Investors and pension schemes looking to analyse climate risks can now utilise new tools from a university spin-out that takes a new approach to scenario modelling.
Transition Risk Exeter Limited (Trex), which was developed at the University of Exeter, provides climate scenario analysis for investment professionals, with a view to helping them make portfolios more resilient to potential risks, while also capitalising on emerging investment opportunities.
Its core message is that the idea of gradual, linear climate change is “dangerously obsolete”. Trex’s climate scenario platform offers a new category of climate analysis – a “non-linear” approach to help investors understand tipping points, systemic risks and opportunities.
Trex is already working with major names including USS, NatWest and Generation Investment Management.
Trex co-founder and co-CEO Willemijn Verdegaal says:“Linear models fail to capture the diverse range of real-world drivers that determine the winners and losers of the energy transition and changing climate.
“These models also fail to reflect climate tipping points that have the potential to trigger sudden, irreversible changes that can dramatically reshape the investment landscape.
“Our non-linear models enable us to move beyond this traditional analysis, that is no longer fit for purpose.”
This new launch comes after widespread criticism of existing climate scenario analysis, which led to The Pension Regulator acknowledging limitations in previous modelling, which potentially “seriously underestimated the financial risks of climate change”.
Trex co-founder and co-CEO Jack Oliver added: “We quantify economic and financial impacts of plausible near-term narrative scenarios that reflect the systemic dynamics of the real world, over timescales that matter to investors.
“We rely solely on methods and models drawn from peer-reviewed academic papers developed by our scientific founders. Everything we do is transparent and intuitive.”
Stuart Brocklehurst, deputy vice-chancellor for business engagement and innovation, added: “Trex is already making a real impact on the understanding of climate risks, which in turn drives financial institutions to make choices which can help steer us away from the most adverse scenarios.
“The University of Exeter is home to more of the top hundred climate scientists than any other institution in the world, it’s great to see this practical translation of that expertise through this spin-out, one of many ways in which our academics are driving real change in the world.”
Professor Lisa Roberts, president and vice-chancellor of the University of Exeter, said: “The University of Exeter’s vision – to use the power of our education and research to create a sustainable, healthy and socially just future – requires us to work across academia and beyond, putting our expertise to practical effect.
“Our latest spin-out, Trex, is a great example of our world-leading systems thinking and tipping points research supporting the investment community to strengthen commercial resilience.”
