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
Technology revolution
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.
