Climate Risk Data Remains Critical with Larry Lawrence from Intercontinental Exchange

Sponsored by: EDF power solutions -- Info@EDF-re.com

This episode marks the turn of one of the most popular guests we’ve ever had on this show: Larry Lawrence, Vice President of Sustainable Finance Data at Intercontinental Exchange (ICE). When we had him on the show back in 2023, our conversation veered into the various ways data was evolving to drive innovation in sustainable finance. 

Well, it’s 2025 and it’s safe to say … things have changed. The very word sustainable is now taboo in some spaces, but Larry and the team at ICE don’t get caught up in all that. They don’t let semantics get in the way of the data. 

And when it comes to climate risk data, the financial services industry is listening to what the data says. Asset managers are listening. Investors in mortgage-backed securities are listening. And perhaps most importantly, insurers are listening. Natural disasters like wildfires, floods and hurricanes have reshaped insurance markets. So much so that, as the team at ICE shared in a recent report, climate risks are creating affordability risks that can ultimately lead to default risks. 

More resources

ICE Report: How are home insurance costs changing across the United States?

Key highlights

Importance of clarity in climate risk data - (4:27)

Natural disasters and 'on the ground' data - (6:27)

Innovative ways investors are using climate risk data - (13:10)

Impact of climate risk on home insurance costs - (18:38)

Can the insurance affordability problem be solved? - (20:55)

A shift in how we talk about 'sustainable' finance - (27:39)

Real-time markets for climate risk data - (31:06)

Larry's bold predictions for the future of climate risk data - (34:53)

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Transcript

(Note: This trasncript wqs created using AI. It has not been edited verbatim.)

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This episode of the Renewable Energy SmartPod is brought to you by EDF power solutions. Are you ready for the new energy paradigm? EDF power solutions specializes in innovative multi technology solutions that step up to the challenges of the evolving energy landscape. Contact us today at info at EDF-re.com to get started on powering your future. That email address again is Info@EDF-re.com or just click on the link in today's show notes. 

Sean McMahon  00:49

what's up everyone? And welcome to the Renewable Energy SmartPod. I'm your host, Sean McMahon, and today marks the return of one of the most popular guests we've ever had on this show. Larry Lawrence. Larry is the vice president of Sustainable Finance Data at Intercontinental Exchange. When Larry joined me on this show, back in 2023 our conversation veered into various ways that data was evolving to drive innovation in sustainable finance. 

Well, it's 2025, and it's safe to say things have changed. The very word sustainable is now taboo in some spaces, but Larry and the team at Intercontinental Exchange don't get caught up in all that. They don't let semantics get in the way of data. 

And when it comes to climate risk data, the financial services industry is listening to what the data says. Investors in mortgage backed securities are definitely listening, and perhaps most importantly, insurers are listening too. Natural disasters like wildfires, floods and hurricanes have reshaped insurance markets, so much so that, as Larry explains, climate risks are driving affordability risks that can ultimately lead to default risks. 

Larry does a deep dive into so many real world easy to understand scenarios that I think you'll value his insights. 

But before we hear from him, just a quick reminder to check out the most recent episode of this podcast. Jeffrey Jakubiak, a partner at Vinson and Elkins, stopped by the show to share his views on the specific load demands that AI data centers are projected to place on the grid. And perhaps most importantly, Jeffrey also weighed in on whether the US will be able to overcome numerous challenges in order to build out enough generation capacity to meet that demand. 

And of course, just my normal reminder that if you want a daily dose of renewable energy news delivered directly to your inbox, head on over to SmartBrief.com and sign up for the Renewable Energy SmartBrief or just click on the link in today's show notes. 

Right now, let's get things rolling with Larry Lawrence from intercontinental exchange. Larry, how you doing today?

Larry Lawrence  03:14

I'm doing well. Thank you so much for having me. 

