Integrating Climate Change Risk into Management Strategy: Gaia Vision's Challenge

When considering sustainability in business, incorporating natural disaster risks into management strategy has become a global trend. Even in Japan, where earthquakes and torrential rains frequently occur, its importance is undeniable.

How should companies confront the intensifying risks of climate change? What are the latest technologies enabling risk assessment? Takashi Arima of DentsuInc .'s Sustainability Consulting Office spoke with Yuki Kita and Tetsu Demoto of Gaia Vision, a startup providing disaster risk analysis services related to climate change to companies and others.

※This article is re-edited based on content originally published in Transformation SHOWCASE.

 

A Startup Born at the University of Tokyo

Arima: In recent years, we've increasingly encountered or heard about meteorological disasters and extreme weather events like typhoons, torrential rains, resulting floods, and heatwaves, either directly or through news reports. Gaia Vision is a startup gaining attention for providing solutions that leverage cutting-edge technology to mitigate natural disaster risks caused by climate change. Could you first tell us about Gaia Vision's specific business activities and the technologies you are researching and developing?

Demoto: We are a startup originating from the University of Tokyo, providing risk analysis platforms using climate change and flood simulation technology to companies and other entities. Ultimately, our goal is to suppress disaster risks caused by climate change as much as possible. For example, while many companies are currently striving to reduce CO₂ emissions, from a climate science perspective, temperatures will inevitably rise unless emissions reach zero. During this period, large-scale natural disasters remain possible, making efforts to reduce risks crucial.

Recently, there has been a growing international trend in business to incorporate the impacts of climate change into corporate management strategies. In 2015, the Financial Stability Board (FSB), composed of financial ministries and central banks from major economies, established the Task Force on Climate-related Financial Disclosures (TCFD). This initiative recommends that companies disclose information about climate-related risks and strategies. In other words, companies are expected to manage climate change risks themselves. However, it can be difficult for individual companies to assess risks and implement effective countermeasures on their own. We develop easy-to-use risk assessment tools and provide support for developing countermeasures and disclosures, leveraging our specialized expertise.

Satoru Demoto, Co-founder of Gaia Vision. Conducted research on climate change at the Center for Climate System Research, Atmosphere and Ocean Research Institute, University of Tokyo, earning a Master of Science degree. Engaged in strategic consulting related to cutting-edge technologies such as AI at PwC Consulting and ADL (Arthur D. Little Japan). Subsequently, served as Executive Officer and CSO at Araya, managing AI and neurotech-related businesses, and involved in strategic planning and business development. Former Youngest Certified Weather Forecaster

Arima: What kind of technology do you use for risk assessment?

Demoto: Our core technology is the world's most advanced flood simulation technology developed at the University of Tokyo. It predicts with high precision and speed how far and to what extent areas will be flooded across a wide region in the event of a large-scale flood. The difference from municipal hazard maps is our ability to assess future risks. We can quantitatively show how much flood damage areas will expand and how risks will increase as global warming progresses. Another major difference is our global coverage, not just Japan, enabling analysis of overseas facilities like factories.

Our "Financial Impact Assessment" function converts risks into monetary values. By inputting data like factory production output and asset values, it calculates risks on a monetary basis. This enables risk assessment that also considers how critical a facility is to the company. For executives, hearing "flood damage is X meters deep" is less impactful than being told "damage costs tens of billions of yen."

Arima: I believe "personalization" is a crucial element in advancing sustainability. Quantifying risks in monetary terms helps corporate executives truly internalize climate change as their own concern. This approach seems significant not only for risk assessment but also for fostering a shift in awareness regarding climate change.

Connecting Finance, Business, and Climate Change

Arima: Regarding climate data, I understand Mr. Kita originally researched this at the University of Tokyo. What motivated you to transition from research to founding a company?

Kita: I was born in 1992 and am now 31. During my elementary and junior high school years, global warming and environmental destruction began emerging as major issues. Even as a child, I thought, "This isn't good." Later, as natural disasters became more frequent in Japan too, a strong desire grew within me to "prevent disasters and protect beautiful nature," leading me to pursue disaster research. However, due to Japan's frequent typhoons and other natural disasters, climate research was already quite advanced. I wanted to engage in more practical disaster countermeasures than research, so I joined a private company and worked on natural disaster risk analysis.

During this time, I learned that overseas, researchers were actively contributing to business using financialization rules like the TCFD. This inspired me to contribute to society using my own knowledge and research findings, leading me to launch Gaia Vision in September 2021. To incorporate the latest data and insights into our products, I continue my research today as a Project Researcher at the University of Tokyo's Institute of Industrial Science.

Yuki Kita, Representative Director of Gaia Vision, Specially Appointed Researcher at the Institute of Industrial Science, University of Tokyo. He conducted research on bomb cyclones and waves at the University of Tokyo's Graduate School of Frontier Sciences, earning his PhD in Environmental Science in 2020. After working at MS&AD InterRisk Research Institute, Inc., where he was involved in natural disaster risk analysis for insurance underwriting and the development of disaster information systems, he founded Gaia Vision. At the university, he researched climate change and flooding.

Arima: Mr. Demoto, you became a certified weather forecaster at age 14, the youngest ever at the time. After graduating university, you worked in strategic consulting and managed an AI startup. What led you to join Gaia Vision?

Demoto: While Kitano and I were in different labs and years at university, I also originally researched climate change at Tokyo University and had always wanted to pursue related business opportunities. Around the time I sensed climate change was becoming a market trend with significant business impact through initiatives like TCFD, I learned about Kitano's startup and we decided to collaborate.

