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Spatial Finance: Unlocking competitive advantage amid macro-level uncertainty

Why embracing Spatial Finance technologies can reduce risk and drive competitive advantage

With all the macro chaos at play in the world today, forward-looking companies have identified adaptation and resilience as a new benchmark for business sustainability and a source of long-term competitive advantage.

Many people associate “climate change” primarily with increases in average global temperatures, abnormal weather events, floods, fires, and other catastrophes caused by growing concentrations of greenhouse gases in the atmosphere. But Earth’s systems are far more interconnected and complex than any single metric.

Indeed, these changes are forcing corporations and investors to adopt a longer-term, multi-dimensional lens as macroeconomic, geopolitical, societal, technological, and environmental uncertainties trigger reactive capital expenditures that erode margins and delay growth.

Among our client base of global corporations, we see a profound shift from the singular pursuit of carbon reduction to adaptation and resilience strategies that leverage Spatial Finance capabilities to secure critical infrastructure, physical assets, key commodities, and trade routes.

Managing planetary and economic chaos is core to profit and loss

Firms worldwide are already grappling with climate-related financial hits. Extreme weather events have cost the global economy over $2 trillion over the last decade, and sectors with agrifood supply chains are losing billions annually from ecosystem loss, water scarcity, and changing weather patterns.

These losses often force firms into reactive spending, such as rebuilding infrastructure, relocating operations, or absorbing supply chain disruptions, which ultimately compounds bottom-line impact. Not only are assets not producing, but companies are incurring additional costs to replace them.

The case for adaptation and resilience planning

Amid this uncertainty, a long-term investment and business planning strategy is not just prudent—it’s required. While short-term volatility is inevitable, firms that proactively adapt to the impacts of climate trends can reduce risk and drive competitive advantage by:

Locate, retrofit, and/or relocate facilities and critical infrastructure to avoid or reduce future losses from extreme weather, fires, water stress, lack of energy supply, blackouts and brownouts, ecosystem degradation, and other exogenous threats.

Guard against supply chain disruptions from macroeconomic, geopolitical, policy, and environmental drivers that can lead to stock-out events, recalls, and short- and long-term price volatility.

Understand, quantify, and tell the story about the co-benefits of adaptation and resilience investments beyond carbon (e.g., biodiversity, soil health, water quality, waste and pollution management, etc.).

How Spatial Finance can help

Emerging Spatial Finance technologies can map the interconnections between planetary systems and policy, financial, and economic activity to help companies evaluate the potential risks and returns of investing in adaptation and resilience. These technologies can also help assess the vulnerability of physical assets and supply chains to natural disasters, climate change, geopolitics, and other macro-trends and support the development of financial solutions.

Forward-thinking companies are leveraging Spatial Finance capabilities to increase the effectiveness of scenario planning and quantify the near-term and long-term business value at risk of their operating models and supply chains. They’re asking questions, like:

What happens if we spend millions to acquire and build a new manufacturing facility and there’s no water at that location in 5 years?
What happens if we face shortages in key commodities in 10 years when yields shift in our current sourcing regions?

Companies who answer these kinds of questions and plan accordingly will ultimately have a competitive advantage over those who don’t.

Spatial Finance in action

For example, companies like Robeco use Spatial Finance and advanced modeling to assess the biodiversity exposure risk of company-specific mining assets. BMO uses it to predict possible climate-related issues, such as increased flooding, drought, extreme weather events, or long-term shifts in temperature and precipitation patterns.

Spatial finance_adaptation and resilience

Pink flower emerging from a cactus bed. Photo credit: iStock

The bottom line

Global market, policy, technological, and environmental mega trends are disrupting operations, damaging assets, and altering supply chains. Adaptation and resilience strategies that leverage Spatial Finance capabilities can help corporations navigate this increasingly chaotic business environment while creating long-term competitive advantage.

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