Today, as we celebrate the anniversary of its creation, the Future of Sustainable Data Alliance (FoSDA) announces the launch of the Data Council.Continue reading
OMFIF & the Future of Sustainable Data Alliance (FoSDA) hosted an event to celebrate FoSDA’s first anniversary and to discuss how data can be leveraged to enable the achievement of the UN Sustainable Development Goals, Paris Agreement goals, and a sustainable post-Covid recovery.
The event took place from 13:00 to 14:00 CET on February 17th and was centered around key focus areas and actions needed in the year ahead, including the mapping of Environmental, Social and Governance (ESG) data holes and gaps, taxonomies and their mapping to data, and the need for ESG data talent development globally.
Sean Kindey, Co-founder and CEO of Climate Bonds Initiative
Sherry Madera, FoSDA Chair and Chief Industry & Government Affairs Officer at the London Stock Exchange
Fabio Natalucci, Deputy Director of the Monetary and Capital Markets Department at the International Monetary Fund
Verena Ross, ESMA Executive Director & IOSCO Sustainable Finance Task Force co-lead on work stream 3 on CRAs, ESG ratings and ESG data providers
Michael Sheren, Senior Advisor at the Bank of England
Huw van Steenis, Senior Adviser to the CEO and Chair of the Sustainable Finance Steering Committee at UBS
Patricia Torres, Global Head of Sustainable Finance Solutions at Bloomberg
Simon Zadek, Finance for Biodiversity Chair
13.00 CET: Welcome by Sherry Madera, FoSDA Chair & Chief Industry & Government Affairs Officer, LSEG
13.02-13.30 CET: PART 1 – In conversation with moderated by Sherry Madera
ESG data needs in the coming year – supervisory/user perspective
- Verena Ross, ESMA Executive Director & co-lead of the IOSCO STF workstream focused on CRAs, ESG ratings and data providers
- Fabio Natalucci, NGFS co-lead on bridging the data gaps & IMF Deputy Director of the Monetary and Capital Markets Department
- Michael Sheren, Senior Advisor, Bank of England
- Huw van Steenis, Senior Adviser to the CEO, Chair Sustainable Finance Steering Committee, UBS
13.30-13.58 CET: PART 2 – Panel discussion moderated by Danae Kyriakopoulou, Chief Economist and Director of Research at OMFIF
Key actions & focus areas in the year ahead from FoSDA partner perspective
- Sean Kidney, Co-founder and CEO, Climate Bonds Initiative and member of EU Platform on SF
- Simon Zadek, Finance for Biodiversity (F4B) Chair
- Patricia Torres, Global Head of Sustainable Finance Solutions at Bloomberg
13.58 CET: Concluding remarks by Sherry Madera, FoSDA Chair & Chief Industry & Government Affairs Officer, LSEG
Launched in Davos in January 2020 by Refinitiv and the World Economic Forum, the Future of Sustainable Data Alliance (FoSDA) is a multi-member alliance aiming at addressing the climate crisis and sustainability issues from a data perspective and fostering collaboration in financial markets. FoSDA believes that investors need reliable, decision-ready data to confidently invest in sustainable economic activities.
Founding partners of FoSDA include: OMFIF, IIF, ASIFMA, Tsinghua University, GFMA, Climate Bonds Initiative, FinTech4good, Everledger, Oxford University, the Spatial Finance Initiative, Catapult, Finance for Biodiversity, GoImpact and Icebreaker One.
This article was written by Sherry Madera, Chief Industry & Government Affairs Officer at Refinitiv. It was first published as part of the World Economic Forum‘s Davos Agenda.Continue reading
FoSDA has launched its initial recommendations for best data practices for global future transition to a carbon-neutral, sustainable economy.Continue reading
The move towards sustainability is accelerating even as the global economy grapples with the consequences of Covid-19, an OMFIF-Refinitiv report shows
- Climate issues highlight technical gaps in the practical usage of non-financial data
- Granular tracking through technology has improved, but regulators and investors struggle to determine precise attribution e.g. via Scope 3 emissions along global value chains
- New data demands in the wake of the Covid-19 pandemic; regulatory and industry emphasis has rebalanced away from principally environmental issues to a more holistic focus across the three ESG pillars
Socioeconomic resilience in the face of risks such as the pandemic and climate change is moving to the forefront of agendas across the financial sector. Stakeholders are unanimous in the belief that clear and consistent environmental, social and governance data will be critical to realign the financial markets towards sustainable development and help achieve the sustainable development goals. While there has been significant progress in disclosure of information in relation to environmental and societal impacts over the past decade, this field is still young with unrealised potential.