Sean McMahon  03:16

Yeah, it's good to have you back. You know, I was kicking myself because I think you were on the show a couple years ago, actually, a year and a half, and we wrapped that episode by talking about how this was great. We could go for another hour or two, and we've waited quite a while to reconnect so but I kind of view that as a good thing, because, you know, things have changed since 2023 obviously, what's also good is, I want to just send a shout out to our listeners. If you're not following Larry on LinkedIn, I highly recommend you do so he should be your next favorite follow. He shares a ton of excellent data and research that he and the team atICEhave pulled together, and really kind of presents it in a way that you know, full of clarity in these times when there's a lot of banter about what climate science and sustainable data really means. So I appreciate that, and I hope our audience will flock to you and bombard you with all kinds of requests to connect.

Larry Lawrence  04:08

I appreciate the shout out. I'm always trying to find ways to increase my influencer status. So yeah, please follow me, and hopefully I won't bore you to death. But as you said, I don't over share, but I do love to share some of the great work our research team is doing here. And yeah, very excited to dig into that today as well.

Sean McMahon  04:27

Certainly and like I said, when I think of you and the research you and your team produce, the word that just comes to mind is clarity. You know, it's, it's really kind of data points that are almost inarguable. And like I mentioned earlier in this time, where people want to argue about so much stuff, it's your team is like, No, this is what happened. This is this is real. And so let's kind of kick off this conversation with that. You know, there's a lot of, seems like year round headlines about natural disasters. You know, whether it's hurricanes or atmospheric rivers or heat domes and all these funky new names for things like. That, what are some of the ways that your team is taking the outcomes from some of those things, or long term outcomes, I should say, and taking that climate risk data, and how is that making an impact on sustainable finance? What are you seeing in the marketplace?

Larry Lawrence  05:14

Yeah, that's that's a great question. And to pick on your first point about sort of bringing clarity. I think that's a very important thing to just double click on really, really quickly, in a world where everyone is arguing about what sustainability means, or what ESG means, and all these terms, our clients, and 70% of the clients that we work with at ICE,ICEClimate is my group. Are asset managers, banks, investors, traders, who are looking for information that is empirically as close to the truth as possible to help them make decisions, to influence whether or not they include an opportunity in a portfolio, what questions they ask when a deal comes across your desk about a real estate property, you know if the real estate property has elevated flood risk. You know, it triggers questions about, are there flood defenses, and what would be the damage if a flood were to occur and like so, all of those things are being factored into decisions, day in and day out, and we try to keep it as close to that as possible, and leave the noise and arguments about definitions to other people. We just want to help our clients manage their day to day and give them information that's actionable. So with that being said, to your question about the natural disasters that are continuing like we see headlines all the time, we had a number of major events this year already, the LA wildfires in January, Hurricane Melissa, a few weeks ago, that you know, had some pretty catastrophic impact on Jamaica and a few other islands there. To me, the way that we're making an impact in the climate. Risk of data that we curate makes an impact. It really all comes down to who has the best data on the ground truth, and I mean that literally and essentially it's how much information do you know about what's on the ground, where these events are occurring? Because that's the absolute critical thing to understand, to help you assess risk, to help you assess loss, to help you assess, you know, rebuild cost, things like that are being factored into decisions day in and day out. To like, I'll double click on climate risk like, specifically how we approach it, to effectively do and look at climate risk, climate physical risk, for example, at the asset or property level, we need three things. You need to understand the location and the footprint of a building. We need to know where the asset is and its physical characteristics. Is it on a hill? Is it near water? What's its shape? This geospatial detail is critical. The next thing is sort of more about the hazards themselves. These are wildfires, floods, hurricane, wind, coastal, flood, inland, flood, things like that. For example, what's the flood depth or wildfire flame height at that exact location under different scenarios or time horizons. And then the third sort of piece of the puzzle is property or asset characteristics. So we bring the detailed attributes like building type, number of stories, construction materials. All of this comes from the rich data set that we have across our different mortgage teams, and the asset level data we have across the organization. So that ground truth, and I again mean that literally, like, what do you know about what's on the ground is where we start, because we build up from there. And I'll give you some examples of what that is. So for example, we've built a geospatial database of 1.6 billion building footprints around the world. So for 1.6 billion individual locations around the world, we have a good view of what's on the ground. Is that a high rise? Is it a sort of a loft, or, you know, a community? Is it a factory or distribution center or location? So we leverage this geospatial technology and sort of the best and the latest of AI tools to help us get a pretty good sense of what's on the ground. So it's absolutely critical the other area where, again, staying on the theme of assets, absolutely critical to understand what's on the ground. We have for the US over 155 million property parcels we basically cover in 99.9% of US households. We have a pretty good view of what's happening there. We're able to link that to mortgage loans, over 200 million mortgage loans, and we're we're also able to link that to sort of the securitized pools that different investors invest in over 1 million of those agency on non agency pools. So that ground truth again, is where we start and we build up from there. Another example I'll provide you is on the corporate side. Like we have, we cover about 20 plus 1000 public companies in the world for those 20. 1000 public companies. We have 3.2 million corporate asset locations, manufacturing facility, office location, retail distribution centers. So again, absolutely critical to have that ground truth start from the ground floor, understand what's on the ground, what's exposed to these events, and then build it back up and link it back to these instruments that our clients invest in or trade. So that's that's where we start, and that's what's critically important. That's why this climate data is becoming more and more sort of embedded in decision making. And it's specifically for the reasons you mentioned. It's people are honing in on it because it's specific. You can tie that to a specific event, sort of a building being struck, being damaged, so that's why it resonates well, and that's why you're seeing a bit more focus there.

