Cleantech startups use satellite data to monitor climate risks such as the Delhi smog or the Amazon fires, which are seen as a danger to people, businesses and investor portfolios.  (Pradeep Gaur/Mint)
Cleantech startups use satellite data to monitor climate risks such as the Delhi smog or the Amazon fires, which are seen as a danger to people, businesses and investor portfolios. (Pradeep Gaur/Mint)

Green, social impact influence where investors put their dollars

  • Climate risk is no longer seen as a blip in the distant future, but a clear danger to people, businesses and investors’ portfolios
  • India is emerging as a test bed for such initiatives, given the magnitude of environmental and social problems here coupled with tech talent

BENGALURU : Every year, Harvard Business Review (HBR) publishes a list of the world’s 100 top-performing CEOs. Amazon’s Jeff Bezos topped the list in 2014 and has been on it every year—until now.

This year, HBR raised the weightage for environmental, social and governance (ESG) to 30%. That’s why Bezos dropped off the list—Amazon scores low on ESG because of working conditions, data security and anti-trust issues. HBR added ESG parameters to financial performance back in 2015 but upped its importance this year.

Cynics might scoff at such a list being nothing more than notional. But companies are starting to feel the effect of a bad showing on ESG where it hurts the most. Businesses perceived as “clean, green and good" are attracting dollars from investors as well as consumers, especially millennials for whom the future looks bleak if they don’t act.

A report published last month by the Thinking Ahead Institute, surveying the 500 largest asset managers in the world, shows that assets with ESG mandates rose by 23.3 percent in 2018, whereas overall assets under management (AUM) were down 3 percent from the previous year. Socially responsible investments amounted to $30.7 trillion in 2018, rising 34 percent in two years, according to a biennial report of the Global Sustainable Investment Alliance.

GATHERING MOMENTUM

“The trend is clear: high net worth families, foundations, and institutional investors like pension funds, insurance companies, and sovereign wealth funds are aligning investments to their values or those of their stakeholders," says Sushant Kumar, principal at Omidyar Network India, who handles “responsible tech investments".

Impact investing, which is more specifically directed at creating a social and environmental impact along with financial returns, rose to $228 billion in 2018, growing 13 percent annually over five years, according to an annual survey of the Global Impact Investing Network.

The momentum picked up in India as well in 2015 when impact investments crossed $1 billion, according to a McKinsey report. It continued the following year as average deal value doubled. “Large multilateral funds now have a presence in India. They’re the next level cheque writers beyond early stage investing," points out Kumar.

This augurs well for a new generation of entrepreneurs willing to tackle the world’s most complex challenges, such as pollution and climate change.

The US SIF (Sustainable Investment Forum) reports that “climate change/carbon" had risen to become the top ESG criterion for money managers.

Along with the move to responsible investing comes a need for robust data to pinpoint polluters and prevent “impact washing" - where businesses apply the label without making a real impact. Tech entrepreneurs are jumping in to tackle this problem too.

India is emerging as a test bed for such initiatives, given the magnitude of environmental and social problems here coupled with tech talent. Gurugram-based startup Blue Sky Analytics, founded by IIT and Yale alumnus Abhilasha Purwar last year, is analysing satellite imagery to offer “high fidelity" pollution data to governments, enterprises and citizens.

“You want to see bright minds tackling non-trivial problems," says Shobhit Shukla, chief revenue officer and co-founder of location-based data analytics company Near, who is an early investor in Blue Sky Analytics. “Near is an example of using geospatial data for marketing and business decision-making. Now Blue Sky is a very different take on how you can use such data from satellite imagery."

NEW SOURCES OF DATA

What makes it possible to analyse terabytes of satellite image data to derive actionable insights is new age tech, thanks to advances in computer vision, machine learning and artificial intelligence. New commercial sources of satellite data, like Planet’s ring of nano satellites, are adding to the possibilities.

For example, Santa Fe-based Descartes Labs crunches satellite data for predictions on agriculture yields and natural resources; San Francisco-based SpaceKnow uses it to monitor global economic activity for clients; and Geofinancial Analytics helps hedge funds and asset managers “move beyond company disclosures and news to scientific observations."

Climate risk is no longer seen as a blip in the distant future, but a clear danger to people, businesses and investors’ portfolios.

Pollution and its health hazards worsen by the year. What’s changing is the resolve to push back with money.

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