The executive director of the Green Digital Finance Alliance—a collaboration between Ant Financial and the UN Environment Programme—recently discussed with Finextra Research the challenges and opportunities presented by new technologies in collecting and utilizing data essential for sustainable investment.
Established in 2017, the Green Digital Finance Alliance aims to provide data sets that assist organizations in developing sustainable financial instruments. Marianne Haahr, reflecting on the organization’s efforts in country mapping and exploring the underlying technologies for environmental initiatives, notes that tools such as machine learning, distributed ledger technology (DLT), and the Internet of Things (IoT) have not yet matured sufficiently for widespread application.
Haahr asserts, "Currently, the data sets available to financial decision-makers largely come from existing databases. Most DLT-driven solutions are still at the proof-of-concept stage and lack scalability. Moreover, IoT’s integration into fintech remains rudimentary."
This early stage of development poses challenges in leveraging data from sources like Earth observations related to deforestation and biodiversity. Companies may hesitate to invest in harnessing such data when the benefits are uncertain. Haahr points out, however, that quality data already exists—collected either by machines or humans—and resides in open-source databases, yet it often fails to be integrated into financial decision-making.
"There is a wealth of available data," she explains, "but fintech innovators are not actively seeking it, and financiers are not demanding it."
As an illustration, she cites agricultural data from multiple European Union countries that specifies phosphate usage in wetlands, demonstrating how much ends up in oceans. "You could easily implement an algorithm that estimates the oceanic biodiversity impact of agricultural credits in specific locations," Haahr elaborates.
Finextra Research recently hosted its second Sustainable Finance co-creation workshop focused on the technologies that can facilitate success in achieving the United Nations Sustainable Development Goals, in partnership with Responsible Risk. For more information, visit here.