Complementary advances in data capture, sharing and storage technologies, as well as in data analytics, are paving the way for understanding and extracting information for decision-making on non-financial issues. Central banks, supervisors and private firms are engaging in deeper levels of collaboration to develop common disclosure standards and governance frameworks for non-financial data via platforms such as the Central Banks and Supervisors Network for Greening the Financial System.
Future of Sustainable Data Alliance
The Asia Securities Industry and Financial Markets Association (ASIFMA) is a partner of the Future of Sustainable Data Alliance (FOSDA) and is leading theworkstream to understand data challenges for environmental, social, and governance (ESG) and Sustainable Finance in the AsiaPacificregion.
FOSDAseeks to address the following question:
What data do investors and governments need to meet the requirements of regulators, citizens and market demand for sustainable investments and portfolios to 2030?
FOSDA’s key objectives:
- Articulate future ESG data requirementsof investors and governments to accurately integrate ESG data into decision making;
- Promote new technology capabilitiesand data by highlight the key role that new technology and data sets must play in the transition to sustainable development; and
- Address UN Sustainable Development Goals (“SDGs”) related data needsand how to satisfy them for investors wanting to take greater account of SDG-related risks and impacts.
Everledger’s Leanne Kemp and Refinitiv’s Julia Walker set out the urgent case for cross-border data flow, including to channel finance to sustainable investments.
On paper, data governance looks a bit restrictive. Like the traffic police on the information highway, perhaps? Given its importance for driving innovation across the world, an open-ended and unregulated approach to data sharing might sound more effective.
In reality, data governance is more of a traffic calming system, which aims to speed up and proliferate the circulation of information across international borders. Far from stifling progress, data governance helps to establish channels and processes that greatly stimulate the global response to critical challenges such as biodiversity and carbon management, as well as health data security and traceability. For example, since the outbreak of Covid-19, governments around the world have started to realise and admit that restrictions on cross-border data flows not only inhibit scientific and economic progress but actually cost lives.
The urgency for international data governance has grown in recent years for two seemingly conflicting reasons. Firstly, data has become indispensable for business in the digital age. Between 2018 and 2022, global mobile data traffic (about half of all internet data traffic) is expected to grow at a compound annual growth rate of 46 percent to 77.5 exabytes per month.
The technologies of the Fourth Industrial Revolution (4IR) – such as artificial intelligence, blockchain, the Internet of Things (IoT) and cloud computing – are wholly reliant on open access to data. For example, McKinsey has projected that data-driven AI has the potential to deliver additional global economic activity of around USD 13 trillion by 2030.
Meanwhile, the International Data Corporation estimates that the number of connected IoT devices will swell to 41.6 billion by 2025, generating 79.4 zettabytes (ZB) of data. By way of comparison, the entire global datasphere was just 33 ZBs in 2018.
Although the call for data has amplified, countries have become more resistant to cross border data sharing. Research by the OECD in 2018 found that an estimated 200-plus data regulations were being implemented worldwide. The overall level of restrictiveness has doubled over the past decade, according to the European Centre for International Political Economy’s Data Restrictiveness Index. This is partly a misperception that protectionism is better for developing local markets. However, the restrictions are also due to legitimate fears around enforcement, sovereignty, privacy and security of data.
The disruption of the Covid-19 pandemic has swelled the perception of supply chain vulnerability and over-reliance on the rest of the world for data, goods, services, and materials. Countries and firms are looking to become more self-sufficient. However, international trade will remain a critical driver of GDP and business growth. Creating effective policies on cross-border data flows must be a priority for all countries and regions that wish to thrive in the post COVID-19 era.
The World Economic Forum (WEF), alongside a global community of like-minded organisations, has launched a Roadmap for Cross-Border Data Flows, with the aim of “identifying best-practice policies that both promote innovation in data-intensive technologies and enable data collaboration at regional and international levels.”
