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How is space data being applied in fintech to address climate change?

Sehrish Alikhan

Sehrish Alikhan

Reporter, Finextra

Addressing climate change and achieving net zero targets has become increasingly critical in the fintech sector. Corporations are being held responsible by regulators, stakeholders, and clients to actively work towards sustainability and be transparent in the environmental impact of their operations. With the advent of artificial intelligence (AI) and data analytics technology, new modalities and solutions are emerging with which institutions can monitor and measure carbon emissions and log sustainable data. Among these new solutions is satellite and geo-spatial data, which is recovered from satellites and is being used to shape sustainable initiatives.

As climate change persists and the planet is plunges further into disaster, advancements in climate science and the availability of new data from space and satellites can address the climate issues and spur the climate finance industry to action. The new mines of data made available through space and satellite data can inform and guide future sustainable initiatives, whilst monitoring how we are currently impacting the world around us and learning how to limit that impact.

Recognising the potential that space technology has to inform climate action, the UK government announced in September 2021 that they would be working with the UN Office for Outer Space Affairs to engage more climate action informed by space data.

A recent investment report shows that earth observation is a key area of investment in the UK.  The report details a rise in space investors since 2015, and predicts that the space sector will see 11% of growth in the next year. As the market for investment in space is on the rise, the research indicates that more movement in the space industry will facilitate further technology-driven initiatives to enable sustainability and decarbonise economies.

What can satellite data do for businesses?

Data collected from satellites can be used to create climate models in numerous ways, the European Space Agency (ESA) reported that climate observations can be made to make predictions for the future environmental status and provide guidance on actions to reduce carbon emissions. The ESA has currently put into place an initiative, the Climate Modelling User Group, that will focus on bolstering Earth observation to fully embrace the potential of satellite data in the fight against climate change.

There are over 5000 satellites orbiting the globe as of 2022, able to monitor illegal mining and fishing and record the impact of greenhouse gases. Satellites launched by the ESA such as Copernicus contain imaging monitors that survey air pollutants all over the globe and report findings every day. Scientists that have assessed this data have made it available to policymakers, allowing companies to track how methane emissions are also damaging the planet.

Satellite data can provide industries and businesses with climate risk assessments that analyse the emissions and impact of their operations. Trisha Saxena, investor at Seraphim Space, points out that satellite data can offer crucial information to inform company climate risk portfolios.

She states: “Satellite data can also be used to enhance risk disclosures such as the Task Force on Climate-Related Financial Disclosures (TCFD) – which aim to make firms’ climate-related disclosures more consistent. For example, Moody’s, a credit rating agency, uses satellite data analytics to assess companies’ impact on the climate and biodiversity, thus allowing them to assign ESG ratings to these companies and inform investors about which companies are most exposed to natural capital risk. Satellites can provide reliable, frequent data about the world, which can help such institutions understand their climate risks better.”

Mauro Cozzi, CEO and co-founder of Emitwise, highlights how financial institutions can use satellite data in their climate-related reporting which they are required to submit by the TCFD. Cozzi cites that businesses can identify exposure to nature-related risk such as weather conditions and changes in the geographical terrain.

He adds: “Additionally, satellite data has been employed by auditors and regulators to monitor the emissions of highly emitting industries like oil and gas. By cross-referencing reported figures with observable data from space, for instance, in relation to methane emissions, they can ensure compliance and accuracy in emission reporting.”

Innovation in space can reveal previously hidden risks and inform decision-making processes when it comes to investment, insurance, sustainable reporting, and net zero goals.

Saxena observes that space data has already encouraged sustainable operations in the agricultural sector, allowing farmers to work sustainably and protect their farm using data collected by space technology.

Citing Immarsat, a satellite communications company, Saxena explains that satellite technology could accelerate the net zero transition by ten years and reduce global emissions by 18%.  She adds that the use of GPS and imagery data can reduce emissions in measures of tonnes by planning out aviation and maritime to keep clear of congested ports and enhance air traffic control.

She furthers: “Another way satellite technology can help solve climate change is through the Internet of Things (IoT), whereby a series of monitoring devices are connected to satellites to provide real-time information. For example, if there is an irrigation issue on a farm - detected through a satellite-connected sensor - the water could be turned off remotely while the problem is resolved. Furthermore, satellites used to monitor crops and farmland can be used to reduce the use of chemicals, inform optimal harvesting timings, and thus increase yield, ensuring the world can be fed sustainably.”

