The Story of Arbol: Building the Future of Climate Risk Management

The Story of Arbol: Building the Future of Climate Risk Management

Growing up among India’s national parks, surrounded by tea gardens and forests, Sid Jha developed an early appreciation for the environment. In a recent episode of Category Visionaries, he shared how this childhood experience laid the foundation for what would become Arbol, a company transforming climate risk management.

From Wall Street to Climate Innovation

After graduating from Harvard with degrees in math and statistics, Sid followed a well-trodden path to Wall Street. His fascination with commodities trading stemmed from its connection to the physical world: “When you think about commodities, it’s oil and gas, corn and beans, livestock, metals. I love the variety of it. I love the physical aspect of it. It’s not just an abstract set of numbers. It is so tied to the real world, how we get food on our plates, how we get gasoline in our cars.”

But after 15 years in the industry, Sid saw an opportunity to connect the worlds of finance and climate risk. The decision to leave Wall Street wasn’t easy: “It was very difficult. I had spent about 15 years building a career… and then to abandon all of that and to start something new is very difficult.”

The $3,000 Beginning

Arbol’s early days tested this conviction. “I remember it taking almost six months to arrange the first transaction, which was a grand total of $3,000 in gross revenue,” Sid recalls. The team worked without salaries for over a year, focused on building the foundation for something bigger.

Their persistence paid off. From that $3,000 first transaction in 2019, Arbol grew to “about a couple of million” in 2020, then $70 million in 2021, and closed 2022 with $171 million in gross revenue.

Building a New Asset Class

The company’s rapid growth came from identifying a critical market gap. “You have $200 billion of annual climate losses now and over half of it is uncovered by insurance,” Sid explains. Traditional insurance models, with their subjective assessments and lengthy payout processes, weren’t serving businesses effectively.

Arbol’s solution uses data to automate payouts. As Sid describes: “If it’s too hot for 20 days in a row, here’s your payment. No ambiguity. The payout is one week after the data comes out and you’re done.”

The Future of Climate Risk Management

Looking ahead, Sid sees Arbol creating “a whole new asset class at a scale that has not been done before.” The platform connects businesses needing climate insurance with capital providers seeking uncorrelated investment opportunities.

The applications span industries: “Think of what climate risk they are sitting on. So if suddenly there’s a heat wave, they have to supply their customers, homes and businesses who are now running a lot more air conditioning, but they only generate a certain amount of power.”

For power plants facing heat waves, wind farms dealing with low wind speeds, or agricultural businesses worried about crop failures, Arbol provides a new way to manage climate risk. As climate-related losses continue to grow, the company is positioned to play a crucial role in helping businesses adapt to an increasingly unpredictable climate future.

From his childhood among India’s national parks to building a platform that’s revolutionizing climate risk management, Sid’s journey shows how deep industry knowledge, patient platform building, and a focus on solving real-world problems can create transformative companies.