extending European disclosure standards to suppliers in Vietnam, Mexico, Nigeria, and beyond. A 2024 survey by CDP found that 78% of European procurement leaders now require climate risk assessments from tier-one suppliers, with 45% extending requirements to tier-two suppliers. This regulatory cascade creates unprecedented demand for analytics platforms capable of operating across heterogeneous data environments, regulatory frameworks, and physical climate contexts.

The fastest-moving subsegments reflect this demand pattern: physical risk scoring for asset-level exposures, transition pathway modeling aligned with Net Zero Investment Framework (NZIF) requirements, and integrated lifecycle assessment (LCA) tools that connect carbon accounting to financial materiality. Founders who can deliver these capabilities with emerging market data coverage and regulatory mapping will capture disproportionate value as compliance deadlines accelerate.

Key Concepts

Climate Risk Analytics refers to the quantitative assessment of how climate change—both physical manifestations and societal responses—affects financial performance, asset values, and strategic positioning. This encompasses acute risks (extreme weather events), chronic risks (sea-level rise, temperature shifts), and transition risks (policy changes, technology disruption, market preferences). Modern platforms integrate geospatial data, climate model outputs, and financial modeling to produce forward-looking risk scores at asset, portfolio, and enterprise levels.

Scenario Modeling involves constructing plausible future states of the world to stress-test strategies, portfolios, and disclosures against different climate outcomes. The NGFS provides canonical scenarios—Orderly Transition, Disorderly Transition, and Hot House World—that have become de facto standards for financial institutions. Effective scenario modeling requires integrating climate science (Representative Concentration Pathways), economic projections (Shared Socioeconomic Pathways), and sector-specific transition pathways into coherent analytical frameworks.

Corporate Sustainability Reporting Directive (CSRD) is the EU regulation requiring approximately 50,000 companies to disclose sustainability information according to European Sustainability Reporting Standards (ESRS). For climate risk, ESRS E1 mandates disclosure of transition plans, physical risk exposures, and scenario analysis results. The extraterritorial reach of CSRD—applying to non-EU companies with substantial EU revenues—drives global harmonization of climate disclosure practices and creates derivative demand for analytics solutions in emerging markets.

Life Cycle Assessment (LCA) is a methodology for evaluating environmental impacts across a product's entire value chain, from raw material extraction through end-of-life disposal. In the context of climate risk analytics, LCA data feeds into Scope 3 emissions calculations and enables companies to identify hotspots for decarbonization. The integration of LCA with climate scenario modeling allows organizations to assess how their products' carbon intensity might evolve under different transition pathways and policy regimes.

Digital Product Passport (DPP) represents an emerging standard for capturing and sharing product-level sustainability data throughout supply chains. Mandated under the EU Ecodesign for Sustainable Products Regulation (ESPR), DPPs will require machine-readable disclosure of carbon footprints, material compositions, and circularity metrics. For climate risk analytics providers, DPP integration enables granular Scope 3 accounting and facilitates compliance with buyer requirements for supply chain transparency.

What's Working and What Isn't

What's Working

Asset-level physical risk scoring with hyperlocal resolution has achieved strong product-market fit among infrastructure investors and development finance institutions. Platforms like Jupiter Intelligence and One Concern now deliver 90-meter resolution flood risk scores for individual facilities, enabling investors to price climate risk into acquisition due diligence and insurance negotiations. In emerging markets, this capability has proven particularly valuable for evaluating renewable energy projects, where even modest changes in precipitation patterns can materially affect long-term power purchase agreement economics. The African Development Bank's Climate Risk Screening Tool, developed with technical support from the Global Center on Adaptation, now screens all new infrastructure investments against multiple climate scenarios, setting a precedent for peer institutions.

TCFD-aligned scenario analysis platforms with regulatory mapping have gained traction as companies struggle to interpret diverse and evolving disclosure requirements. Solutions that combine scenario modeling capabilities with jurisdiction-specific guidance—automatically mapping ISSB requirements to Brazilian CBPS standards or Singaporean MAS guidelines—reduce compliance costs and accelerate adoption. Risilience, acquired by Moody's in 2024, exemplifies this approach, offering pre-built scenario templates aligned with major regulatory frameworks alongside custom modeling capabilities. The combination of standardization (reducing implementation friction) and flexibility (accommodating sector-specific considerations) has proven commercially compelling.

