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Sarah Kapnick: Revolutionizing Climate-Related Financial Advisory

In 2004, a young analyst at Goldman Sachs, Sarah Kapnick, recognized a critical intersection between financial growth and climate change—an area surprisingly overlooked in client advisories. Her unique background in theoretical mathematics and geophysical fluid dynamics positioned her to tackle this complex challenge.

Driven by a need to deepen her understanding of climate science, Kapnick’s career trajectory took her to the National Oceanic and Atmospheric Administration (NOAA), where she immersed herself in climate, weather, and oceanic studies. Her efforts culminated in her appointment as NOAA’s chief scientist in 2022, a role that solidified her expertise in applying scientific insights to economic and security frameworks.

Two years later, JPMorgan Chase saw the value in Kapnick’s unique blend of skills and brought her on board—not as the typical chief sustainability officer but as the global head of climate advisory, a role she envisioned nearly two decades earlier.

Just days before the North American hurricane season, Kapnick discussed her role at JPMorgan from her New York office. The conversation highlighted her impact on client strategies concerning climate change.

Diana Olick, CNBC: Why does JPMorgan need you?

Sarah Kapnick, JPMorgan global head of climate advisory: JPMorgan and banks need climate expertise because there is client demand for understanding climate change, understanding how it affects businesses, and understanding how to plan. Clients want to understand how to create frameworks for thinking about climate change, how to think about it strategically, how to think about it in terms of their operations, how to think about it in terms of their diversification and their long-term business plans.

Kapnick’s role is distinct from that of a chief sustainability officer. She brings a profound integration of climate science and business implications to the table, leveraging NOAA’s focus on commerce under the Department of Commerce to translate scientific data into actionable economic insights.

Her expertise extends to practical client interactions, such as advising on the increasing risks of wildfires. She explains the evolution of building codes, the role of predictive modeling, and regulatory changes, equipping clients with the knowledge to make informed decisions.

Diana Olick, CNBC: So are they making investment decisions based on your information?

Sarah Kapnick: Yes, they’re making investment decisions. And they’re making decisions of when to invest because sometimes they have a knowledge of something as it’s starting to evolve. They want to act either early or they want to act as more information is known, but they want to know kind of the whole sphere of what the possibilities are and when information will be known or could be known, and what are the conditions that they will know more information, so they can figure out when they want to act, when that threshold of information is that they need to act.

Kapnick’s non-economist background does not hinder her effectiveness; rather, it enhances her collaborative approach at JPMorgan. She works alongside experts from various sectors to tailor comprehensive solutions that address both risks and opportunities brought about by climate change.

The scaling back of critical data collection by governmental agencies like NOAA and FEMA during the Trump administration posed challenges, yet Kapnick adapted by seeking alternative data sources. This shift has prompted an increasing reliance on private sector data, necessitating a careful evaluation of its credibility.

Diana Olick, CNBC: But the government data was considered the top, irrefutable, best data there was. Now, how do we know, when going to the private sector, that this data is going to be as credible as government data?

Sarah Kapnick: There’s going to be an adjustment period as people figure out what data sets to trust and what not to trust, and what they want to be using. This is a point in time where there is going to be adjustment because something that everyone got used to working with, they now won’t have that. And that is a question that I’m getting from a lot of clients, of what data set should I be looking for? How should I be assessing this problem? Do I build in-house teams now to be able to assess this information that I didn’t have before? And I’m starting to see that occurring across different sectors, where people are increasingly having their own meteorologist, their own climatologist, to be able to help guide them through some of these decisions.

Kapnick concludes, underscoring that climate change is not a distant risk but a current reality impacting financial strategies and operations today. Her pioneering role at JPMorgan not only fulfills her early career vision but also marks a significant evolution in how financial institutions address and integrate climate science into their core operational strategies.