Sean McMahon  10:47

I appreciate what you're saying about having this on the ground knowledge, and you've kind of blown my mind. I think. Did you say that? Not only do you understand that the threat that a structure has from fire, but also the height of the flames?

Larry Lawrence  11:00

Right, the height of the flame will determine the amount of damage it will cause in an area. So that's embedded in the sort of the scenarios in the climate, in our wildfire model that we produce and project the future. So these models look at risk from today all the way out to 2030 so for from today all the way out to 2030 we can give you a view of how that risk changes. It's the same with flood right flood depth, like if you're in a valley, it's likely that if you have a building or an asset in the in the valley, where water will collect, and if it floods, they will see a lot more damage. So understanding where things are, the way the land is sort of designed or structured, and where water collects and where water flows, that's pretty critical into helping you estimate the potential damage and exposure and risk from from those events. I mean, I'll give you another stat, right? I think Munich Re reported earlier this year that globally, there was over 300 billion in economic losses from natural disasters in 2024 we did our own study of the sort of biggest events, biggest hurricanes in 2024 I think there were five big ones, hurricane, Beryl, Debbie, Francine, Helene and Milton each caused more than a billion dollars of damage in the US alone. We're talking pretty catastrophic. Over 300 people died due to these storms, making it one of the deadliest hurricane seasons since 2005 and beyond that in the implication for investors to across these five different billion dollar storms or hurricanes, there were over 300,000 corporate asset locations that were significantly damaged. You know, close to 3000 municipal issuers that experience damage, and over 11,000 properties and active commercial backed securities exposed to these like pretty high winds. So it's quite impactful. I mean, what investors are really after is, hey, tell me where it's material. I don't want to argue about the definition of what something is tell me when it matters to me, in the day to day of managing assets and managing my portfolio.

Sean McMahon  13:08

And you mentioned how they manage their portfolio, right? And in a few minutes ago, you talked about pools of mortgages and how all these data points factor into those risks. You know, are there any innovative ways that you've heard from investors or clients that you're willing, you're, I guess, able to share without giving away anything. What are some of the innovative ways that investors are using all this data to manage their portfolio risk? 

