The Orbitas
Approach
WHY THIS MATTERS
How governments, consumers and businesses respond to climate change matters. The nature and scale of their responses will determine the impacts of both the climate emergency itself and the disruption felt by the economy as a result of new policies, commitments and consumer preferences.
All changes disrupt the status quo, presenting both risks and opportunities. Climate change and the transitions to mitigate it represent some of the potentially largest systemic changes our economies have ever seen.
Capital providers must foresee and navigate these changes. Those that do will maintain and increase the value of their own and their customers’ assets; those that do not will go the way of many other companies and financial institutions that have been unable or unwilling to adapt to changes in their operating environments. This is true in every sector of the economy.
RESPONDING TO A NEED
Capital providers are deeply engaged in financing tropical commodities. An initial sample of companies, drawn from prior research by Chain Reaction Research, reveals over $80 billion in current financing for key tropical commodities. You can explore these linkages in the graphic below, which begins to scratch the surface of the capital exposed to tropical commodities.
OUR CUTTING-EDGE
METHODOLOGY.
Tropical commodities are complex. Credible scenarios require forecasting how climate transitions affect the economics of each commodity – globally and in key producing regions.
Tropical commodities are complex. Credible scenarios require forecasting how climate transitions affect the economics of each commodity – globally and in key producing regions. Once these changes are quantified, the impact is then mapped geospatially to see the shift in development.
A concession to develop soy may no longer be economical, which might reduce business for the nearest processing facility, for example. The final step in the process is to translate these changes into their financial impact, such as a reduction in productive assets or a loss of revenues that could impact either their equity value or ability to service their debt.
Orbitas is developing an innovative methodology that combines each of these elements to provide the most robust scenario analysis for tropical commodities available to capital providers. We will continue to revise our approach to take advantage of new data and additional techniques that enhance our analysis.