Environment  |  UW Notebook

September 25, 2024

Q&A: UW Climate Risk Lab focuses on financial impacts of climate change

The University of Washington Climate Risk Lab, based in the Foster School of Business, brings together experts in finance, climate data, and business to research climate-related financial risk.

Executive director Phillip Bruner, who is also a professor of practice of sustainable finance, and other representatives from the lab, are participating this week in Climate Week NYC. This annual event brings together “business leaders, political change-makers, local decision-makers and civil society representatives” to promote global climate action.

UW News talked with Dr. Bruner about Climate Week NYC, developing the UW Climate Risk Lab in 2022 and how climate change is related to financial risk.

How will you be participating in Climate Week NYC?

Phillip Bruner: Thanks to the visionary leadership of our Dean, Frank Hodge, the University of Washington is a founding partner of the New York Climate Exchange, which is New York State’s flagship climate innovation program. The UW Climate Risk Lab aims to provide access to leading climate risk research to the New York Climate Exchange network, as well as other financial sector stakeholders, which will significantly help broaden our impact beyond Washington state.

For us, this week will be about presenting our work and research to-date, discussing our data and the open-source software tools we’re developing with early funding, and explaining how we plan to fulfill our mission — which is to make the best climate risk data analysis and tools available to all.

Interestingly, our presentation will take place on Governor’s Island, which has been slated by the State of New York to be developed, in part, into a significant climate innovation hub.

Can you describe the focus of the UW Climate Risk Lab?

PB: We’re building a research and innovation platform that will advance our understanding of how climate change impacts financial risk analysis, and our understanding of financial risk at the level of assets and supply chains. For example, we’re looking very closely at what happens when extreme weather events become more frequent, more extreme and more costly — and how those extreme weather events can affect valuations and premiums for Washington state businesses and residents.

We’re looking at the Washington state grid right now, and that will be our focus for about the next six months. How will the increased intensity and frequency of wildfires affect the power grid in Washington? How will that, in turn, affect various interest groups and stakeholder communities? Our MSBA students led a capstone project at the end of last quarter looking at the effect wildfires can have on power reliability and this in turn can present added risks to data center operations in Washington state.

We’re looking to put a number around the question: How much is climate change going to cost Washington state utilities over the next 10 years? What does that mean for local communities? What does that mean for asset valuations? What does that mean for the insurance sector? What does that mean for the long-term strategic planning of the energy sector in Washington state? Of course, there are lots of additional questions we could ask, but we’re starting with a focus on just costs.

It’s likely to come as a surprise to some people that the Business School is home to a climate lab. Is this a relatively new idea?

We’re one of the first. There are a couple of universities that have a climate risk focus nationwide, but it’s a small number. Folks really need to understand the financial implications of climate change to make decisions and to protect communities and local businesses. Climate-related financial risks need to be tackled by building more resilient, sustainable energy systems.

It makes sense to me and to the Foster School to have this kind of research in the finance department, because businesses and corporations are mainly focused on what is material to their business. So, while climate change is a big global problem that everyone in the world needs to come together to solve, our focus is local and it’s on: What can we do in our backyard?

We’re thinking globally and acting locally regarding the problem of global climate change. Numbers don’t lie. Forty years ago, the U.S. experienced a billion-dollar disaster every four months. Today, we experience a billion-dollar disaster every three weeks. Climate change carries significant financial risks to businesses and communities, and we need to develop open-source tools and transparent resources to help all decision-makers adapt rapidly.

Beyond the Washington state power grid, what are some other issues the lab could focus on in the future?

PB: We’re very concerned about the growth of artificial intelligence and how data centers are used. AI could be useful for coming up with new ideas to solve climate change, but right now there’s almost a frenzy around large tech companies trying to build more and more data centers. There’s a direct relationship between the growth of AI, consumption in general and power consumption. So outside of wildfire and other weather-related risk to Washington state utilities, we are also looking at the risk to data centers and weather-related threats to critical infrastructure.

Emergency services is another area where we would like to focus on the future — power supply to hospitals, power supply to transportation networks. We also want to look at the disproportionate impact of power outages on historically marginalized communities. So how power outages disproportionately affect low-income communities and people living in rural versus urban constituencies. Not everyone’s affected the same way.

For more information, contact Bruner at pdbruner@uw.edu.

Tag(s): Climate Risk Lab • Foster School of Business • Phillip Bruner

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