Larry Lawrence  13:31

Yeah. I mean, I think, you know, one thing I love to do is talk to our clients and talk to the market. And we learn a lot from them. We engage them very early in any product development effort, even when we just set the idea stage, because they have so many ideas of how they can deploy it, how they can use it, or what makes sense and what doesn't. A couple of interesting ways that people are leveraging this stuff today, real time, like what we just talked about was, hey, projecting risk today over a period of decades into the future, but the one area where we've seen an enormous amount of focus is investors are looking at sort of near real time data when these events occur, and are using it to make decisions. Hey, should I exit out of this particular bond or particular equity? Because this storm is approaching, and they've got a concentrated of assets in this area, because that's going to, that's going to interrupt their business or have sort of catastrophic impact on, you know, the recovery that might slow down the economic activity in that area, for example, you know, I'll give you, and I don't want to be talking too much about products, but we have this tool called real time. We call it hazard watch, so as events occur, when the LA wildfires were happening, if you remember, in January, this was over a two week period, right? Every single day the fire spread and the extent of damage increased. So every single day, people got more and more worried about where they had exposure, thinking about the investor angle here. So we got so many phone. Calls so many people using our tools to understand, hey, load up my portfolio, which of my assets are in the perimeter of the fire, giving you real time view, both from a corporate perspective, a Muni perspective and a real estate perspective, that's an interesting way where people are using this in sort of a real time manner to make decisions and to report to their stakeholders, who are asking them, where we have exposure. This one was pretty unique, because it happened over a two week period, and every day, the scope and cost of damage increased. So it's sort of, it's sort of built up and built up. So that's, that's one interesting way where, where we're seeing people use it. The other two other things I'll mention, like, let's not underplay transparency here. What we are doing and the things we've been working on are really transforming the definition of transparency across the mortgage and securitized space, for example. Now we can link all of these events to any property in the US. We can tie it back to any loan outstanding loan in the US mortgage loan, and we can tie it to any number of the mortgage backed securities that are out there, and giving you really interest in transparency, nothing, no one's I don't think we've ever been in the period where we've had all of this information at our fingertips to make decisions that's really interesting and really unique. The other way people are sort of embedding this information is around insurance diligence. We had one insurer client publicly state earlier in the year that they they neglected to insure a library district bond. I don't know if I can say who it is. We'll just keep it high level for now, because of the wildfire risk that they were exposed to as a result of using our data like so these things are starting to find their way into, sort of like every, sort of every aspect of the market, and helping with decision making. The other element, and we may talk about this a little bit more, is looking at things that you know is that related or influenced by climate insurance costs are sort of elevated everywhere in the country, and we've seen some pretty big shifts. So we're starting to see people look at how insurance is affecting affordability, as in people's ability to stay in their homes, to afford new homes, and that how that may affect the municipals ability to sort of continue to generate revenue from taxes because of people's ability to buy homes or move away from those expensive areas that they can no longer afford. So all of this is being used imagine, like, remember when big data was a big thing, a big word like this, the definition of that, like, it's so much data being curated to give you sort of transparency like you've never had before on so many different dimensions that enable you to make different decisions and do research in a number of ways.

Sean McMahon  17:48

We'll be right back. 

Hey everyone, just a quick reminder that today's episode is sponsored exclusively by EDF power solutions. Join EDF power solutions in creating energy designed for the future, our innovative behind the meter strategies allow for flexibility and efficiency for energy consumers of all sizes, get in touch at info, at EDF-re.com to keep your business powering forward, that email address again, info at EDF-re.com or just click on the link in today's show notes. 

And now back to my conversation with Larry Lawrence from Intercontinental Exchange. 