The WEF sets out six steps to help governments develop robust domestic policies that retain a balance between the benefits and risks of data flows:
- Allow data to flow by default
- Establish a level of data protection
- Prioritise cybersecurity
- Hardwire accountability between nations
- Prioritise connectivity, technical interoperability, data portability and data provenance
- Future-proof the policy environment
The roadmap aims to help countries to streamline requirements to facilitate cross-border data flows and create mechanisms to reduce regulatory overload. Doing so will capitalise on economies of scale, particularly at a regional level, and allow governments to create a friendly policy environment for indigenous and international investment. Investment breeds opportunity, and those countries with a burgeoning technology sector can start to maximise these companies’ opportunities on a global scale, enabling them to develop cutting-edge technologies with global impact as well as experiencing potential knock-on economic and societal benefits.
Close the sustainability data gap
The WEF is not alone in taking a lead on international data governance. The Future of Sustainable Data Alliance – spearheaded by Refinitiv and the WEF – campaigns for data collaboration as a means of channeling more finance to sustainable investments. By helping capital markets to gain a better grasp of sustainability considerations, the alliance of firms such as Everledger, IIF, The University of Oxford, The Climate Bonds Initiative and many others, is working to reduce the current misspend on “inefficient and even environmentally or socially damaging projects and assets.”
The Alliance has three goals:
- To articulate the future data requirements investors and governments need to accurately integrate Environmental, Social and Governance (ESG) data into decision making processes.
- To highlight new technology and data sets that can support a smooth transition to sustainable development.
- To determine data needs and how to satisfy them for investors wanting to take greater account of SDG-related risks and impacts.
Refinitiv’s Global Head of Government & Industry Affairs, Sustainable Finance, Julia Walker recently warned against losing sight of sustainability amid the chaos of the pandemic. “Despite many governments and regulatory bodies developing policies focused on sustainable investment as part of their strategies to meet the UN’s Sustainable Development Goals (SDGs), no country is as yet on track to meet the Goals, and the Covid-19 crisis has moved us even more off track,” she said.
“Therefore, reliable and actionable ESG data is now a critical requirement for effective sustainable investment. Industry needs to identify gaps in existing data sets, plan for future data needs and pinpoint what it is that the investment community needs in order to make better and more impactful investment decisions at scale.”
Mainstreaming climate and environmental data into capital markets in decision-useful form requires standardisation. With greater support and collaboration for alignment and innovation, investors will have the guidance and tools needed to tailor their investments and fulfil their fiduciary duties through better quality and more widely available data on sustainability and performance; superior data analytics through the advent of artificial intelligence and machine learning; and more informed decisions relating to strategic resilience.
Transparency in action
The Data Alliance recognises the value of data transparency in global supply chains, especially for scope 3 emissions. Data provenance (i.e. capturing a secure record of the lifetime history of an object) can become a powerful factor, as it enables transparency throughout the value chain.
The diamond industry provides a telling example of how international data sharing can make a real difference on the ground, both environmentally and socially. Diamonds were traditionally exchanged along opaque supply chains, where data was commonly lost, manipulated, suppressed or destroyed. More recently, mining companies, manufacturers and retailers have taken steps to become more transparent about the provenance of their diamonds, in response to customer demand for green and conflict-free stones, as well as international regulatory efforts.
Blockchain has emerged as a secure technology for flowing data in an interoperable way, based on its ability to document the origin and complete historical record of any type of data in an immutable record. Every instance of data changing hands or going through any type of operation is traceable, unlike the traditional paper trails or even Web 2.0 technologies, which have proven to be vulnerable to malefactors.
Powered by blockchain, transparency becomes a two-way street. Information flows securely upstream, carrying insights about the origin and characteristics of the diamond or gemstone. Eventually, the customer at the head of the chain can make their purchase on the basis of increased knowledge and a more thorough understanding of the provenance and value of the piece. An example of this is the project carried out by Everledger for Chow Tai Fook (one of the world’s largest jewelry retailers) and GIA (the foremost gemological institute in the world, creators of the 4Cs standard for diamond classification), which increased consumer confidence on the jewelry they are purchasing.
Information can also be sent downstream to help all stakeholders make more informed decisions. The overall impact is increased transparency in a complex supply chain, which results in closer adherence to the aims of the UN SDGs, whether related to gender equality, decent work and economic growth, or responsible consumption and production.
In one scenario, any restriction to this data flow could result in a regression of mining and manufacturing standards, which would in turn impact communities, biodiversity and carbon management. At the head of the chain, retailers could face a commercial loss, if consumers lose trust in the provenance of a potential purchase.