Based on my experience as both a researcher and a consultant, I believe the role of connecting finance, business, and climate change is extremely important. For instance, discussions about financial flows occur at international conferences like the UNFCCC COP. I often think that incorporating insights from climate science experts could lead to better mechanisms. Having deep expertise in both finance/business and climate change holds significant value.

Looking ahead 5 to 10 years

Arima: In my interactions with various client companies, I sense that while the term "sustainability" is becoming more widespread, not as many people perceive "climate change" – which is at the heart of environmental issues – as something directly relevant to corporate management. How do you two feel about this?

Takashi Arima: Planner and Consultant , Dentsu Inc. Sustainability Consulting Office. After joining Dentsu Digital Inc., he was assigned to the CX/BX division as a service designer, primarily working on projects for the telecommunications, mobility, and beverage industries. Later, he was assigned to a telecommunications company as a consultant responsible for SNS and email newsletter distribution. In 2023, he joined Dentsu Inc.'s Sustainability Consulting Office. Primarily working as a planner/consultant, he focuses on corporate and business transformation starting from sustainability.

Kita: Since the SDGs (Sustainable Development Goals) were established at the UN Summit in 2015, "sustainability" has been a global topic of discussion. However, I believe it's only recently that the critical question of how to balance economic growth with environmental protection has truly permeated the business world. Still, environmental issues like climate change often feel secondary to economic rationality and capitalism. Climate change and human rights issues are actually worsening, so I believe the business world needs to engage more sincerely and address these problems.

Demoto: We often speak with people from sustainability-related departments, and it seems quite common for them to feel barriers within their own companies, especially with other departments. The so-called "business units" typically have short-term KPIs, which can make finding common ground difficult. However, as one company representative noted, "Actually, the sustainability team is the one thinking most about the business from a long-term perspective." This is absolutely true. Within a corporate organization, it's crucial to balance activities that focus not just on the immediate future, but also on the next 5 or 10 years. That's precisely why I want to reiterate that initiatives prioritizing sustainability, including climate change, are extremely important for companies.

Arima: What kinds of inquiries does Gaia Vision actually receive from companies?

Demoto: We get many inquiries about information disclosure related to corporate activities, such as TCFD , CDP scores (CDP is an NGO that collects, analyzes, and evaluates environmental activity information from major global companies), and TNFD (Taskforce on Nature-related Financial Disclosures), often referred to as the biodiversity equivalent of TCFD. We also receive many inquiries about preparing for flood risk.

Kita: It seems awareness is gradually spreading among companies that they must disclose information and continuously update their climate change initiatives. Since explanations lack credibility without reliable data sources, this is leading to the use of our services.

Updating public awareness

Arima: As Japan is often called a "disaster-prone nation," it experiences significantly more earthquakes and other disasters compared to many other countries. Recently, we've also felt an increase in natural disasters caused by abnormal weather, like typhoons, torrential rains, and resulting floods. Would you say Japan is experiencing the impacts of climate change more strongly than other nations?

Kita: Regarding the frequency of heavy rain, in some areas it has doubled compared to 30 or 40 years ago. However, Japan has robust flood control measures like levees and dams, so compared to other countries, the damage costs and number of people affected haven't increased dramatically. On the other hand, floods are occurring frequently around the world. Recently, the flood damage in New York was severe. With insufficient flood countermeasures in place, infrastructure suffered major damage, including subway systems being submerged.

Arima: It's true that in Japan, rivers don't overflow every time a typhoon hits. Japan is relatively resilient against natural disasters, isn't it?

Kita: Japan has historically experienced many natural disasters, so it has accumulated observational and research data and produced many excellent researchers. The country has over 1,300 observation systems like AMeDAS, and the government manages meteorological disaster risk. In these aspects, I believe Japan is at a world-class level. Also, while this relates to research in the US, Dr. Yoshio Manabe, who won the 2021 Nobel Prize in Physics, used numerical models to reproduce the mechanism of global warming, demonstrating how rising carbon dioxide concentrations contribute to it.

Arima: On the other hand, what are the challenges facing Japan's climate change initiatives and disaster prevention measures?

Kita: Precisely because disaster prevention measures are so robust, there seems to be a correspondingly low awareness among citizens about taking individual action or fundamentally changing their behavior.

Additionally, compared to Europe especially, there's the challenge of not effectively leveraging valuable research data for business or policy. While there are examples of local governments utilizing it for agriculture, I believe the data could be applied across many more fields like logistics, finance, and renewable energy. We need initiatives to channel this valuable accumulated data back into society through business applications.

Arima: What specific initiatives are needed to repurpose observation data and research findings for business?

Demoto: I see two major challenges that need to be addressed: rule-making and funding. For example, in Europe, some countries require risk assessments considering future climate change when undertaking real estate development. Rules protecting the environment are established, creating a structure where necessity drives the creation of business opportunities.

Another challenge is that the scale of funding for developing platforms to implement research findings into society is smaller in Japan compared to Europe and the US. I think we also need to update the awareness of the entire population to enable investment in these areas.

Arima: Regarding communicating the importance of utilizing climate science data for business to society, Dentsu Inc. might be able to assist in some way.

Kita: When it comes to raising awareness about climate change, the narrative often leans negative, like "If we don't stop global warming, we're in big trouble." But instead, we want to communicate in a positive way – showing the progress made in tackling environmental issues and how society benefits as a result.