DigFin Green is our series profiling leaders in fintech companies addressing environment, social and governance (ESG) solutions, using technology to power financial services toward sustainable outcomes. Contact us if you would like to be included.
Jason Tu is co-founder and CEO of MioTech, which uses artificial intelligence to solve the sustainability, climate change, and social responsibility challenges faced by financial institutions, corporations and governments.
What problem are you addressing?
Regulators in China and elsewhere are mandating that all asset managers report their ESG-related exposures. Banks need to incorporate green-finance criteria in their reports, most of which has to be quantitative.
ESG-based valuation is about technology, data, and standards. Data is the foundation of everything. Standards must develop to govern its journey throughout the entire process.
Investors are used to being able to make comparisons. That’s why they use benchmarks and ratings agencies: to obtain a simplified signal. But, as our institutional clients know, ESG is about anything other than financial statements. That’s the scope of data we’re talking about: literally thousands of indicators that are different for a given geography.
What does MioTech do?
We think about how to transform data to intelligence. Data and intelligence are two different things, especially when we’re talking about delivering frequent, comprehensive data. Some of it comes from databases, or images, or documents – whatever the source, it’s data, and you need to make sense of it, so it becomes information that informs you.
- Read more:
- ESG now a third of MioTech’s A.I. business
- Asia’s A.I. startups making buy-side inroads
- DigFin Green: Yotam Ariel, Bluefield
We use natural language processing to mine text and engineer it so it can be put into simple words, so the computer can recognize the entity that is being discussed. For example, so a system can understand the main topic of a news article or research report. But that’s just the starting point, because making sense of one piece of data is not knowledge.
What does this look like in practice?
People and companies are interdependent. They have relationships with one another. We are putting everything into a graphics database that makes a record of this interconnectivity.
This allows me to show information to investors or corporate clients in a visually appealing way. It’s not just a piece of code. We offer a dashboard of ratings, indexes and data to help our users generate benchmarks. At the back end, our database is synchronized with our user’s, so we can push information to them daily. I’m talking about terabytes of data: news, event monitoring, on all their portfolio companies or a wish-list of investee companies.
Listed companies are interested in peer comparison, understanding the trends, and having a view on where ESG fund managers are investing. They want to have a private system to monitor suppliers and track their data, so they can engage with global investors or trading partners. We can help investors monitor things like deforestation. This also helps regulators monitor industries better.
What else do we need to know?
Let me tell you why MioTech is doing this in ESG. Greta Thunberg is famous, but there are even more key opinion leaders in Greater China. Greta Thunberg has 4.1 million Facebook followers and 2.9 million likes on Twitter. But in China, there’s an opinion leader named Li Ziqi, who has 40 million followers on Douyin (TikTok’s China platform) and 77 million followers worldwide. If you hashtag themes like “my green life” on TikTok, you will find billions of views.
The social values of Gen Z are different and these will go mainstream, which will propel industry to a new set of financial values. We think of ESG as a new financial-value framework aligned with the future.
Value is driven by passion, but valuation is driven by data. Traditional data focuses on financial statements. But a company’s income statement is a reflection of more than just shareholder value. Jeff Bezos now says shareholder value is no longer the sole objective of corporations. Social value is part of that.
The problem is how to measure social value. We can measure shareholder value using equations and accounting standards, from traditional data sets. But for social value, we must rely on alternative data.
Each geography has its unique factors that contribute to ESG performance. Most of our clients want to build their own standards: factors that generate investment returns, based on the methodologies and philosophies that fund management companies have accumulated, sometimes over decades. We respect that. I can help them categorize data.
A universal standard will never work. But there will always be universal benchmarks. It’s both an art and a science to convert different standards and data points into a simplified signal like a credit rating.