Climate risk digital solutions market to skyrocket to $4 billion by 2027, says report

Rick Steves

Such high market growth expectations are attracting increasing interest from major firms, including McKinsey, Conning, BlackRock, Moody’s, and S&P Global, whch have acquired or launched climate resilience solutions in the past two years.

ESG offerings

The global surge in investment in climate risk will grow the size of the climate risk digital solutions market to $4 billion by 2027 compared to just $880 million in 2021, according to a new report from independent research and advisory firm Verdantix.

The report also found that software and consultant packages offering business performance climate risk analysis is the fastest-growing sector and is predicted to hit over $1 billion.

Such high market growth expectations are attracting increasing interest from major firms, including McKinsey, Conning, BlackRock, Moody’s, and S&P Global, whch have acquired or launched climate resilience solutions in the past two years.

The rise of climate risk digital solutions stems from the increasing severity of extreme weather events, as global losses in 2021 are estimated at $280 billion, but also due to increasing regulation. Task Force on Climate-Related Financial Disclosures (TCFD)- aligned regulations are being implemented globally with European Union regulation taking effect in 2024 and US rules expected to follow.

Climate risk digital solutions enable companies to plan for and protect against losses and help firms demonstrate to insurers that they know their risk which is valuable considering the rising cost of property insurance premiums which are predicted to rise 22% by 2040.

Verdantix was founded in 2019 to provide high quality research and advice to its clients. THe firm has offices in London and Boston.

Environment, Health and Safety (EHS) software market also up

Earlier this year, the firm found that private equity investor interest is building in the fast-growing Environment, Health and Safety (EHS) software market with more than 50 transactions in the past two years. The market for EHS software is expected to grow from $1.6 billion in 2022 to around $2.7 billion by 2027.

Key differentiators for firms in the sector include the use of Artificial Intelligence (AI) and automation, with ESG and sustainability seen as major areas for expansion and development in what is a largely mature EHS software market. The past 24 months have already seen a tsunami of ESG-aligned product releases, acquisitions, and partnerships, driven by huge revenue potential.

The report, Green Quadrant: EHS Software 2023, outlines how buyers increasingly seek all-in-one integrated solutions, including EHS, ESG and operational risk management. It describes seven firms – Benchmark ESG, Cority, Enablon, Intelex, SAI360, Sphera and VelocityEHS – as offering robust all-round EHS management capabilities, making them ideally placed to react to this change in buyer demand.

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