Data is therefore a precious asset in its own right, with a financial, human and environmental value. The right governance can help ensure this value is shared for the benefit of all nations.
‘Spatial finance’, where geospatial data is integrated into financial theory and practice, creates a significant opportunity to increase transparency within the financial system for practitioners and data providers alike. How can the finance industry harness the opportunities that geospatial data brings?
Join Refinitiv, The Future of Sustainable Data Alliance and the Spatial Finance Institute for a webinar on Thursday 25 June, where we will discuss new technology and datasets that support a just transition to sustainable development.
Key take-aways include:
- Understanding what spatial finance is, and how geospatial data is collected
- How can AI and geospatial data increase transparency within the financial system?
- Innovation in Earth observation, remote sensing and AI, and how we can apply them across industries
- Practical applications of geospatial data in financial decision making
Date: This webinar is over. You can still access the webinar on-demand through the form on the right. Time: – Location: Complete the form on the right to access the recording Speakers:
- Ben Caldecott, Director, Oxford Sustainable Finance Programme & Associate Professor, University of Oxford
- Christophe Christiaen, Sustainable Finance Lead, Satellite Applications Catapult; Co-Founder, Spatial Finance Initiative
- Susanne Schmitt, Nature and Spatial Finance Lead, World Wide Fund for Nature (WWF-UK)
- Adina Gillespie, Director, Business Development (Europe), GHGSat Inc
- Julia Walker, Global Head of Government and Industry Affairs, Sustainable Finance and Risk, Refinitiv
Director, Oxford Sustainable Finance Programme & Associate Professor
University of Oxford
Dr Ben Caldecott is the founding Director of the Oxford Sustainable Finance Programme. He is an Associate Professor and Senior Research Fellow at the University of Oxford Smith School of Enterprise and the Environment, a Supernumerary Fellow at Oriel College, Oxford, a Visiting Researcher at The Alan Turing Institute, and a Visiting Scholar at Stanford University. Ben is also Senior Advisor to the Chair and CEO of the UK Green Finance Institute and the COP26 Strategy Advisor for Finance based out of the Cabinet Office.
Ben specialises in environment, energy, and sustainability issues and works at the intersection between finance, public policy, and academe, having held senior roles in each domain. Ben has authored and edited a substantial number of publications related to sustainability and is an experienced media commentator and public speaker. He has a number of board and advisory panel appointments, including with the University of Oxford Socially Responsible Investment Review Committee, The Prince of Wales’s Accounting for Sustainability Project, ATLAS Infrastructure Partners Ltd, Impact Lens Ltd, the British Standards Institution, and the Green Alliance.
He has conceived and initiated a number of initiatives related to sustainable finance. Ben founded and co-chairs the Global Research Alliance for Sustainable Finance and Investment (GRASFI), an alliance of global research universities promoting rigorous and impactful academic research on sustainable finance. He established and leads the Sustainable Finance Theme at The Alan Turing Institute and initiated the Spatial Finance Initiative, which aims to mainstream geospatial capabilities enabled by space technology and data science into financial decision-making globally. He co-founded the Commonwealth Climate and Law Initiative (CCLI), which is examining the legal basis for directors and trustees to consider, manage, and report on climate change-related risk, and the circumstances in which they may be liable for failing to do so.
Ben chairs the International Green Finance Coordination Group on behalf of the UK Green Finance Institute and the UK Government. He currently serves on the US Commodity Futures Trading Commission’s Climate-Related Market Risk Subcommittee and the UK Department for International Trade’s Export Guarantee Advisory Council. In his capacity as a Member of the UK Green Finance Taskforce, he chaired its Workstream on Task Force on Climate-related Disclosures (TCFD) Implementation.
Sustainable Finance Lead, Satellite Applications Catapult;
Co-Founder, Spatial Finance Initiative
Christophe Christiaen is the Sustainable Finance Lead at the Satellite Applications Catapult and worked with the Oxford Sustainable Finance Programme to establish the Spatial Finance Initiative. He is responsible for the Catapult’s sustainable finance activities, engaging with sustainable finance stakeholders and promoting the Spatial Finance opportunity across finance and geospatial communities. Christophe started his career in corporate finance for an FMCG multinational, then joined the European Space Agency as a business analyst before joining the Catapult’s Business Strategy team.