Integrated carbon accounting and LCA platforms with ERP connectivity are succeeding where standalone carbon calculators failed. Enterprise buyers increasingly demand solutions that embed sustainability data into existing financial and operational systems rather than requiring parallel data infrastructure. Persefoni's integration with SAP and Watershed's connectivity with Salesforce reflect this imperative. In emerging markets, where ERP penetration is growing rapidly, platforms that can ingest data from heterogeneous sources—including spreadsheets, legacy systems, and manual inputs—while maintaining audit-grade accuracy are capturing enterprise contracts. Sinai Technologies' work with Latin American mining companies demonstrates the value of combining carbon measurement with scenario modeling to evaluate decarbonization pathway costs under different carbon pricing assumptions.

What Isn't Working

One-size-fits-all global platforms without emerging market localization consistently underperform expectations. Climate risk is fundamentally local: flood models trained on European river basins fail when applied to monsoon-driven hydrology in Bangladesh; transition risk frameworks calibrated to OECD policy environments miss the dynamics of fuel subsidy reform in Indonesia or grid reliability constraints in South Africa. Companies that attempt to scale globally without investing in local data partnerships, regulatory expertise, and customer success capabilities find themselves displaced by regional specialists who better understand context-specific requirements.

Overly complex enterprise solutions with lengthy implementation cycles struggle in emerging market contexts where buyer organizations often lack dedicated sustainability teams and IT resources. A 2024 analysis by Verdantix found that climate risk analytics implementations in emerging markets take 40% longer on average than comparable deployments in North America or Europe, with data quality issues cited as the primary cause. Founders who design for data scarcity—using proxy methodologies, satellite-derived inputs, and statistical imputation—outperform those who assume enterprise-grade data availability.

Pure-play disclosure automation without decision support capabilities is increasingly commoditized. As regulatory requirements stabilize and templates standardize, the value of simply automating report generation diminishes. Buyers now expect climate analytics platforms to deliver actionable insights: which suppliers pose the greatest transition risk exposure, which facilities should be prioritized for climate adaptation investments, which product lines face stranded asset risk under aggressive decarbonization scenarios. Platforms that remain focused on backward-looking compliance rather than forward-looking strategy struggle to justify premium pricing and face displacement by lower-cost compliance-focused alternatives.

Key Players

Established Leaders

MSCI provides climate risk metrics and scenario analysis tools integrated into its broader ESG and index offerings, with climate Value-at-Risk (CVaR) calculations covering over 10,000 companies globally. Their 2024 expansion into physical risk analytics through the acquisition of Carbon Delta strengthened emerging market coverage.

S&P Global Sustainable1 offers climate scenario analysis, physical risk assessments, and carbon data across corporate, sovereign, and infrastructure asset classes. Their Climanomics platform delivers asset-level physical risk scores with particular strength in Latin American markets.

Moody's has assembled a comprehensive climate analytics capability through acquisitions including Four Twenty Seven (physical risk), Vigeo Eiris (ESG research), and Risilience (scenario modeling). Their integration with credit rating infrastructure creates unique distribution advantages.

Bloomberg provides climate risk data through its terminal ecosystem, including temperature alignment metrics, physical risk exposures, and TCFD-aligned scenario outputs. Integration with trading and portfolio management workflows drives adoption among asset managers.

Refinitiv (LSEG) offers carbon data, climate risk scores, and scenario modeling capabilities within its broader data infrastructure. Their emerging market data coverage, particularly across Asian markets, positions them well for cross-border compliance requirements.

Emerging Startups

Cervest delivers AI-powered climate intelligence with asset-level physical risk assessments. Their EarthScan platform provides climate risk ratings for any global location, with strong adoption among agricultural supply chains operating in emerging markets.

Sust Global specializes in hyperlocal physical climate risk data, offering API-based access to flood, wildfire, cyclone, and heat stress projections. Their emerging market coverage spans over 50 countries with particular depth in Southeast Asia.

