With a cannot-be-missed deadline approaching for a VIP client, Karl Mallon’s team at physical risk analytics provider XDI found a mistake in data they’d already prepared to deliver. The debate inside the company: quietly ship it and hope no one noticed, or blow the deadline, admit the error, and redo it — knowing they might lose the client.
They chose to redo it. It’s the kind of decision Karl says gets harder to make the more money is riding on the answer, but it’s Exhibit A in his argument supporting private sector climate analytics against claims of “climate risk washing” raised by two academics with the University of Exeter.
Karl is CEO of the Climate Risk Group and founder of XDI (Cross Dependency Initiative), which he started in 2007, long before other vendors muscled into the space.
In this week's episode, he tackles the academics’ argument that climate risk modeling belongs in the public sector, because private firms are structurally incentivized to soften bad news for paying clients. Karl pushes back hard, while conceding a long-running problem: he thinks the real failure is that regulators reward companies for having a go at disclosure without requiring them to report anything uncomfortable, so firms report that everything’s fine — and nobody checks.
That’s part of why XDI is working with Resilience ARC to publish its own risk views on thousands of companies unprompted, then inviting those companies to challenge with their own data, an attempt to do independently what ratings agencies like Moody’s or S&P Global do for credit risk: mark the market’s homework instead of taking self-reported numbers at face value.
The other half of the conversation is about where XDI is trying to take the industry: past risk scoring and into adaptation. Karl wants physical risk to borrow the concept of a transition plan from decarbonization, where a company’s net-zero pathway matters more than its emissions today. He argues resilience should work the same way: not just what a company's climate exposure is now, but what it’s doing about it.
Karl rounds off the conversation with his musings on the future of a climate risk analytics market roiled by geopolitics, running low on capital, and about to start a price war that could prove ruinous for some.
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Louie Woodall
Editor