tNature and Spatial Finance Lead
World Wide Fund for Nature (WWF-UK)
Susanne is a conservation professional with more than 20 years’ experience at the intersection of the fields of biodiversity, sustainable finance, geo-spatial intelligence, the extractives industries and sustainable natural resource management. She is one of the founders of the WWF-SIGHT tool and approach and until recently headed the WWF-UK Conservation Intelligence team. Following her innovative work on biodiversity and extractives, sustainable finance and conservation intelligence, Susanne is now focusing on developing the exciting new area of Nature and Spatial Finance for WWF. Working closely with other members of WWF-UK’s Sustainable Finance team and the Conservation Intelligence team, she advocates for greater use of geo-spatial and asset-level data and tools to support more sustainable financial decision making that contributes to protecting and restoring nature.
Director, Business Development (Europe)
Adina is responsible for GHGSat business development and expansion in Europe. She also leads on European institutional engagement and strategic partnerships with the European Space Agency and others.
Adina has nearly 20 years’ experience delivering programs and strategic advice in the application of Earth observation technology, including for governments and commercial users. For three years she headed the UK’s operational contribution to the International Charter for Space & Major Disasters, delivering situational awareness for the UK Cabinet Office and civil protection authorities around the world. In this role she also facilitated one of the International Charter’s first ever contributions to a national exercise – “Exercise Watermark” had more than 10,000 players, from blue light emergency responders to the Cabinet Office Briefing Room (COBRA), and remains the largest ever peacetime exercise held in the UK.
During her time with the satellite manufacturer, SSTL, Adina helped commercial customers define their Earth Observation needs for delivering specific services (e.g. infrared imaging for ocean plastic assessment, multispectral imaging for agricultural health assessments, and radar/optical satellite twins for security and defence).
She served 5 years on the EO Advisory Committee to the UK Space Agency and chaired the Industrial Advisory Group on Commercial EO Regulations. She currently serves on the Satellite Applications Catapult Advisory Group, the Regional Catapult Advisory Board, the UK Space Growth Partnership and the Advisory Board to the Spatial Finance Initiative.
Head of Government and Industry Affairs, Refinitiv
Julia is currently the Global Head of Government and Industry Affairs focusing on Sustainable Finance and Risk at Refinitiv. She is also Author/ Editor of ‘Sustainable Development Goals; Harnessing business to achieve the SDGs through Finance, Technology and Law Reform’ published by Wiley Uk, 2019, and contributor to ‘The RegTech Book’.
The Future of Sustainable Data Alliance
Launched at the World Economic Forum Annual Meeting 2020, The Future of Sustainable Data Alliance was formed to ensure investors and governments have the data they need to meet the requirements of regulators, citizens and market demand for sustainable investments and portfolios.
Together with our partners, we aim to achieve the following goals:
- Articulate future data requirements of investors and governments to accurately integrate ESG data into decision making
- Determine data needs and how to satisfy them for investors wanting to take greater account of SDG related risks and impacts
- Promote new capabilities – highlight the key role that new technology and data sets must play in the transition to sustainable development
Biodiversity loss poses one of the biggest risks to financial institutions. However, investors are not aware or have a poor understanding of its impacts. A Future of Sustainable Data Alliance (FoSDA) webinar highlighted biodiversity risks and discussed how they can be better integrated into investment portfolios.
- The World Economic Forum’s 2020 Global Risks Report ranked biodiversity loss as one of the five top risks of the next decade. However, few investors fully understand or are aware of its potential impact on investment portfolios.
- Experts at a FoSDA webinar considered the current and future states of biodiversity risk and analyzed future policy landscape and the industry response.
- In the face of COVID-19, what biodiversity lessons can be learnt for the future?
Much like climate change a few years ago, biodiversity-related risk is a liability that is currently poorly understood by investors and is omitted from most financial institutions’ balance sheets.
It is widely accepted that climate change already has a material impact on investment performance for some sectors and firms, and poses a systemic risk to financial stability.
However, very few financial institutions manage, understand or are even aware of the risks concerning biodiversity.
More complex to measure and spatially differentiated, biodiversity or nature-related risks are systematically mispriced, leading to poor allocation of large pools of capital — especially in land-based sectors — and exposure for the financial sector.
The crisis in biodiversity
Nature has suffered a pandemic-like crisis for over a century.
Human activity has accelerated the rate at which plant and animal species are becoming extinct by a factor of over 100, and paved the way for a growing climate crisis.1 This activity threatens about 25 percent of assessed plant and animal groups, with one million species facing extinction, many within decades.