ClimateAlpha combines climate science with investment analytics, helping institutional investors identify climate-resilient opportunities in emerging market real assets. Their location-scoring methodology integrates over 60 climate variables.

Doconomy provides carbon footprint measurement and climate impact assessment tools, particularly strong in consumer-facing applications. Their Åland Index partnership extends climate analytics into emerging market banking ecosystems.

Intensel focuses on physical climate risk analytics for the built environment, with particular strength in Asian markets. Their granular modeling of tropical cyclone and urban heat island effects addresses gaps in global platforms.

Key Investors & Funders

Breakthrough Energy Ventures has invested in multiple climate analytics companies, including Persefoni and Watershed, providing patient capital and corporate partnership opportunities through its coalition of major technology companies.

Generation Investment Management backs climate-aligned technology companies with sustainability expertise embedded in due diligence, having invested in climate data infrastructure across developed and emerging markets.

TPG Rise Climate deploys climate-focused capital at scale, with portfolio companies spanning physical risk, transition technology, and climate analytics. Their emerging market investments include climate intelligence platforms operating in Latin America and Asia.

The Global Innovation Lab for Climate Finance incubates blended finance instruments that often incorporate climate risk analytics requirements, driving demand for standardized assessment tools across development finance.

IFC (International Finance Corporation) provides both equity investment and technical assistance for climate analytics adoption in emerging markets, with dedicated facilities for climate-smart investment tools.

Examples

Brazil: Vale's Integrated Climate Risk Platform

Mining giant Vale deployed an integrated climate risk analytics system across its Brazilian iron ore operations in 2024, covering 387 assets worth $48 billion in book value. The platform combines satellite-derived precipitation data with tailings dam stability models to generate dynamic risk scores updated weekly. Following implementation, Vale identified 23 facilities requiring accelerated adaptation investments totaling $340 million, while simultaneously demonstrating to European steel buyers that supply chain physical risks were actively monitored. The system processes 2.4 terabytes of climate and operational data monthly, producing CSRD-aligned disclosures automatically. Vale reports 35% reduction in climate disclosure preparation costs and improved terms on $2.1 billion in sustainability-linked financing.

Indonesia: Bank Mandiri's Climate Stress Testing Framework

Indonesia's largest bank by assets implemented a comprehensive climate stress testing framework in response to OJK regulatory requirements and NGFS guidance. The platform models transition risk across 12 carbon-intensive sectors comprising 42% of the bank's corporate lending portfolio, using NGFS scenarios localized for Indonesian policy dynamics including fuel subsidy reform trajectories. Physical risk scoring covers all collateralized real estate assets using flood, sea-level rise, and extreme heat projections. Results from the initial stress test identified IDR 18.7 trillion (approximately $1.2 billion) in potentially stranded assets under a disorderly transition scenario, prompting portfolio rebalancing toward green lending. The framework has since been adopted as a template by five additional Indonesian banks.

Kenya: M-KOPA's Supply Chain Climate Transparency

Off-grid solar provider M-KOPA implemented a supply chain climate analytics system to meet requirements from European institutional investors and development finance lenders. The platform traces embodied carbon and physical risk exposures across 847 component suppliers spanning China, Vietnam, and Kenya, producing digital product passport-ready data for solar home systems. LCA integration revealed that shipping logistics represented 34% of product carbon intensity, driving a shift to regional manufacturing partnerships. The system generates automated reports aligned with EU Taxonomy technical screening criteria, enabling M-KOPA to access €45 million in green bond financing at 180 basis points below comparable conventional instruments. Customer-facing carbon impact data has also improved retention metrics by 12% as consumers demonstrate preference for climate-transparent products.

Action Checklist

FAQ

Q: How do CSRD requirements affect companies operating primarily in emerging markets? A: The CSRD applies extraterritorially to non-EU companies generating >€150 million in EU revenues across two consecutive years and having either an EU subsidiary or branch meeting size thresholds. For emerging market companies supplying European customers, the impact is indirect but substantial: European buyers must report on their value chain (Scope 3) emissions and risks, creating derivative demand for supplier-level climate data. A Brazilian agricultural exporter or Vietnamese electronics manufacturer will increasingly face climate disclosure requirements as a condition of market access, even without direct CSRD applicability. Proactive adoption of climate analytics positions emerging market suppliers as preferred partners for compliance-conscious European buyers.