Okay, so you mentioned the insurance angle, and you're right. You know, in the preparing for this show, there is a piece of research I want to dive into. So we'll just do that right now.ICErecently published a report about how home insurance costs have been going up. I think that the data point was they've increased 90% since 2014 yeah, there's obviously some states and areas like we talked about where the prices are going up the most, in addition to what we talked about, what's causing that surge, and broadly speaking, you touched on a little bit, but I want to go deeper on, like, what does that mean for the economies in those areas?

Larry Lawrence  19:11

Yeah, there are a couple of things. Let's contextualize that a little bit. So what we're seeing is a broader sort of trend and stress on affordability in general, insurance is one of the elements that plays a pretty big role into a lot of that. So the way I would characterize it, unless we can sort of stick on mortgages and properties real estate for a minute, 90% of the mortgages out there are 30 year fixed rate mortgages. So you just assume, hey, all I need to do is worry about my principal payment, pay that for the next 30 years, and I own my home right? Straightforward enough, like that's and that's all, and that's usually the calculus that people use in calculating whether or not they fit within this affordability bracket. Hey, can I buy a house that's between. 300 400,000 or, you know, 507 100,000 or anywhere in between. So that calculus is changing quite a bit, because what we're seeing is that the variable costs, these additional costs that are not always factored in, insurance is one of them, property taxes, is another, and then the other one is the energy and water costs, all of which are going up in some parts of the country. These variable costs account for 30 to 50% of your annual payment on your home. Like that's significant. So it's like having a second mortgage on your home. That's a variable cost mortgage, a variable rate mortgage, and that's changing a lot of the calculus for affordability. Some people can't afford to live in their homes because, you know, water and energy costs are going so high, or they can't find insurance.

Sean McMahon  20:55

Dive into that real quick. Let me. Let me jump into that. Interrupt you, but, but, yeah, let's talk about it insurers. It's one thing to as a homeowner, you know, if you're holding a mortgage, to have be faced with an insurance bill that's skyrocketing. Yeah, it's another to not be able to get insurance because insurers have just pulled out. How are we going to solve that? You have entire neighborhoods that are already built and, like, no, there's some states. I know, California has a state, a state program that you know, got in some trouble. The math didn't quite pencil out when they really needed it to. But like, what is the future of that landscape look like?

Larry Lawrence  21:33

I think. I mean, I don't, I don't have a crystal ball. I wish I did. But what we're what we're seeing, or the conversation, tends to sort of hover around, how can the private market play a more important role in this segment? Should states really jump in and protect consumers and individuals? More is that a good model, or not even in some areas, where not to go off topic, but just a quick highlight, we did a brief study recently looking at flood zone data, like the FEMA flood zone data, and we looked at a bunch of areas in the country that were considered pretty high risk, that were not actually flagged as flood zones, which should carry flood insurance but don't so they were underinsured. So that that's another risk that's bubbling out there, like, what happens if there is all of these additional floods in these areas that are not covered, that are not currently considered flood zones? So I think there are multitudes of things that need to happen. What the one thing I know is that because insurance companies are pulling out of certain areas, they're increasing premiums, they're starting to recalibrate their models because of the changes. And I think you're going to need a few forces from federal government to private market to sort of think through how to solve it. I don't have a crystal ball, but I think they're going to be it's one of those things where you may see more insurance companies that are more like you've seen a few in the past, right? I can't say any names, but that are more online, AI driven some that are more on the ground, sort of like more your traditional models. You know, reinsurers may need to play an important role in this as well, where you may need a few, you know, national governments or central banks to play a role in helping more reinsurers get in the market. So there are some things that people are talking about doing, but the conversation typically hovers around, all right, this risk is not going away. I've had a few people even say like, this is one of the ticking time bomb, this insurance crisis, and it needs to be solved. And I know there's a lot of talk about solving it across the government as well. But what our study found, just to give you some anecdotes, because we looked at insurance costs for the last 10 years and did a pretty deep dive study across it, and as you said, the average annual insurance premiums for single family homes rose about 90% from like in 2014 when it was about $1,200 to 2025 when it was over $2,400 per year on average. That's a pretty steep climb. There are some regional disparities that are growing as well. Right? Louisiana, Nebraska, Florida saw the largest increases per like $1,000 of coverage between that 10 year period. And the other anecdote we saw is like homeowners with newly originated loans tend to pay less per $1,000 of coverage than homeowners other homeowners, homeowners who've sort of had their insurance for a long time don't renew or originate their insurance or shop around every year. And so we saw that trend as well, which was, which was interesting to see. But you know, I think the reason it matters and why people are paying such close attention to this, we see relationships between climate risk and Mortgage. Frequency rates as well as mortgage delinquency rates and extreme weather events, right? This is the type of research that we're doing. Because we have all this data, we also see a clear association between Climate Risk and Insurance costs. You know, though, of course, state regulators come in. Can you play with this as well, along with other, many other factors and then high risk places like Cape, coral, North port, Florida, we're also seeing falling home prices as a result of all of these stresses. So like all of this is cumbersome for anyone who's looking at real estate, who's looking at mortgage, who's looking at the securitized market, and who's looking at the muni market, because a Munis depend on home ownership and the tax base. They depend on people living there. If things become unaffordable, people tend to sort of migrate and move around. Where is that shift going to happen? So? So those are the types of conversations we're having with with clients. It's one of our most popular pieces we've published over the last couple of years. It's so topical right now. It's every like one client in Singapore, and we sent a piece to them, literally came back to me within minutes. Was like, this is the topic du jour right now in our company. So everyone across the world is paying attention to the insurance in the housing market in the US.