The scale of change to the natural environment is staggering; 75 percent of global land surface is significantly altered; 66 percent of oceans are experiencing cumulative deterioration; and over 85 percent of wetlands have been lost.
Figure 1: Species extinctions since 1500
WEF 2020 Global Risks Report
Almost three-quarters of the market capitalization of the FTSE 100 was found to be associated with production processes highly dependent on nature.2
This was recognized in the World Economic Forum’s 2020 Global Risks Report (GRR), which ranks biodiversity loss and ecosystem collapse as one of the top five risks in terms of likelihood and impact in the coming 10 years.
The impact and the risk are not specific to agriculture and food systems. Sectors across the entire economy are highly exposed to nature-related risks, primarily through their supply chains.
While the impacts and risks to primary industries that rely on the extraction of natural resources is clear, risks to secondary and tertiary industries are more complex.
Taking six industries as an example — chemicals and materials; aviation, travel and tourism; real estate; mining and metals; supply chain and transport; retail, consumer goods and lifestyle — over 50 percent of the gross added value (GVA) of their supply chains is highly or moderately dependent on, or has an impact on nature.3
Increased incidence of pandemics
Compounding this, COVID-19 demonstrates the staggering scale of nature-related systemic crises. A growing body of evidence suggests that the destruction of nature is increasing the incidence of pandemics related to zoonotic diseases.4
With economic damage set to surpass the 2008 global financial crisis, even small changes to tail-end risks will result in tremendous shifts in the value at risk across the financial system.
Managing risk caused by biodiversity loss
Finally, global policy on biodiversity is expected to tighten, with countries holding themselves accountable to targets and deploying incentives which expose corporations to transition risk.
The outcome of next year’s UN Convention on Biological Diversity (the biodiversity equivalent of the UNFCCC) will be instrumental in setting this ambition.
In parallel, engaged jurisdictions such as the EU are already moving ahead on biodiversity. As governments across the world integrate national targets into domestic policy, environmentally intensive assets may become stranded, risking insolvency.
The financial community has or is likely to have duties to understand and manage these impacts and risks, and disclosure may become mandatory in the future.
Laws and regulation governing environmental liabilities are constantly evolving. As data and technology enables transparency, governments and organizations will have stronger grounds to pursue claims.
The emerging Taskforce for Nature-related Finance Disclosures (TNFD) will create guidelines specific for the financial sector, building pressure on financial institutions to incorporate nature-related risks into internal risk management processes.
Those who act decisively now may not only reduce compliance costs in the future, but also stand to capitalize on new investor demands for environmental resilience.
Watch: Refinitiv Perspectives Live – ESG Investment, a cure all for Asset Management?
Biodiversity-related financial risks
In January 2020, Refinitiv spearheaded the formation of a new multi-member alliance through the launch of the Future of Sustainable Data Alliance (FoSDA) with the World Economic Forum in Davos.
This collaborative body of global influencers will focus on the fact that investors actually need to confidently invest more in sustainable economic activities. It will also aim to accurately inform and increase capital raising and allocation at the scale needed to tackle global societies’ environmental and social challenges.
The FoSDA webinar Biodiversity loss: Why your portfolio is already at risk introduced biodiversity or nature-related financial risks. Having brought together experts from the finance community, it covered (i) the current state of biodiversity; (ii) channels of nature-related risk; (iii) the future evolution of the policy landscape; and (iv) the emerging industry response.
The webinar also acted as the launchpad for a working group of FoSDA members to anticipate future challenges.
1. IPBES (2019): Summary for policymakers of the global assessment report on biodiversity and ecosystem services.
2. Natural Capital Finance Alliance (2018): Exploring Natural Capital Opportunities, Risks and Exposure: A practical guide for financial institutions
3. World Economic Forum (2020): Nature Risk Rising: Why the Crisis Engulfing Nature Matters for Business and the Economy
4. Johnson, C. K. et al. (2020): Global shifts in mammalian population trends reveal key predictors of virus spillover risk’; Jones, K. E. et al. (2008): Global trends in emerging infectious diseases; Olivero, J. et al. (2017): Recent loss of closed forests is associated with Ebola virus disease outbreaks’
Spatial finance offers socio-economic and environmental insights that have the potential to enhance data transparency in the financial system. How could this help create a smoother transition to sustainable development?
