Australia, like other developed markets, is mandating climate-related reporting for large and medium-sized companies and their greenhouse gas emissions. Its new law goes into effect this January.
That has opened the door for a greentech startup based in Sydney, WollemAI, that has secured seed funding and is now working with its first Australian clients: financial institutions such as banks, insurance companies, asset managers, and superannuation funds.
It provides detailed analytics on land and agriculture-based companies that these financial institutions have exposure to. This enables the banks et al to not only comply with new disclosure and reporting rules, but also help manage their financial exposures.
“Agriculture and farms account for only about two percent of bank loans, but they account for 15 percent or more of lenders’ emissions exposure,” said John Mottram, co-founder of WollemAI.
Automating disclosures
For now most institutions measure their climate risk by sending surveyors to the farmers and agriculture companies in their portfolio. But large lenders or insurers could have exposure to thousands or even tens of thousands of farms and companies in the food value chain.
With the new reporting requirements, there is no way they can get an accurate view of their total exposures if they rely on manual visits. It has to be automated, Mottram says.
WollemAI has launched on the back of the work of data scientists, several of them PhDs, steeped in climate disciplines. Agriculture is a big part of the Australian export industry, but the food system is also a major contributor to greenhouse gasses.
According to The Climate Group, the world’s food system accounts for about a third of global emissions, including production, processing, packaging, distribution, and consumption. It’s also responsible for around 30 percent of global energy consumption.
WollemAI’s data covers Australian companies managing various parts of the food chain, such as cattle, sheep, and wheat. At some point it will add viniculture, Mottram said.
Nitty gritty
Even within these categories, there is huge variation that can impact someone’s financial exposure to these companies. Cows aren’t just cows: a dairy herd in Tasmania has a completely different profile to a cattle herd in Queensland.
WollemAI sources data partly from free public sources, as well as from commercial sources (including satellite imagery) or is given access to specific information about portfolios by its clients.
It runs models to measure carbon footprints per company, as well as predictions based on climate scenarios over the coming 20, 30 or 40 years.
The data accounts for things like herd rotation or farm yields, rainfall and temperature patterns, drought years, and other factors that impact a given farm’s emissions.
It also looks at the farmland’s ability to capture carbon from the forests that may be present, and trends on whether farms are deforesting (clearing land for more crops, for example) or building back their forests.
Predictive AI
Emissions minus carbon capture provide net emission data, along with trends that show if a given farm’s footprint is widening or shrinking, and what it would look like given certain climate scenarios over time.
Mottram says the startup has mapped every hectare of agricultural land in Australia.
This in turn translates into financial projections, to understand the financial vulnerability of a given farm over time due to climate change.
Lenders, insurers and investors can use this information to compare one customer versus another, to help change their pricing or terms. The granularity of the information gives financial firms valuable insights they can share with their customers, to help them decarbonize over time.
Mottram says selling the startup’s software-as-a-service requires engaging with multiple teams within a financial institution. These include people responsible for disclosures, pricing risk, and customer insights. It can also involve the sales people covering a customer, credit officers, sustainability chiefs, and people charged with monitoring the firm’s financial or insured emissions profile.
“Banks and insurers have their existing credit and risk calculators,” Mottram said. “We add climate metrics to that.”
Funding and Asia expansion
WollemAI closed a seed round of an undisclosed amount in December 2023, which allowed it to build its data-science team and platform, and win its first domestic clients. Mottram says the company will look to raise a Series A round in the next 12 months.
The startup is keen to expand to Asia and the United States. Mottram says once the company has worked through the domestic portfolios of its first Australian clients, it will begin to address their Asia portfolios.
WollemAI is also building relationships in Singapore, which is the international financial center for most Australian institutions, and is in early discussions with Singaporean banks too.
He is confident the company can bring a similar level of detail to its analysis of agricultural businesses in other countries. Obtaining the data is not too difficult; the value add is the organization and modeling of the data.
Note from DigFin:
According to the United Nations:
- Three billion people cannot afford a healthy diet. Two billion are overweight or obese. Food systems generate one-third of all greenhouse gas emissions and are responsible for up to 80 percent of biodiversity loss.
- 17 percent of all food available at consumer levels is wasted. This amounts to a big waste of resources used in production, such as land, water, energy and other inputs, and unnecessary greenhouse gas emissions. Reducing food waste can save money, reduce emissions, and help preserve resources for future generations.
- Meat and dairy provide just 18 percent of calories consumed, but use 83 percent of global farmland and are responsible for 60 percent of agriculture’s greenhouse gas emissions.
- A diet that is higher in plant-based foods and lower in animal-based foods has a lower environmental impact due to reduced greenhouse gas emissions, and less energy, land and water use.
