Competitors have become collaborators in a project that has created free tools to help financial institutions and other organisations gauge the sustainability performance of companies and assets.
Banks, including BNP Paribas, and asset managers, such as Allianz, have contributed to the OS-Climate project, which aims to increase the easy availability of technology to help with ESG decision-making. The programme has so far created three tools that help assess the physical risks posed to real assets by climate change, a portfolio management tool that calculates impact on global temperatures, and a scenario analysis tool focused on climate transitions.
OS Climate is part of the Linux Foundation, which encourages companies, academics and other institutions to communally collaborate on technological projects for the good of broader markets. Participants in this open source community can freely take the tools and incorporate them in their own operational processes, or they can develop the coding further and share the new iterations with fellow members.
OS Climate has extended that philosophy to ESG in the belief that by cooperating on developing the tools to measure environmental and social impact, solutions can be found faster and more efficiently, said OS Climate Project Leader Michael Tiemann. That, in turn, will help eliminate greenwashing and promote more trust in the ESG industry.
“When you look at the challenges of the ESG space, its complexity, its urgency, and you look at how important that truth and that trust and that technology is, this provides people with a way to elevate the baseline of technology capabilities, which then allows them to decide how they want to build on top of that strong baseline,” Tiemann told ESG Insight.
Free Data
OS Climate is among the largest efforts yet to democratise the technology and data needed for financial institutions to make better informed ESG decisions. Earlier this year, ESG Book was created by asset manager and data vendor Arabesque, providing a free resource of sustainability data on thousands of public companies. It has the backing of international banks including HSBC and Deutsche Bank.
Also, Refinitiv offers ESG Company Scores for more than 10,000 firms on its website and S&P Global began providing free access to its Global ESG Scores on 9,200 companies. Free access to ESG data is also ingrained in European regulations via the final draft of its Regulator Technical Standards for sustainability reporting.
As well as financial institutions, OS Climate is also supported by big players in other industries, such as aeroplane maker Airbus. Participating companies have chosen to put aside their commercial rivalries in the name of improving markets and the environment, said OS Climate CEO and Founder Truman Semans.
“At the very core of this tool is developing something that will be available for communities, national governments, agencies that are planning disaster relief, economic development, institutions like the World Bank and other development finance institutions, that urgently need to be taking account of how climate and weather and related impacts are changing,” Semans told ESG Insight.
Of the tools already created, BNP Paribas contributed to the physical vulnerability, risk and resilience calculator, which enables the study of real assets’ risk to rising temperatures, flood and other severe events linked to global warming.
Allianz helped build the portfolio alignment tool, which was based on a methodology devised by former Bank of England Governor Marc Carney as part of what became the Glasgow Financial Alliance for Net-Zero, a coalition of major financial institutions committed to accelerating a carbon-free economy.
That tool helps investors assess a company’s decarbonisation progress by calculating the likely impact on global temperatures if its activities were applied globally. So far, the model is focused on a handful of industrial sectors and OS Climate hopes that it can be further developed by the community to provide financial institutions with a 360-degree view of the economy.
The third tool was extended from a model Airbus had been trying to construct with Capgemini in order to build more airframes that can help decarbonise the aviation industry. The task was too big even for the plane maker and so it has contributed the equivalent of 15 full-time technicians and the know-how it has accrued to OS Climate in the hope that the open source community can properly develop the model.
Potential Realised
All the tools are available on Jupyter Notebooks, openly available web-based computing platforms that contain the coding and the means to share new iterations with other users. The tools are useable, and Truman said some companies had already begun to incorporate them into their own processes. But he said there is more work to be done on them and he hopes that will happen now the coding has been put to the open source community.
“If one has the necessary data internally or through subscriptions, the outputs of those tools can be integrated into investment decisions, into big decisions, into engagement decisions,” he said. Tiemann said open source has created a ‘pre-competitive’ layer of technology for interested parties to seize and help ‘take us out of the dark ages’ in which all technology is proprietary.
Only then can the possibilities seen in ESG be fully realised.
“What will it really take to make ESG work? We need truth. We need trust. We need technology,” said Tiemann. “We need all the things that the open source software and open data movements can provide, and to connect that with the most important asset owners, asset managers and financial institutions in this space. That is what OS Climate is trying to do.”
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