- Spatial finance, the integration of geospatial data into financial practice, can help increase transparency within the financial system for practitioners and data providers alike.
- Sustainability related risks can be better managed through the use of geospatial data. It can also assist in the analysis and management of other factors affecting risk and return in different asset classes.
- A primary objective of The Future of Sustainable Data Alliance, an industry partnership co-founded with Refinitiv, is employing new data and technology to support a just transition to sustainable development.
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Today, more geospatial data is being collected than ever before. New generations of small satellites are orbiting our planet, taking high resolution images of every point on Earth, enabling us to observe planetary-scale change on a daily basis. ‘Spatial finance’ is the integration of this geospatial data and analysis into financial theory and practice.
When combined with artificial intelligence (AI) to automatically scan and interpret this vast amount of visual data on the cloud, the true capabilities of spatial finance become apparent.
Combining Earth observation and remote sensing with AI can transform the availability of information in our financial system, and to change how risks, opportunities, and impacts are measured and managed by financial institutions and civil society.
By incorporating geospatial data into financial decision making, spatial finance provides an opportunity to enhance transparency within the financial system for both practitioners and data providers.
Watch: In Conversation with Sherry Madera, Chief of Industry and Government Affairs — #WEF20 Davos
This last decade has seen an unprecedented level of investment and innovation in the space sector. This has been driven by satellite hardware miniaturization, standardization, and reduced launch costs.
Start-ups and entrepreneurs have leveraged these trends to launch more satellites and, in doing so, are collecting huge volumes of data from anywhere on the planet, multiple times per day. Planet, for example, uses satellite imagery to provide users with real-time geospatial insights to support sustainable agriculture, emergency response or natural resource protection.
New sensors are becoming available all the time. Spire employs data to track maritime vessels and airplanes, and understand localized weather patterns, while GHGSat uses its platforms to measure asset-level greenhouse gas emissions. Meanwhile, satellite data collected by ICEYE is used to monitor economic activity day and night.
Advances in data science and AI mean that these huge datasets can now be processed and analyzed in a much more effective way.
Satellite Earth observation data and its derived geospatial services are highly complementary to corporate (non-)financial disclosures, providing insights across a wide range of economic, social, and environmental topics. The data can equally furnish insights where no information is disclosed at all.
What are the advantages of spatial finance?
Spatial finance allows financial markets to more accurately measure and manage sustainability-related risks, as well as enhance a vast range of other factors that affect risk and return in different asset classes.
These technologies will enable governments, regulators, companies, investors, and civil society to tackle a wide variety of global challenges in new ways:
- Asset owners will be able to test portfolios against their investment beliefs
- Asset managers will be empowered to actively engage with investees in a timelier manner
- Corporates will be able to verify internal data collection, compare performance with peers, and understand biodiversity risks and impacts within their supply chains
- Regulators will be able to more accurately assess environmental and social systemic risks within the financial system
- Policymakers will be able to track progress against the Paris agreement
Future of Sustainable Data Alliance
One of the main objectives of the Future of Sustainable Data Alliance, an industry partnership co-founded by Refinitiv, is to highlight new technology and datasets that can support a just transition to sustainable development.
Geospatial data and technologies provide relevant insights across all economic sectors with a direct or indirect link to the physical economy, and are therefore a key focus for the Alliance.
Spatial finance allows us to illuminate sustainability risks and opportunities as never before, qualify new categories of risks, and extend measurement to places not previously possible.
Its practical applications include:
- Biodiversity: Applications range from overlaying corporate operations with protected areas and protected species ranges, to the monitoring of land use impacts driven by corporate operations and supply chains
- Climate: Applications include asset-level physical climate risk exposure, and direct assessments of facility emissions and outputs indicating transition risk exposure
- Emerging markets: Historical satellite data can be used to generate environmental risk profiles underpinning credit or insurance products where no other historical data is available
Satellite data is widely adopted in sectors such as agriculture, extractive industries, logistics and infrastructure, and is increasingly embraced by civil society and the sustainable development ecosystem.
Adoption across the financial sector, however, is lagging.
The Spatial Finance Initiative was set up to mainstream geospatial capabilities enabled into financial decision-making globally, and is proud to be a partner in the Alliance to accelerate reliable, actionable ESG data and related technologies needed to deliver a truly sustainable financial system.