· Ed Dowding · Portfolio · 2 min read
SouthPole Transition Risk Model
Climate transition risk assessment platform quantifying financial exposure of corporate portfolios to policy changes, technology shifts, and market disruption under net-zero scenarios.
The Problem
Financial institutions must disclose climate transition risks (TCFD, EU Taxonomy) but lack tools to quantify exposure. “What happens to our automotive portfolio if Europe bans ICE vehicles by 2035?” requires modeling policy scenarios, technology adoption curves, and market share shifts—beyond spreadsheet capacity.
What I Built
A transition risk modeling platform for SouthPole’s enterprise clients:
- Scenario Analysis: Model portfolio exposure under IEA net-zero pathways (1.5°C, 2°C, BAU)
- Sector-Specific Models: Transition curves for energy, transport, heavy industry, agriculture
- Financial Impact Quantification: Estimate revenue loss, stranded assets, and capex requirements
- Regulatory Mapping: Track global climate policies and auto-update models with new regulations
Tech Stack
Python + pandas for risk calculations, Monte Carlo simulations for uncertainty quantification, PostgreSQL time-series data, Plotly for interactive visualizations.
Lessons Learned
Uncertainty Quantification Builds Trust: Initial models gave point estimates (“Your risk is £47M”)—clients didn’t believe it. Adding confidence intervals and sensitivity analysis (“£32-68M depending on policy timing”) enabled decision-making despite uncertainty. Lesson: precision without accuracy is useless; communicate unknowns honestly.
Domain Expertise > Modeling Sophistication: Simple models built with sector experts outperformed complex ML models trained on generic data. Deep industry knowledge (e.g., steel production economics) mattered more than algorithmic sophistication. Lesson: partner with domain experts, don’t try to learn domains via data alone.
Regulatory Deadlines Drive Adoption: Tool usage spiked before TCFD report deadlines (March annually). Building “report generator” features (auto-populate disclosure templates) converted evaluation users to paying customers. Lesson: solve the compliance deadline problem, not just the risk assessment problem.