CSC SEEKS TO MONETIZE CLIMATE DATA WITH BIG DATA ANALYTICS SEPTEMBER 2012 Verdantix Ltd 2007-2012. Reproduction Prohibited.
CSC SEEKS TO MONETIZE CLIMATE DATA WITH BIG DATA ANALYTICS September 2012 EXECUTIVE SUMMARY Licensed Content This report provides finance directors and risk officers with an independent analysis of CSC s ClimatEdge launched in June 2012. CSC s ClimatEdge supports decision-making in the commodity trading and risk management sectors through long-term climate insights. Verdantix selected this subject for detailed study because despite the public availability of long-range climate datasets, commodity traders and investment managers have rarely used them because of their size and complexity. CSC s ClimatEdge takes climate data from organizations such as NASA and the National Oceanic and Atmospheric Administration, and combines it with crop yield information to produce forecast data to support investment decisions by commodity traders and investment managers. To better understand CSC s offering we interviewed CSC s Chief Climate Scientist. Moving beyond the financial sector, Verdantix believes that CSC s ClimatEdge can deliver benefits to a range of industries that are sensitive to changes in climate patterns such as food and beverage, transport and water-intensive firms. TABLE OF CONTENTS CSC SEEKS TO MONETIZE CLIMATE DATA WITH BIG DATA ANALYTICS CSC Links 12 Month Forecasts To Material Risks In The Commodity Markets CSC s Solution Can Deliver Value Beyond The Financial Sector REFERENCES ORGANIZATIONS MENTIONED Atmospheric and Environmental Research, Australian Government Bureau of Meteorology, Bloomberg, CDP, ConAgra Foods, CSC, Danone, Earth Networks, Ecometrica, Kimberly-Clark, International Research Institute for Climate and Society, NASA, National Oceanic and Atmospheric Administration, National Rail, Nestlé, PepsiCo, Telvent, Unilever 2012 Verdantix Ltd. All Rights Reserved. Verdantix, Green Quadrant, Total Portfolio and Critical Moments are trademarks of Verdantix Ltd. All other trademarks are the property of their respective companies. Verdantix clients may make one attributed copy of each figure or paragraph contained herein. Additional reproduction is strictly prohibited. Verdantix Ltd 2007-2012. Reproduction Prohibited. 2
VERDANTIX CSC SEEKS TO MONETIZE CLIMATE DATA WITH BIG DATA ANALYTICS CSC SEEKS TO MONETIZE CLIMATE DATA WITH BIG DATA ANALYTICS This report helps finance directors and risk officers understand CSC s ClimatEdge offering reports that provide long-term climate analytics and commodity risk insights to support decision-making and risk management in the commodity trading, financial and insurance sectors. At present commodity traders and investment managers frequently rely on 14 day weather forecasts to understand climate risk and inform investment decisions. Whilst long-range climate forecasts for the next several months are freely available through NASA and National Oceanic and Atmospheric Administration (NOAA) databases, commodity traders and investment managers rarely make use of them due to their size and complexity. In June 2012 CSC launched ClimatEdge, which extracts commercially relevant insights from this publicly available Big Data (data that is high volume, high variety and high velocity) on weather and climate. To hear more about this new proposition, Verdantix spoke to Dan Walker, Chief Climate Scientist at CSC. CSC Links 12 Month Forecasts To Material Risks In The Commodity Markets On June 4, 2012, CSC, the $15.9 billion revenue technology services firm, launched ClimatEdge to support commodity traders and investment managers in identifying potential weather and climate risks in the commodities markets two to 12 months into the future. CSC s ClimatEdge was previously only available to users of the Bloomberg Professional service, but CSC has launched this as a separate subscription service. While there are numerous suppliers of short-range weather risk analysis for commodity traders such as Atmospheric and Environmental Research, Earth Networks and Telvent, CSC sees the value of its solution in providing commercially relevant climate insights two to 12 months into the future. CSC s ClimatEdge solution: Leverages publicly available climate forecasts from NASA and NOAA. CSC integrates and analyses large publicly available climate data sets from organizations such as the Australian Government Bureau of Meteorology, International Research Institute for Climate and Society, NASA and NOAA. CSC applies advanced analytics to researchgrade satellite data and earth observation data to forecast weather and climate-related risk for commodities such as cocoa, coffee, corn, dairy and groundnuts. Technological developments in processing speeds and data storage and a corresponding decline in the cost of the technology infrastructure support the emergence of this type of Big Data analytics solution. Translates scientific analysis into commercial risks for five sectors. CSC quantifies the impact of climate patterns over the next two to 12 months through monthly reports on five sectors: agriculture, energy, grain and oilseeds, natural gas, and sugar and soft commodities. For example its grain and oilseeds report examines the impact that predicted weather and climate will have on production and yield risks for corn, rice, soybean, and wheat across multiple geographies. Generating commercially relevant insights from large environmental datasets is an emerging trend and can be seen with Ecometrica s Our Ecosystem solution. This allows firms to map the environmental impact and environmental exposure of their operations across multiple dimensions (see Verdantix Ecometrica Converts Geospatial Data Into Corporate Insights). Verdantix Ltd 2007-2012. Reproduction Prohibited. 3
