Cervest has made the ESGFinTech100. The definitive list includes the world’s most innovative businesses offering tech solutions to address ESG challenges or opportunities faced by financial institutions. These challenges and opportunities range in areas of climate risk, sustainability, social responsibility and governance.
Given the huge rise in appetite for ESG tech solutions in financial services, the ESGFinTech100 was produced to identify the 100 most innovative tech companies every financial institution needs to know about as they consider and develop their ESG assessment and performance improvement strategies.
“Banks that adopt ESG across their business model will be better positioned to engage and retain clients over the coming years. This can turn into a competitive advantage – and a source of new revenue streams.”
The standout companies were chosen by a panel of industry experts and analysts who reviewed a study of over 500 ESG tech companies undertaken by FinTech Global, a data and research firm. The solution providers making the final list were recognized for their innovative use of technology to solve a significant industry problem or their impact on ESG imperatives and/or sustainability enhancements generated for clients.
Climate risk and financial institutions
Globally, climate change puts financial assets worth an estimated USD2.5 trillion at risk. The pressure is on financial institutions to act on climate-related financial risks and integrate climate adaptation into their ESG strategies and operations. However, there is a vast gap between being aware and actually being prepared for climate risk.
The European Central Bank recently introduced a Climate Risk Stress Test to examine whether European banks understand and are prepared to act on climate risk. The results go on to highlight a host of pitfalls in the financial sector, such as 60% of the participating banks (41 European banks) do not yet have a climate risk stress testing framework in place.
Realizing the catastrophic impact unabated climate change will have on its economy, the UK is amongst one of the first countries to take regulatory action by making reporting on climate-related financial risk mandatory. With the US likely to follow suit, it’s no longer the case for if ESG teams within financial institutions will have to report on their climate-related financial risk, but when.
Climate intelligent financial institutions
The world has made it clear: climate risk is financial risk. Yet, climate data is complex and fragmented, and therefore difficult to process by an ESG team thoroughly in-house.
Partha Bose, Head of Capital Markets at Cervest says: “The only way for institutions to accurately and completely assess their financial risk exposure to climate hazards, is to integrate best in class, asset-level climate intelligence, that includes spatial and multi-hazard correlations, into the existing suite of modeling and stress testing solutions.
To reach this level of accuracy regulators must encourage banks to adopt climate intelligent technology. Banks and other financial institutions should also ask their clients for more detailed asset-level climate risk disclosure, in the same way that they would expect them to disclose other potential sources of risk in order to obtain loans or access capital.
This will lead to climate risk being incorporated in decision workflows at a transaction level, and will help banks develop robust climate stress testing frameworks, leading to more rigorous and relevant bottom-up stress tests that can be performed on a regular basis.”
This decision-useful climate intelligence is only available through Cervest’s product, EarthScan™.
David Sobotka, former Global Head of Fixed Income at Merrill Lynch and member of Cervest’s Climate Intelligence Council devoted his whole career to managing risk, including financial risks and those related to physical assets. He says: “Over that time, huge advances were made to the tools that measure and manage risk, much of it due to the ability to access and process large amounts of data. This enabled us to better predict outcomes and estimate potential downsides. Today, a new class of risk has sprung up: climate risk. I am drawn to the efforts of Cervest to bring that same analytical capability to measure Climate Value at Risk (CVAR) for owners of physical assets.”
We’re delighted to be recognized in the ESGFinTech100. Helping financial institutions build a more resilient future for our planet marks another milestone in Cervest’s mission-led journey to empower everyone to adapt with climate change.
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