For the past few years, Sara Menker has been pushing one basic idea: that we can use technology and data to help manage the supply shocks and food shortages caused by global warming. It’s an alluring proposition, and one that has driven the growth of her commodities data platform Gro Intelligence. Co-headquartered in New York and Nairobi, with an office in Singapore, the company raised $85 million dollars in venture capital funding in 2021. Gro was also named as one of the TIME100 Most Influential Companies that year.
Menker says her focus on commodities and systemic risks was informed by her childhood growing up in Addis Ababa, Ethiopia. Her family was middle class, but the setting exposed her to people living in extreme poverty, as well as to the way the society dealt with shortages in the aftermath of a devastating famine in the 1980s. She ended up attending college in the U.S., and then worked as a commodities trader for Morgan Stanley, before leaving to start Gro. From there, she says, a focus on climate change was a natural progression. “In building the world's largest agricultural data platform, we ended up building the world's largest climate data platform without even knowing it,” Menker tells TIME.
Menker and Gro have been leaning into climate data. This spring, the company partnered with investment advisor Kepos Capital to launch what they call their Carbon Barometer, a tool meant to help track and compare emissions policies around the world. TIME spoke with Menker in June about the new tool, and the broader trends they’re seeing in a warming world.
This conversation has been condensed and edited for clarity.
Can you explain what the carbon barometer is? How does it work?
The carbon barometer is basically a way of measuring the implied price of carbon emissions at a country level. It's not a barometer to measure the emissions of specific companies, but really looking at essentially the price of CO2 as implied by the policies that have been adopted by [each] country, whether they're incentives to produce more CO2 or reduce CO2. The carbon barometer covers the countries that emit about 80% of global emissions, so it does a pretty good job of getting to [the question of], what is the global price [of carbon], what's the difference between countries, what policy levers exist to get to a higher or lower implied price, and how has the policy trajectory moved over time.
Can you give us an example of how the math works?
It's actually quite simple in some ways. We partnered with Kepos on this. Kepos had spent a lot of time looking at this to [assess] how countries are transitioning. And then what we did as a data company was to take that logic to look at it over time in a systematic way that continuously updates as policies get adopted. Policies are either a [CO2] subsidy or an incentive to reduce [emissions]. We came up with different sorts of policy levers, so everything from actual outright fossil fuel subsidies, to whether a country has a carbon tax or not, [or] an emissions trading system, or fossil fuel taxes. Are there feed-in tariffs? Are there low-carbon fuel standards, and are there renewable portfolio standards? That’s not every lever there is. But these levers certainly represent the biggest chunk of what is actually measurable today by country. And then we created a way to weight those different levers and come up with a [carbon] price per country.
What's interesting is that we talk about the E.U. as if every E.U. country is exactly in the same place in that journey, and one of the things that this barometer highlights is there's actually a pretty decent difference between Spain and France, for example, or Spain and Germany, which has a bigger gap, where the implied carbon price in Spain is $129.47 per ton, whereas the implied price in Germany is $105, and the implied price in Italy is $100, which is a pretty substantial difference between countries that are part of the same policy framework but still have individualized levers that they're still using or not using.
The U.S. numbers were interesting. Your barometer had a small amount of carbon subsidy, but more on the tax side. What are the policies in the U.S. that are creating that weight towards a carbon tax rather than a carbon subsidy?
The reason the U.S. fossil fuel subsidies are really low is because the government is at least not actively spending money in trying to increase fossil fuel production. It is charging taxes at the gas pump for that fuel that you are consuming. The thing that's surprising to me is the global implied price for the 20-odd countries that we have in the barometer is about $18.52 a ton. And the U.S. is hovering at a little lower than the global average, [though] it's meant to be a leader in the space. To see India actually have a slightly higher implied price than the U.S. is one of the more shocking things I saw. I didn't realize India was that far ahead.
What were some of the other surprises in the data?
One was definitely the U.S., and I'm hoping that as the Inflation Reduction Act gets implemented some of that will start to change. Another surprise was the trajectories over time. If you look at a country like Brazil, in 2010, they had a carbon barometer price of essentially $72.77 as a subsidy. And it's now a $9.54 [tax]. Like just the steep curve of change in the right direction is an important thing to look at. You see a country like Brazil and you see a really positive story. And then you see a country like Australia, and you see a lot of volatility because you've seen policy changes based on the political candidates actually reflected in the price.
Let's talk about Gro. You spoke with the Leadership Brief about two years ago. What has changed since then?
What hasn't changed? So when I first talked with TIME, we were just starting to step out into the world as a player at a bigger scale in terms of influencing public policy and having our data be used by governments for really big consequential decisions. The start of that journey was during COVID. It was at a time when people were very focused on food security, and we were really the one data provider that could provide that depth of knowledge for every part of the world. We were squarely focused on just the agricultural data side of it. One big change is we're much bigger and we've made a much bigger impact, not just in the commercial world, but actually in the public sector world as well.
The second [change] has actually been climate. In building the world's largest agricultural data platform, we ended up building the world's largest climate data platform without even knowing it. So what has changed a lot has been the application of our climate data to so many more industries outside of just agriculture. It's still the same product, but it's making impacts in areas where two and a half years ago it felt like it could be possible, but it was not material. Whereas now it's very real. [Clients] use our climate indices on the physical climate side, so measuring different climate risks like droughts and floods, [and] applying [them] to many more industries outside of the agricultural industry.
Is there one industry that's using your data now that seems like it might have been least likely to do so two years ago?
We can now use our climate data to trade equities and fixed income instruments. That was not anywhere in the realm of possibility [two years ago]. We sold our data to financial institutions originally for them to trade commodities using our data. They were not using it to trade things like equities, fixed income securities, or macroeconomic policies, where some of our indices become predictive of things like a country’s actual inflation as opposed to just food inflation.
What are the biggest trends you're watching now? You’ve spoken a lot about food inflation—are there other long term trends that you're looking at ?
I think [the trends are] a continuation of what we've seen, and I think it is really linked to climate. When we talk about climate change and a warming planet, we think of it like it's warming everywhere, not that it's actually just becoming significantly more volatile. We just came out of three years of la Niña, which meant that there was basically excessive droughts in major agricultural regions like the U.S. and South America. And we're about to go into El Niño, which is now going to make it more difficult [to grow crops] in Australia, Malaysia, and Indonesia. You're seeing these weird cycles happening much faster. The disruptions are just more persistent.
Food inflation is [also] still a major issue in most parts of the world. Most people track prices on a dollar basis, not a local currency basis. But when you look at the price of products in many parts of the world on a local currency basis, which is how people live and eat, inflation is still a huge problem that we need to tackle. So it's still very top of mind for us as a company to keep highlighting it. But I would say climate is going to continue to present really complicated challenges, not just for the agriculture industry, but really for industry as a whole, for anything from power production to being able to mine the minerals we need for electric vehicles. There are these deep interlinkages that are becoming clearer.
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