Sean McMahon  26:18

Yeah. And it just resonates because, I mean, I know someone who recently sold their home in Southern California, and insurance was a big, huge reason why, you know, the affordability of it, you know, loved the house. Lived there for 15 years. It was paradise, and then can't afford it, you know, I like the term you mentioned earlier. It's variable cost, mortgage, variable rate, but it's actually variable cost. You know, what you pay and the rate stays the same.

Larry Lawrence  26:46

But, yeah, it's variable cost. It's like having a second mortgage on your home. It's just, let me see, I had a few stats. I can share a few additional stats with you that are really interesting, because if I look at like, what percentage of someone's what percent of the total cost, very, year over year, percentage of like, total housing costs going towards like these variable things like property taxes, insurance, energy and water. Miami, Dade, 45% on average, is going to those variable costs. Nashville, Tennessee, 35% you know, Springfield, Illinois, 53% Dallas Texas, 45% San Diego. 37% of those costs that you're paying for your home are these variable costs. It's pretty striking.

Sean McMahon  27:33

Yeah, I definitely agree. I'm one of those people. I think my insurance everything is right about half, yeah. So I want to step back for a second and just kind of kind of, you know, pull back from, you know, the individual properties and mortgages and bonds and things, and then just kind of talk about sustainable finance from a broader view, you know. And last year too, it seems like there's been a shift from a focus on sustainable finance as its own asset class, you know, to climate data being used to manage risk and asset classes that aren't explicitly labeled as sustainable finance, but they still depend on that data for their performance, you know. So first of all, I want to ask you, have you seen that same shift? And if you, if you have, you know, what do you make of it?

