Accounting for climate change
Sara Menker comes by her nightmares honestly. She was born in Ethiopia in 1982, shortly before a two-year famine resulted in the death of up to a million of her compatriots. Menker was too young to have firsthand memories, and her family was solidly middle class—her mother was a seamstress for Ethiopian Airlines, and her father worked in IT for the U.N. Economic Commission for Africa. Still, the famine left a searing impression on Ethiopian society and Menker, and the years that followed were marked by shortages and deprivation. Sugar was rationed, as was gasoline. Driving on Sundays was prohibited.
Her childhood imprinted a profound sense of how easily life can be disrupted by catastrophic forces, and the importance of preparing for looming disaster. That worldview and her commodities-trader background inspired Menker in 2014 to found Gro Intelligence, a startup that uses artificial intelligence and machine learning to help confront two of the biggest challenges faced by humanity: food security and climate change. “It’s about getting ready for disaster,” says Menker. “It’s about hedging for the downside risk.” The timing is excellent for a company focused on forecasting and managing climate disaster. In the U.S. alone last year, there were a record 22 climate-related disasters with losses exceeding $1 billion each. In all, the droughts, cyclones, wildfires and storms combined for a staggering $95 billion in damage. With such headlines fresh in the minds of investors, in January Gro raised $85 million. Backers include prominent tech investors Intel Capital and Africa Internet Ventures (a strategic partnership between TPG Growth and EchoVC). Menker is one of the handful of Black female founders who have the potential to achieve unicorn status, the term applied to startups valued at $1 billion or more.
Gro Intelligence works with thousands of clients, ranging from big food companies like Unilever and Yum! Brands to financial institutions, including BNP Paribas and Wells Fargo, providing them with a host of data and analysis on the global agricultural ecosystem. Gro ingests and analyzes over 650 trillion data points from more than 40,000 sources—crop forecasts, satellite images, topography, reports on precipitation, soil moisture, evapotranspiration—to provide insights and forecasts into 15,000 unique agricultural products. Curious about how the African swine fever impacted the Chinese pork market and its subsequent cascading impact on global commodity prices? Gro has a model. Or how a threatened trucker strike over the cost of diesel fuel could impact sugar prices in Brazil? That too. Gro even created a climate-risk score to assess the future of 300 ski destinations. (Better conditions for southern hemisphere locales such as Patagonia and New Zealand; worse conditions for Japan, interior U.S. and Canada, and parts of the Alps.) The company also works with governments around the world on food-security issues, to help them adequately plan for reserves.
Hedging against the inevitable downside is second nature to Menker. “Basics matter a lot to me because we grew up on restricted basics, the whole country,” she says. That mindset made her well prepared for COVID-19: she opened a closet and discovered that she had “85 rolls of toilet paper.” That impulse instantly kicked in when she was still trading on Wall Street and the stock market crashed in 2008, setting off a global financial crisis. “The first thing I thought of was, I know what the end of the world looks like, and this is not it.” Back then, she called her parents, concerned about their food supply, only to learn that her mother had been quietly buying land in the country and empty shipping containers and keeping them filled with a multiyear supply of grain in case of an emergency.
Now, as corporations around the world are tripping over one another to make ambitious climate pledges, Menker is spending much of her energy laying the foundation for a new class of financial instruments to help companies hedge against climate risk. Regulators are increasingly calling for the introduction of such products. Both the Federal Reserve and the Treasury Department have recently created new senior-level positions to address the risk of climate change to the stability of financial markets. “Climate change poses a major threat to U.S. financial stability, and I believe we must move urgently,” Commodity Futures Trading Commission acting chairman Rostin Behnam said in March, calling for new derivatives that would help price climate-related risks. Gro already has an index that measures the severity of drought that could serve as the basis for one such instrument. Despite a huge appetite for such information, there is a dearth of good data to help investors take potential climate shocks into account.
That’s where Gro comes in. Menker “is creating the first real clean global data set on climate,” says Gary Cohn, a former president of Goldman Sachs, who has a deep background in commodities trading. (Cohn, who was named vice chairman of IBM in January, served a stint as a senior economic adviser to President Trump.) “What Bloomberg did for bonds [aggregating all available information in one place], she is trying to do for climate,” says Cohn. Menker, a consummate networker, recently added Cohn to Gro’s board. He and Menker had a series of socially distant outdoor meetings in New York City during the pandemic. (The company was founded in Nairobi and also has a co-headquarters in New York City.) Cohn says after the two first met, Menker began calling him every other day for advice. “You don’t build a company without being tenacious, without having drive,” he said. “She doesn’t take no for an answer.”
Menker moved to the U.S. to attend Mount Holyoke College in 2000. (She also has an MBA from Columbia.) At first she could not relate to the experiences of African Americans when they talked about racism. Once she’d been in the U.S. a few years, however, her experiences and the double standards she witnessed “beat the Blackness into” her, she says. When she went to Wall Street, after a brief attempt at trying to assimilate left her feeling miserable, “I did not try to fit in: My hair always looked like this. I dressed as I pleased. I brought my culture to work.” Menker is still close to some of her former Morgan Stanley colleagues, and she clearly revels in the bawdy camaraderie of the trading environment. (She recalls the advice a colleague once gave about a trading strategy, “Sell a teeny, lose your weenie.”)
Yet even with her years of training and experience, 2020 was particularly intense for Menker. As a commodities expert, she was early to spot the supply-chain disruption potential of the pandemic, and in February, she again called home, worried about basic provisions. It wasn’t just the pandemic that she was worried about. Ethiopia and other parts of East Africa were under siege from a devastating swarm of locusts, devouring hundreds of thousands of acres of the corn, wheat, sorghum, millet and barley that the region relies on for much of its food. Menker was overcome with painful memories of the impact of the 1980s famine and beset by vivid nightmares filled with dead animals and locusts.
She sent out an impassioned all-staff email to her fellow “Gronies,” and the company swung into action, building 11 models that estimated the total area affected by the spread of the locusts, and yield models for the five crops most affected. The company set up a #locustmodels Slack channel to sync and share information. The Gro team pored over satellite data to monitor and predict the path of the swarm to help figure out where best to deploy scarce pesticides, and worked with the Ethiopian government, on a pro bono basis, on how to ramp up food reserves ahead of a projected increase in global food prices.
Dorothy Shaver, global marketing sustainability lead for Unilever’s largest food brand, Knorr, says she initially partnered with Menker’s “big brain and big data” in 2018, on Knorr’s ambitious plan to first identify and then help develop a market for Future 50 Foods—foods that are nutritious, affordable, tasty, and that have a lower environmental impact than animal-based foods. Menker was a particular advocate for teff, a prized grain in Ethiopia, and also fonio, a quick-growing white rice substitute that grows in sub-Saharan Africa, requiring little water. Shaver calls fonio “a little miracle grain that never embarrasses the cook or the farmer.” After the 50 were selected, Gro analyzed each crop for a variety of factors, including current levels of production and possible impacts on local communities if Knorr’s interest led to a spike in demand.
Menker’s current big concern—“I have new nightmares now”—is rising food inflation as countries including Russia, Ukraine, Argentina and Indonesia raise taxes or limit exports on products like wheat, palm oil and corn to protect domestic supplies. Still, she is fundamentally hopeful. “If you think about so many of the world’s challenges today, it’s about this tension between ecological preservation and economic growth,” she says. “That tension doesn’t need to be there, and I’m hoping that one of the things that we do is find a way to reconcile that.”
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