Jon Trask, CEO of Dimitra, a blockchain-based enterprise system for AgTech, described how geospatial data is being used to support farmers in working sustainably, speaking specifically on how the team is supporting female cocoa farmers in Honduras with the local organization Red Departamental de Mujeres Chiquimultecas (REDMUCH).

“Our mission is to help small farmers in Honduras, and around the world, with technology,” says Trask, ”and we use revolutionary technologies in order to do that, such as blockchain and AI, satellites and drones, and mobile devices. We have built four applications, each serving a unique purpose. Regarding REDMUCH, we are using an application that we created called Connected Farmer, which is a mobile app that essentially reads real-time farm-input data. Forming a geofence around the farm, we run satellite reports to help us assess farming conditions and performance. We can look back 15 years of how the farm’s performed, at different crops they have developed, moisture management, and the impact of climate and weather.

“Farmers then input real-time data from crops on their farms into the Connected Farmer app alongside info such as how they fertilize their land and about their soil. As they grow their crop, we make recommendations throughout the growing season on how they can better farm the land. We also advise farmers after harvest so they can prepare for the next season. Post-harvest, we also use blockchain in order to provide documentation to farmers so that they can get a premium price for their product on export, and to track-and-trace their products easily and hassle-free.

“We use our Deforestation Platform extensively in relevant countries such as Brazil to help farmers comply with new EU regulation. The regulation, which will take effect in 2024, means farmers globally now face strict frameworks if they wish to export to the EU’s lucrative market. Our platform is built around offering farmers simple track-and-trace elements and irrefutable evidence, stored on the blockchain, that they are meeting these deforestation regulations.”

Space data can also identify the most efficient and impactful actions that can reduce carbon emissions and enable businesses to meet their net zero targets.

Discussing how space data can contribute to solving climate change, Giancarlo Raschio, senior manager for sustainable finance and innovation at Gold Standard comments on the emergence of new technologies that collect spatial data – multi-spectral and hyper-spectral satellites, radar, drones, and proximal sensors: “These techs are the inputs for algorithms that generate information about data. As such, better and more detailed data can enable better decisions and greater understanding of the impacts of an intervention. Therefore, I believe the role of spatial data in reducing climate change impacts and aiding companies on net-zero goals is focused on setting baselines and conducting measurement, reporting, and verification (MRV).”

How can space technology contribute to climate action in the financial services sector?

Space data provides ample opportunity for data collection and innovation that can be implemented in the sustainable and climate finance sectors. As financial services becomes more digitised, personalised, efficient – it also holds the responsibility to become more sustainable. Fintech plays a role in planning how to process satellite data, analyse, and share it through different methods. Using data collected through space, financial institutions can strategise on how to finance sustainable initiatives and the net zero transition.

Nicola Anderson, CEO of Fintech Scotland cites a few fintechs that are focusing on space technology: "Space intelligence is using AI and Earth observational data to expand understanding of lesser developed green initiatives such as the carbon market and carbon offsets. Snugg, a fintech, is designed to support homeowners in addressing energy efficiency and moving towards net zero, and is looking to invest in satellite technology to advise that."

She continues that there is an increase in space tech investment coming from the UK and Scotland in particular, and that Fintech Scotland has recently launched an accelerator programme to gain more insight into the intersection of the space sector and financial services sector.

Anderson explains: “We are seeing Earth observational data present opportunity for the financial services sector to deepen their understanding around emissions, the net zero agenda, the investment market, and the housing market. The financial services industry is starting to really embrace the regulatory requirements that they now need to meet from a reporting perspective on ESG. The data that space innovation can offer will give them confidence in some of the things that they need to report against.”

Cozzi outlines how satellite data can make a significant difference in addressing climate change in several ways: detecting greenhouse gas emissions which can inform carbon reduction protocols, detecting physical nature-related risks such as rising sea levels, extreme weather, droughts and wildfires, and how geographical terrain will need to be adapted when exposed. Imaging systems and geo-spatial data acquired by satellites can enable speedy responses to natural emergencies and mitigation efforts.

Cozzi concludes: “There is a strong prediction for growth in both the space tech industry and investments in space data. As awareness of the importance of climate change mitigation and sustainable practices continues to rise, there will be an increasing demand for space data and satellite technologies that contribute valuable insights to address climate challenges. This demand will likely drive innovation in the space tech sector and attract more investment, leading to advancements in space data analytics, satellite technologies, and applications related to climate and sustainability initiatives.”

Comments: (1)

Richard Peers
Richard Peers - ResponsibleRisk Ltd - London 01 November, 2023, 14:16Be the first to give this comment the thumbs up 0 likes

Big fan of this, thanks Sehrish