Larry Lawrence  28:18

Yeah, I think it's we touched on this at the very beginning, right? It's like the move from the intangible to the more tangible, where, like the most consistent feedback I've received from investors is, hey, I need more empirical material data that helps me embed this information in a way that it's meaningful, so that I can go to a portfolio manager and say, here's the story and tie it back to performance and tie it back to like, revenue impairment, that's the focus. So what climate does that like the broader sustainable finance umbrella doesn't do is it gives you something specific, a little a little bit more specific to target. And even within climate, there's, you know, a number of different things. But where we're finding a lot of people focus their attention is on physical risk, you know, risk from wildfire, flood, hurricane, even the more longer term risk, like extreme cold and extreme heat that people in like, you know, the southern parts of the country that bought the 3000 square foot home because it was cheap. Now they've got to pay so much to cool it during the hot summers, and it's hotter on average, a lot more. So all of these things are part of the calculus now. So I think it's again that move from intangible to tangible, going back to value add, value creation, linking it to materiality, that's where people are looking for those opportunities. Because if you can't, like the critical thing is, if you can't go to your investment team or investment committee and put a relevant and compelling story forward, or why you have a thesis, and tie it back to. Evidence you're going to have a hard time, right? And that's where people are looking for data to support those stories, to support those cases, to demonstrate why. Hey, you should pay attention to physical risk and high yield, because that's where a lot of risk is hidden. You should pay attention to physical risk. Hey, there's an event happening in this location. Here are the companies in your portfolio that have outside exposure to this region. You should pay attention to it, because we expect there to be X percent revenue impairment from that because of the potential downtime from these events. So that's where the narrative, I think, have shifted even some of the recent events I've been at. You know, in previous years, it was dominated by this sort of more, hey, net zero. Let's try to sort of think about how we achieve net zero goals and align and optimize our portfolios for that to where, like these more tangible, physical risks have become. You know, 50, 60% of the conversation now where people are looking for that empirical evidence to demonstrate value add and so that, I think that's why you've seen that shift.

Sean McMahon  31:03

And you mentioned so events that are about to happen, right? And this is kind of circling back to any earlier comments about, you know, real time, actionable, you know, data points that that teams are using to manage portfolio risk. So are we already, or are we soon going to be in a world where, yeah, you know, it was a dry winter in California, the Santa Anas have kicked up. You know, something has sparked up. And, you know, investors are coming in and, and, well, I hate to use Word, you know, dumping, you know, this bond or that investment, but just because they see, okay, fire might hit that in two days and I'm getting out. Or are we seeing pricing kind of fluctuate that quickly with real time, literally with the gusts of wind? Or, you know, is that happening now? Is my question, and or are we going to be there pretty soon? 

Larry Lawrence  31:54

I think it's a combination of happening now and we're going to be there in a big way, really, really soon. And obviously we're helping our clients do that, and I'll answer your last question first, and I'll work through the other one. So I was seeing the price. So in LA, they were in the LA fires, for example, we saw some spreads widen in between, sort of LA, DWOP, which is the Department of Water and Power, over that period as well. So like we're starting to see on the back of these events, you're starting to see some spread widening the other area, like we know that. You know, these credit rating agencies are using this information or embedding that into the research process when they do research now, and how they how they rate these, these bonds. So that's another area, and one another area we're digging into. We don't have the data yet to demonstrate it, but we're hearing a lot of clients ask and talk about it is we're seeing an impact on liquidity. So where you would have seen 20 bids for a high climate risk bond a year ago, now you're seeing like five bids. So you starting to see less of an appetite for those high risk bond, whether that high risk is wildfire risk, high flood risk or high hurricane risk, so you're starting to see it appear in those ways. But yes, I think it's just a matter of time. Like one area that we're doing some work in is, I mean, think of agriculture, right? We have a we have a meteorologist on staff with a weather team that we collaborate with quite closely, and they have a lot of agricultural clients, people responsible for growing all the stuff that we eat. And they pay close attention to forecasted precipitation or dry spells, because it's, you know, make a break for them, right? So you can imagine that being embedded into a lot of what we do on the portfolio management side, that's kind of where we're headed, where you can start embedding these forecasts. Because what we do now, like if you think about it, we help answer two very basic questions, right? When an event occurs, we can tell you where you have exposure right away, right? So you could see things as they develop in real time. The second question is, we've built these very usable, easy to understand scores, zero, no risk, five, extreme the most extreme risk to help you understand where an asset or where in the country or the world is highly exposed to these types of events. So you understand, at least, you'll have a view of where, if an event were to occur here, which assets are most likely to see the biggest impact, so that we can do now, but the forecasting piece of it, absolutely, we're starting to see that play a role, and we'll see that play an even bigger role. 

