Intercontinental Exchange (ICE) is positioning itself as a full-service ESG data and analytics provider with two recent substantial investments.
The Atlanta, Georgia-based financial infrastructure giant has bought climate risk data provider Urgentem for an undisclosed sum and unveiled its latest geospatial data offering for mortgage and other structured finance investors called ICE ESG Geo-Analyzer.
The investments are the latest in a string of enhancements to the market services provider’s ESG suite of tools and follow the creation of corporate bond climate indices that capture information on the move to net zero carbon emissions by 2050. They will enable ICE to offer sustainability-linked data and analytical tools to investors in everything from equities to fixed income and real estate.
UK-headquartered Urgentem provides financial clients with emissions and climate transition data on more than 30,000 listed companies and privately held securities worldwide. Aligned with the reporting methodologies of the Taskforce for Climate-related Financial Disclosures (TCFD), the Intergovernmental Panel on Climate Change (IPCC) and SBTi, Urgentem focuses on Scope 1, 2 and 3 greenhouse gas emissions.
ICE was drawn in particular to Urgentem’s analytical tools, which include scenario risk analysis, said Anthony Belcher, ICE Head of Sustainable Finance.
“We felt that they had a differentiated offering in the marketplace that would enable us to better support asset managers and also banking clients in the stress testing activities that they’re required to do,” Belcher told ESG Insight.
Data and technology providers are busily developing their climate risk measurement capabilities as financial institutions, corporates and other institutions pay greater attention to the physical threats posed to assets by a warming climate. They are also using such services to calculate the risks associated with the transition to a net-zero carbon economy. Chief among them is the threat that investee companies will be left with stranded assets as they put in place operations and business plans to reduce their carbon footprints.
Among Urgentem’s analytical tools that Belcher said had attracted ICE to the company was a temperature alignment tool that gives investors the ability to examine how closely an investee company is tracking a given temperature target.
However, Belcher said Urgentem’s “secret sauce” analytic is a Scope 3 emissions intensity modelling tool. This will be key to helping ICE clients derive a company’s performance in reducing emissions from its broader value chain. Gathering Scope 3 emissions data is an endeavour likely to pose the biggest stumbling block because it encompasses such a broad range of service providers, most of whom yield little data because they don’t yet fall within the remit of reporting regulations.
“The development of this inference model around Scope 3 emissions helps clients understand supply chain and downstream transition risks or opportunities that they may need to think about as they’re looking through their investments,” Belcher said.
Urgentem will be integrated with ICE’s sustainability data offerings and its datasets will be provided to clients through the company’s existing ESG products.
Among those products also will be ICE ESG Geo-Analyzer, ICE’s latest geospatial data service for investors in mortgage-backed securities and other instruments tied to physical locations like REITs and corporate operations. The service maps thousands of climate and social data fields, drawn from sources including the American Community Survey and other government datasets, to more than 25 million locations and land parcels.
In that way, such data can be linked to mortgages and assets found within specific locations, enabling ICE to provide investors with a detailed view of the likely spatial risks and opportunities associated with their investments.
“We like to say that real estate is not about the patch of dirt that a building sits on, it’s about what that patch of dirt gives you access to in customers or workers or residents,” said John Sheffield, Senior Director for Product Architecture within ICE’s Data Innovation and Impact Team.
One of the unique features of the Geo-Analyzer is that it can calculate the social opportunities of a property beyond its local area into the broader region.
“We model both the property level and that broad rich economic catchment concept,” Sheffield told ESG Insight.
That means investors can tailor their capital allocation strategies according to specific social purposes.
“Our social impact lens looks at the areas where deployment of capital may have some excess social benefit compared to other locations,” he added. “We have investors in our mortgage-backed security product, for example, that are explicitly targeting lower income neighbourhoods because we know there are financial access problems in them… and so they’re investing in those neighbourhoods because they think a dollar can go further in those places.
“It’s not about the risks of those neighbourhoods, it’s about opportunity to use capital to broaden that opportunity.”
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