Q: What distinguishes credible climate scenario modeling from superficial compliance exercises? A: Credible scenario modeling requires four elements: scientific defensibility (using peer-reviewed climate projections and established socioeconomic pathways), business relevance (connecting climate variables to material financial impacts through sector-specific transmission channels), temporal coherence (maintaining internal consistency across short, medium, and long-term horizons), and decision utility (generating outputs that inform actual strategy and capital allocation rather than merely satisfying disclosure requirements). Superficial approaches often rely on generic scenarios applied without localization, fail to quantify financial materiality, or produce outputs disconnected from business planning processes. Regulators and investors increasingly scrutinize scenario methodology; boilerplate approaches risk greenwashing accusations and undermine strategic value.

Q: How can companies manage climate analytics in data-scarce emerging market contexts? A: Data scarcity requires creative approaches combining multiple input sources. Satellite-derived data (precipitation, vegetation, temperature, flood extent) provides near-global coverage at increasing resolution. Geospatial proxies—using land use patterns, elevation, or infrastructure proximity to estimate exposure characteristics—extend coverage beyond observed data. Statistical methodologies including machine learning can impute missing supplier-level emissions based on sector, size, and geography. Open-source datasets from academic institutions (such as NASA's Global Flood Monitoring) and development organizations supplement proprietary sources. The key is designing analytics architectures that gracefully degrade with data availability, delivering useful outputs even when ideal inputs are unavailable, while clearly communicating uncertainty and methodological limitations.

Q: What role do digital product passports play in climate risk analytics? A: Digital product passports create structured, machine-readable records of product-level sustainability attributes including embedded carbon, material composition, and manufacturing location. For climate risk analytics, DPPs enable granular Scope 3 accounting by replacing estimated emissions factors with actual product data. They facilitate physical risk assessment by linking products to specific manufacturing locations exposed to climate hazards. As EU regulations mandate DPPs for batteries (2027), textiles, and electronics, companies that integrate DPP data infrastructure with climate analytics platforms will achieve more accurate risk assessments while reducing manual data collection burdens. Forward-looking companies are designing DPP architectures now, anticipating that product-level climate transparency will become a competitive differentiator and market access requirement.

Q: How should founders prioritize emerging market segments for climate analytics solutions? A: Prioritization should consider three dimensions: regulatory urgency, buyer concentration, and data feasibility. Regulatory urgency is highest where central banks mandate climate stress testing (Brazil, Indonesia, Singapore) or where supply chains connect to CSRD-covered European buyers. Buyer concentration matters because enterprise sales in fragmented markets are costly; sectors with dominant players (mining, banking, large-scale agriculture) offer more efficient go-to-market paths. Data feasibility assesses whether the inputs required for analytics are obtainable—either through existing databases, satellite sources, or customer-provided information. The intersection of high regulatory urgency, concentrated buyers, and feasible data environments defines attractive initial segments. Latin American mining, Southeast Asian banking, and African renewable energy development currently meet these criteria.

Sources

Network for Greening the Financial System. (2024). NGFS Climate Scenarios for Central Banks and Supervisors: Technical Documentation. NGFS Secretariat, Paris.
European Commission. (2023). Commission Delegated Regulation supplementing Directive 2013/34/EU as regards sustainability reporting standards (ESRS). Official Journal of the European Union.
Task Force on Climate-related Financial Disclosures. (2023). Status Report: Progress and Priorities. Financial Stability Board.
CDP. (2024). Global Supply Chain Report 2024: The Cascade Effect of Climate Disclosure Requirements. CDP Worldwide, London.
Verdantix. (2024). Market Overview: Climate Risk Analytics Software in Emerging Markets. Verdantix Ltd., London.
International Finance Corporation. (2024). Climate Risk Assessment in Emerging Market Lending: Methodologies and Case Studies. IFC, Washington DC.
International Sustainability Standards Board. (2023). IFRS S2 Climate-related Disclosures. IFRS Foundation, London.