Sean McMahon  34:33

All right. Now, you mentioned earlier that you you don't have a crystal ball, and so I'm not going to ask you to predict everything precisely down to, you know, the individual asset. But one of the things I ask people on this show is for their bold predictions. And so, you know, we've talked a lot about what you see coming in the future and what's next. So one, do you have any bold predictions about what we'll be doing, you know, two or three years from now with climate risk data? Yeah. And the second part is, I know that you kind of live and breathe this stuff, right? And I use the word geek out in a complimentary term, right? Like we both kind of geek out on this stuff. So what is a capability that you really kind of wish you had, you and the team advice had, or that it's kind of almost right around the corner.

Larry Lawrence  35:21

All right, let's start with your first question, and then I'll think about the last one. This is literally the question I ask all of our clients and partners. What do you want that we don't have right now that you wish you had that would give you everything you need today? So I love that question because I ask it all the time on the first questions in both predictions, I think real time and prediction is going to be pretty important as a guide for people, because, I mean, a lot of what we do is forecasting the risk, but predicting the shorter term events that people want to react to, especially in the trading context, or if I'm a pm and I see an event happening, I want to exit a position because I know it's going to be sort of squaring the eye of the storm, for lack of a better word, that's something I'd like to know. So I think the prediction piece of that, the forecasting piece of that's going to continue to play an important role. And then you're going to see, as we get into the more real time, sort of event driven element of this, you're going to see the traders get more involved so that that sort of like real time market, get more involved in looking at climate. And I think that's probably going to put some even more pressure on the pricing of this, because it's definitely not priced in yet, not systematically. So that's one area, one fun thing. And I'm not even sure I could say this, but think I'll tell you anyway, and then I'll let you know if I if I change my mind. So, you know, there's been a lot of talk about, you know, sentiment and prediction markets and all the stuff happening in the world, right? I think, I think there's a lot there. So imagine a world where I can take all the chatter happening around different communities, I can mix that in with the real time sort of event data that I have, hypothetically, there's a flood happening in this particular county. I also have all of what the communities and the individuals that live in these county are saying online, and I can tell you, hey, they said that the notified guys there got damaged, or the school is underwater, like all of this can be brought together as a really cool sort of real time prediction, sort of infrastructure to help people react and make decision off of so I'm really excited about that, as well as a potential direction to take this. I think the next big step for me and what we're doubly focused on, is, how do we get how do we make sure that for our clients who want to sort of start to measure how this will be priced into the market and the impact of that, give them that information. Now we've been following and we have spreads that are climate that we help our clients monitor, but how this gets embedded in the pricing and how that influences the valuation of that and price of assets is going to be like, to me, the next big wave of things, because that's when you really get the broad based adoption from the non sort of core climate people, where, hey, I'm speaking your language, right? I'm not giving you some climate data, I'm giving you this sort of price signal that you're used to using and integrating. So to me, that's that's pretty interesting. But that the community stuff, the prediction markets, I think, is an interesting thing to look at, are going to be pretty interesting for us to for us to play with.

Sean McMahon  38:33

All right. Well, hey, I feel like I got to wrap up this conversation the same way I wrapped up the last one, which is just say that I could geek out with this stuff for hours with you. I mean, it's just, it's great data points, great, you know, examples of, you know, real, real world, or, soon to be, real world, use cases. So Larry, I appreciate your time today. Thank you so much for all your insights.

Larry Lawrence  38:56

Yeah, appreciate it. Thank you so much. Enjoy the rest of your day, and thanks for having me on.

Sean McMahon  39:01

Well, that's our show for today, but before we get out of here, I want to say one final thank you to the exclusive sponsor of today's episode, EDF power solutions. 

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