The executive director of Green Digital Finance Alliance, a partnership between Ant Financial and the UN Environment Programme, has told Finextra Research about the mixed picture in being able to harness new technology to collect and tap into the data required to drive investment for sustainable goals.
Green Digital Finance Alliance was formed in 2017 with a goal of providing data sets to inform companies in the creation of sustainable financial instruments.
From the work the organisation has done around country mapping to explore the underling technologies that can power the ‘greening’ process, Marianne Haahr believes that the use of machine learning, distributed ledger technology (DLT) and Internet of Things (IoT) is still not mature enough across the board to serve this purpose.
"We are still in a world where the data sets that are being presented to financial decision makers is mainly from existing databases,” Haahr says.
“I think most of the DLT-powered solutions, for example, are still at the proof-of-concept level and they are lesser scaled. IoT, from our analysis, and its integration into fintech software is also in the very early days.”
This means, therefore, that data from Earth observation of deforestation, biodiversity and so on, may not be advanced enough for companies to be willing to bear the cost of harnessing it when ultimate benefits are unclear.
However, Haahr claims that data of the necessary quality does exist, either gathered by machines or by humans, sitting in open source databases, but are not being translated into financial decision making.
“I think a lot of the data sets are readily available, but a lot of fintech innovators are not looking for them and financiers are not asking for them.”
Haahr provides the example of fertiliser accounts for each farm across many European Union countries, detailing exactly how much phosphate is being used in each wetland area, thus accounting for how much of that phosphate ends up in ocean.
“You could pretty easily apply a machine algorithm to say, ‘Okay, if you’re doing an agricultural credit in this localisation, your ocean impact on biodeversity is going to be this, this and this,’” Haahr describes.
Finextra Research recently held its second Sustainable Finance co-creation workshop exploring the technology that can enable success in meeting the United Nations’ Sustainable Development Goals in association with Responsible Risk. For more information, click here.