We live in unprecedented times; wildfires, extreme weather, pandemics, drought and flooding. Excessive greed and a blind drive for increased profits continues to benefit the few and not the many. While social and earth scientists point out the need for change, politicians fight over who and what they should be protecting: short-term thinking corporations or our planet and people. Frustration with this lack of action has led to the emergence of an increasingly more popular movement, spearheaded by the young. A movement which is taking action. Not just through traditional means such as protest; but by using mechanisms within capitalism to drive change. Namely investment.
And geospatial has an important part to play in this new movement.
Socially Conscious Investors
Today, socially conscious investors are carefully screening potential investments. They are making decisions based on how companies perform against certain criteria: Environmental, Social, and Governance (ESG). These are defined as (source: Investopedia):
- Environmental criteria consider how a company performs as a steward of nature.
- Social criteria examine how it manages relationships with employees, suppliers, customers, and the communities where it operates.
- Governance deals with a company’s leadership, executive pay, audits, internal controls, and shareholder rights.
Sustainability is often associated with ESG. That is meeting the needs of the present without compromising the ability of future generations to meet their needs. Sometimes described as the relationship between profits, planet, and people.
Much of the conversations around sustainability and ESG ignore the many challenges: scale, complexity, hard to define, hard to measure, easy to pretend. Corporations are short term (quarterly) profit centres. Today social responsibility is usually only practiced if it does not get in the way of profits. ESG requires companies to find the right balance. For more on this wider conversation see the excellent book by Simon Sinek: The Infinite Game.
ESG has become a buzz term which still lacks teeth. So where are we today?
Companies and investment vehicles are increasingly sharing ESG ratings. That provides a way for investors to gauge social responsibility.
But the current rating system is near to meaningless. In many cases companies self-report their ESG impact. That is in part due to a lack of an agreed-upon common methodology for measuring impact. Self reporting is a non-starter. As is a compromised rating system, see the rating agencies at the heart of the 2008 global financial crisis for an egregious example. Today’s ESG rating-systems lack a unified assessment methodology. The Economist compared the scores of two big ESG-rating systems: Sustainability and Robecosam. They found a lack of correlation between the two systems. As a result there was no consistent difference between the performance of ESG and conventional funds respectively.
Geospatial has an important part to play in helping to provide an accurate measure of corporate social responsibility. But what is geospatial?
Geospatial = Place on Earth
Not unlike ESG, geospatial is a poorly understood term. Often associated with the geographic discipline, geospatial is focused on location. The terms location intelligence (LI) and area-of-interest (AOC) have become popular alternatives.
Geospatial has a long, 50 year history. Its initial associations were with mapping technologies such as Geographic Information Systems (GIS). But technology advances over the last few years have meant geospatial’s appeal has broadened beyond maps, to answering questions about people and places. Two critical advances have helped drive this change:
- First, the evolution of sensor technology. Today we are collecting a tsunami of location-based data, from satellites (see Earth Observation), to aerial, drones, and terrestrial Internet-of-Things (IoT). The data being collected is of many types, and both static and dynamic or real-time in nature.
- Second, artificial intelligence (AI) and machine learning (ML) have matured to a point where they are now being used to process these huge datasets, and are helping to provide new insights.
Since geospatial data and technology is fundamentally used to understand people and places, it is the natural choice to help provide a measure of ESG compliance.
ESG Geospatial Use Cases
A reliable ESG rating system need be current, independently generated and verifiable. That requires a scientifically based, data-driven approach. That data need be a combination of structured and unstructured data, both static and dynamic.
There are many potential measures of ESG compliance, these include carbon footprint, emissions, pollution, clean energy usage, waste disposal, facility operations, land usage, water stress. The use of geospatial-based data in combination with AI and geospatial technology provides a mechanism for measuring these and many other contributory factors.
Looking for examples of how geospatial is helping with ESG measurement and rating, I turned to RS Metrics. They are experts in this field. I asked Desi Stoeva, Product Marketing Manager at RS Metrics, for her thought on ESG. She shared:
ESG means a different thing to everyone – for some corporates that may be the needed stamp of sustainability approval to appease stakeholders and increase their chances of being on the receiving end of various public and private sustainable investments, for rating agencies that may be the ever-evolving field in needs of standardization, and for others it may be a term designating how environmentally conscious a company behaves. Companies which offer ESG data products and PAAS solutions have long coexisted under broad umbrella terms like “geospatial analytics providers” for the ESG sector. But while companies within the sector have remained very aware of their own distinguishing capabilities, the task to categorize, compare, and choose between them has become increasingly difficult. This is one of the first steps to be overcome on the way to industry-wide ESG standardization – understanding what it is that these companies are providing, and what are the fundamental differences in the quality and reliability of those datasets.
RS Metrics have built a tool called ESGSignals. Using earth Observation data, ESGSignals is designed to provide an assessment of ESG. Desi commented:
A product like ESGSignals becomes truly useful when we look at how it can be used to compare the risk profiles of different companies within the same sector. RS Metrics, whose products are often used by large corporates to oversee and benchmark performance against main competitors, often illustrate that through side-by-side comparison case studies that show progress and risk over time.
Mining Use Case
ESGSignals is an interesting product. I wondered about use cases. Desi pointed me at a case study comparing three major global miners – Alcoa Corporation, BHP Group Ltd., and Rio Tinto PLC. Using ESG asset-level methodology, ESGSignals uncovered which company performed best and worst respectively based on different categories.
The report produced makes for fascinating reading (download for free at this link). At facilities across the world, owned by Alcoa, BHP and Rio Tinto, ESGSignals was used to measure the following:
- Air quality
- Water stress
- Fire risk
- CO and NO2 emissions
- Land cover
It was found that the water stress (water resources in a region being insufficient for its needs) scores varied the most among the companies. In terms of overall environmental risks, from lowest to highest, the report found the order to be Alcoa, BHP, Rio Tinto respectively.
ESGSignals can be used both for self assessment, and to provide those grading companies against ESG a new, unbiased tool.
At WhyofThere, we are focused on sharing the value of EO data and analysis. We do that through planning and building sales and marketing content. Learn more about our 8 step process by downloading our eBook.