VERDANTIX CSC SEEKS TO MONETIZE CLIMATE DATA WITH BIG DATA ANALYTICS Targets commodity traders, financial analysts and investment managers. When taking multimillion dollar positions on the future direction of commodity prices, traders are keen to consult all available information on the factors that shape these price movements. CSC s ClimatEdge solution supports commodity traders, financial analysts and investment managers by providing insights into the impact of extreme climate and weather events on commodity demand and production. Traders on Wall Street could have benefited from such insights in early 2012; many of them failed to anticipate the spike in grain prices in the US triggered by above-average June 2012 temperatures that caused widespread corn crop failure. CSC s Solution Can Deliver Value Beyond The Financial Sector ClimatEdge provides commodity traders, financial analysts and investment managers with a quantitative view on the impacts of two to 12 month weather and climate forecasts on commodity pricing and demand based on trends in observational data. Verdantix believes that in addition to the financial sector, CSC s climate analytics can deliver benefits to other industries that are sensitive to changes in climate patterns (see Smart Vendors: Sustainability And Climate Change Risk Consulting). Key groups requiring climate analytics include: Food and beverage firms facing supply chain risks. Global food and beverage firms such as ConAgra Foods, Danone, PepsiCo and Unilever typically explore supply chain risks through auditing high-risk suppliers and leveraging data from the Sedex platform (see Verdantix Sustainable Supply Chain Benchmark: Food Sector). As these firms are sensitive to climate risk, they also need to take account of climate in their supply chain strategies. For example Nestlé, in its 2012 CDP response, estimates that the financial impact of supply chain disruption and decreased availability of raw materials attributed to climate change could amount to CHF96 million ($101 million). As sustainable supply chain programmes gather momentum supply chain managers can benefit from targeted analytics of commercially relevant changes in weather and climate. Water-intensive firms requiring productivity certainty. In sectors such as chemicals, food and beverage, and personal and household, water plays an essential role throughout the value chain (see Verdantix The State Of Global Water Strategies). For these industries, managing water effectively is critical to maintaining productivity. Witness Kimberly-Clark s $2 million loss in 2010 due to a seasonal drought that halted production at its facilities in Malaysia. Foresight over periods of low precipitation can enable environmental managers to put appropriate water management programmes in place, and prioritize geographies for sustainable water technology investment. Transport infrastructure firms managing investment and safety risks. Incremental changes in climate and extreme weather events can impact the operation of rail system components and pose safety risks to travellers. When making decisions about where to locate high cost, long lifespan railway infrastructure executives are becoming aware that climate adaptation must form part of the plan. In 2010 National Rail, a UK rail transport provider, launched its own 750,000 ($1.2 million) climate change risk assessment project to examine the risks that predicted flooding, heat waves and storm frequencies will have on its current, and planned rail systems. Verdantix Ltd 2007-2012. Reproduction Prohibited. 4
The Authority On Sustainable Business Verdantix is an independent analyst firm. We provide authoritative data, analysis and advice to help our clients succeed in the world of sustainable business. Through our global primary research and deep domain expertise we provide our clients with strategic advice, revenue generating services, best practice frameworks, industry connections and competitive advantage. A Strategic Research Relationship We work with our clients, located in more than 50 countries around the world, to build long-term, strategic research relationships. We listen to our clients requirements for data, analysis and advice on sustainable business to help them succeed with their strategies, programmes and initiatives. Our Knowledge Service helps clients: Plan effectively for regulations Keep pace with competitive actions Make connections with new customers Launch new propositions Educate colleagues with evidence Quickly shortlist suppliers Save time in strategy development Reduce risk with new initiatives Speed up business case assessments Benchmark performance Deliver financial results Achieve competitive advantage Sustainability Expertise And Industry Connections Our analysts combine rich business experience with specialist sustainability expertise. They leverage privileged access to thousands of sustainability decision makers around the world and robust methodologies to deliver analysis that is independent, fact based, and commercially relevant. Find out more: visit www.verdantix.com Contact us: email research@verdantix.com www.verdantix.com Verdantix Ltd 2007-2012. Reproduction Prohibited. 5