New regulatory requirements, such as the EU’s Sustainable Finance Disclosure Regulation (SFDR), contain several demands on asset managers to access the asset geolocation of their investee companies. This includes the need to measure the percentage of investee companies that are operating close to, or in, biodiversity sensitive or protected areas, and report this data on the SFDR indicator. In addition, asset managers will also need to be able to respond to new deforestation due diligence regulatory requirements introduced in the EU and in the UK.
Asset geolocation of companies and their value chains will enable financial service institutions to assess biodiversity-related risks such as deforestation by overlaying geolocation with satellite photos and sensor data, and even linking it to financial transaction data. These measures are being implemented to reallocate capital away from destroying nature, and to adjust financial risk pricing accordingly. But it requires innovation in data models, as many corporates are not going to openly disclose this data, as it can damage competitiveness, but also due to some forms of data regulation.
Therefore in early 2021, Finance for Biodiversity (F4B), in partnership with the Green Digital Finance Alliance (GDFA), initiated a sprint process to scope out the minimum features of a potential data platform solution, to accelerate the diffusion of biodiversity risk accounting across financial and capital markets.
The sprint process lasted for a period of three months, and engaged 44 institutions in bilateral interviews and/or in community-level discussions through three convenings. This started the platform’s community-building process, and tested whether the financial institutions (FIs) and Environmental, Social & Governance (ESG) analytics providers were interested in new ways to collaborate around asset geolocation data in biodiversity material sectors. The engagement also sought to ensure that any follow-on investments would be responding to market demand, to avoid designing a supply-driven data infrastructure.
The first output of the sprint process and various convenings is today’s Open-Source Biodiversity Data Platform Initiative Technical Scoping Paper. The document outlines the high-level platform architecture design of a new digital platform infrastructure, that would enable the financial and corporate communities to start to shape geolocation data sharing standards through new types of collaboration. The paper also reveals a number of key findings:
You can read the full technical scoping paper here.
F4B and GDFA are making the asset geolocation data platform design available via Open Source in the hope that members of the data, biodiversity, financial and corporate communities will take the next step in maturing the design and building a prototype to test.