Next generation of solutions - English

How a company called Arabesque is powering sustainable finance through technology

By The European1.03.2022Economics, Europe, Media

Sustainable investing is a global mega-trend that has reshaped capital markets over recent years. With the European Union seeking to set the rules of the game for ESG through the implementation of the Taxonomy, the huge flows of money currently directed towards sustainability strategies are only going to increase.

Digitial markets need liberal competition. Photo: Shutterstock

But as the ESG market has grown, so too has the landscape become ever more fragmented, with a lack of cohesion between hundreds of rating systems that are now in place. With investors increasingly demanding comparable and transparent ESG data, and AI-based tools capable of generating highly customized sustainability products, interest has turned towards providers that are ushering in the next generation of solutions. One in particular, the technology company Arabesque, is making a mark.

For the EU and the new government in Berlin, sustainability has become a mainstream issue. As it has for millions of investors worldwide who want to invest their money well, but with a clear conscience. Across global markets, the term ‘ESG’, which stands for ‘Environment, Social, Governance’, has become commonplace, with sustainable investment the hot topic of the past decade. An emerging problem, however, is that with such a broad range of ratings and data providers now available, with low correlation between vendors and opaque scores, investors have found it increasingly hard to find reliable, comparable, and transparent data to support their investment requirements, as well as the required technology to process the mountains of data available into customized, alpha-generating investment products.

Based in Frankfurt and London, with offices worldwide, the technology company Arabesque specializes in solving precisely these problems by supporting capital markets through its sustainability and AI solutions. With a mission to leverage technology to power sustainable finance, Arabesque’s tools are increasingly being used across markets as the global green transition gathers pace. The company counts many of the world’s top 100 largest financial organizations as clients, collectively managing over $120 trillion in assets between them. From Commerzbank to Swiss Life, Allianz to DWS and Citi, Arabesque’s solutions are now used by major institutions across the financial ecosystem.

Established in 2013 following a management buyout from Barclays Bank, Arabesque was developed with cooperation from leading professors at Stanford, Oxford, Cambridge, and the Fraunhofer Society, as well as the Jet Propulsion Lab at NASA. Led by founder and CEO, Omar Selim, who is the subject of a Harvard Business School case study on the company, Arabesque is built on the three major disruptors of modern finance – sustainability, AI, and digital assets – with its name, ‘Arabesque’, representing the geometry of patterns in nature and the visualization of the company’s AI technology. Georg Kell, the founding Executive Director of the UN Global Compact, and who first coined the term ‘ESG’ in a 2004 report called ‘Who Cares Wins’, serves as Chairman of the company, with prominent supporters also including Philipp Rösler, former German Minister of Economics and Technology.

For Selim, Kell and the Arabesque team, the mission of the company is rooted in an evidence-based approach to sustainability. From the billions of individual data that Arabesque processes on a daily basis, they have recognized over the years that economic value creation is closely linked to companies that demonstrate environmental stewardship, social inclusion, and sound governance. As Arabesque states on its website, ‘Sustainability factors are more than just additional financial considerations for investors – they form the basis for successful markets”.

Today, Arabesque is widely known in London, Frankfurt, Singapore and across the financial marketplace for its cutting-edge ESG data solutions and AI investment technology. In December 2021, the company launched ESG Book, a new central source for digitized corporate sustainability information, backed by a global alliance of organizations including the International Finance Corporation (IFC), Global Reporting Initiative, Bridgewater Associates, HSBC, Deutsche Bank, HKEX, Allianz and Swiss Re. Through a digital interface, ESG Book makes sustainability data widely available and comparable, allows companies to be custodians of their own data, provides framework-neutral ESG data in real-time, and promotes transparency. By directly connecting corporates and investors in the disclosure of sustainability information, and by making that data free as a public good, ESG Book is seen as a game changer.

Arabesque also recently launched the world’s first fully AI-powered portfolio manager, AutoCIO, which enables investors to build hyper-customised investment strategies tailored to individual goals and sustainability values, at a lower cost. Powered by Arabesque’s proprietary AI Engine, the technology is capable of generating millions of bespoke strategies, with AI used forecast stock performance of over 25,000 equities daily. With AutoCIO having last year received a grant from the Monetary Authority of Singapore (MAS) to research further into how AI can analyse and model raw data for better decision-making, Arabesque believe that the platform is the latest evolution and natural next step for the investment industry, from active to passive and now, to autonomous asset management.

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