Re2 Capital climate risk venture launched by Nephila alumni

Re2 Capital has been launched by three well-known former employees of ILS manager Nephila Capital, with a mission to structure innovative climate risk transfer and financing solutions that can connect private investment capital and risk capacity to climate-linked opportunities.

Re2 Capital is the brainchild of three alumni of Nephila Climate, the weather and climate focused insurance-linked securities (ILS) investment management operation of Markel-owned ILS giant Nephila Capital.

Richard Oduntan, the former CEO of Nephila Climate, has joined forces with Ariane West, the former Director of Structured Finance at Nephila Climate, and Dan Stilwell, former Head of Origination for Nephila Climate.

The trio are all co-founders of Re2 Capital and the business will represent a continuation and an evolution of their thinking on and activities in structuring climate related risks and connecting them with institutional sources of capital and risk capacity.

Oduntan takes on the CEO role at Re2 Capital, while West is COO and Head of Structured Finance and Stilwell is Head of Business Development.

Re2 Capital’s stated mission is to “break down barriers between financial and insurance market approaches to help solve our greatest collective challenge.”

With climate and weather risk still a relatively underinsured class of business, while both are deeply embedded in portfolios of physical and monetary assets, the opportunity to develop and structure climate risk transfer related solutions, while tapping into institutional capital’s appetite for relatively uncorrelated returns from risk assets, continues to be a significant opportunity.

Risk capital is needed to support the world’s climate transition and Re2 Capital will target opportunities that enable financing for the green economy, enhance global societal resilience and support sustainability in the economy.

Given the scale of the investment required to adapt to climate change and to reach the stated net zero targets of countries, industries and corporations, Re2 Capital sees “an enormous opportunity for risk transfer and risk financing.”

Developed as a climate risk platform, Re2 Capital aims to help “create a climate resilient future and accelerate the transition to a low-carbon economy by bringing to market innovative risk transfer and climate finance products.”

Climate resilience, decarbonisation and sustainability initiatives can all be supported by risk transfer, financing and capacity and Re2 Capital will be focused in these areas, among others.

Re2 Capital aims to achieve its targets through the origination, structuring, and management of portfolios of financial and risk products that will enable investment capital and risk capacity to give meaningful support to initiatives to implement green infrastructure and climate adaptation projects.

For investors, the offering is clear, a climate and net zero-aligned risk transfer and financing business that aims to deliver target risk-adjusted returns to its backers, as well as measurable environmental and social impact.

The co-founders explain, “We are building the world’s first dedicated platform for marshalling diverse sources of risk capital to drive climate action, efficiently deploying risk capacity and investment capital to decarbonize the world’s energy supply and address climate resilience priorities.”

Solutions in the renewable energy space will be a key focus, a sector which the trio of co-founders had all worked in at Nephila, given that managers’ ground-breaking work in the space, leveraging third-party capital to back weather risk transfer and renewable energy financing solutions.

As a result, products offered by Re2 Capital will include alternative offtake solutions backed by investor capital and risk capacity partners for green infrastructure development, as well as proxy generation power purchase agreements, tolling agreements, and other forms of revenue hedging for renewable energy generation.

In addition, Re2 Capital will aim to leverage climate and weather hedging structures to support climate resilience goals in sectors such as agriculture, water security, green fuels, electric vehicles, forestry, and more.

As the world adapts to climate change and learns to better respond to climate risk, embedding risk transfer and financing into many of our operations and processes, connecting capital with an appetite for climate risk exposure, that also has an environmental, social and governance (ESG) mandate, will be a significant opportunity.

Re2 Capital has the expertise and industry pedigree to tackle this growth segment effectively, blurring lines between insurance and structured financing, to deliver products that are effective climate risk solutions, while offering attractive returns to investors and capital partners.