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Welcome to In-Orbit, the fortnightly podcast exploring how technology from space is empowering a better world.
Dallas Campbell
Hello and welcome to In Orbit, the podcast exploring how technology from space is empowering a better world, brought to you by the Satellite Applications Catapult. I'm your host, Dallas Campbell, and in this series, we'll be in conversation with some the finest minds in the country exploring all the ways that the UK is using space to make huge differences to our everyday lives as well as gaining a better understanding of its role in shaping and sustaining our planet for the future. In today's episode, we will be discussing sustainable finance and how alongside data insights from space this initiative can be a key tool for promoting sustainable development and combating climate change. I'm joined in the studio by Daniel Dias, he's the founder of the company Route2. We have Christophe Christiaen, who's the head of the Spatial Finance Initiative at the Oxford Sustainable Finance Group, and Cristian Rossi, Geospatial Science Lead at the Satellite Applications Catapult. Now then, what do we mean when we talk about sustainable finance? Well it's complicated but basically sustainable finance refers to financial activities that take into account environmental, social and governance factors in investment decision making. So promoting sustainable economic growth while minimising negative impacts on society and the environment. Satellite imagery can be a very powerful tool for supporting sustainable finance decisions, providing valuable information about the environmental impact of investment activities, helping investors identify potential risks and opportunities, and monitoring the impact of sustainable finance initiatives over time. Last series we talked about sustainable finance as an emerging industry. 18 months on we're exploring how the demand for data has grown and what new technologies can be exploited and what's next on our journey. Welcome Daniel, Christophe, Cristian, it's lovely to have you in the room. Daniel's looking very serious. It's an important topic. It is an important topic, isn't it? Well, it's interesting, we've done this podcast for a long time. Christophe, you were here before.
Christophe Christiaen
Exactly.
Dallas Campbell
So we're trying to work out how long ago it was.
Christophe Christiaen
So important we talk about it again.
Dallas Campbell
Yeah I'm interested to know in the 18 months or so since we last discussed this topic, well I wasn't here with Sarah doing it, what things have changed I kind of think if you take mums as general benchmarks of understanding, that's not a bad place if your mum was in the room explain to her what it is you do.
Daniel Dias
So we at Route 2 are helping companies and investors quantify, value their impacts and try and become more sustainable is what we do as a company.
Dallas Campbell
I understand that. That makes sense. Cristian, Geospatial Science Lead at the Satellite Applications Catapult. Here we are. You're based here.
Cristian Rossi
That's correct. Yes.
Dallas Campbell
What is your day-to-day job?
Cristian Rossi
Yeah, at the Catapult I manage research activities linked to the geospatial sector. So this is also called remote sensing and observation. I'm also a lecturer at the University of Oxford where I teach remote sensing. So that's my expert area and most recently I've been also, I became an Associate Research Fellow at the Center for Greening Finance and Investment where Christophe is also working with.
Dallas Campbell
And Christophe, just to remind our listeners, they will have all listened to the other episode, I'm sure.
Christophe Christiaen
Multiple times.
Dallas Campbell
Multiple times, exactly.
Christophe Christiaen
As my mum did, yes.
Dallas Campbell
Yeah, exactly. But just remind us, just for the one or two people who didn't, who haven't listened yet.
Christophe Christiaen
So I'm at the University of Oxford working for a research group focused particularly on sustainable finance, the Oxford Sustainable Finance Group. I lead our innovation and kind of spatial finance, spatial data activities. Previously I was at a catapult, so it's great to see many colleagues here again today and a lot of our work is focused on research, looking at what are the data sets that you need or should be using to actually properly account for sustainability issues in financial decision making.
Dallas Campbell
Great, park that thought, we are going to come on to that. Actually my first question before we get on to sustainable finance, I'm quite interested in what unsustainable finance is and then maybe we can move on from there. What would be a good example of unsustainable finance and why the change I suppose?
Daniel Dias
I think all finance probably today is unsustainable, basically and you know, what does finance mean?
Dallas Campbell
What does that mean?
Daniel Dias
Well, it means from like, you know, investment activities to banking activities, pension funds, every all of it is unsustainable.
Dallas Campbell
In what sense? In an environmental sense, in a social sense?
Daniel Dias
Both, I think. I think it's the outcomes of financial transactions are leading to, you know, environmental degradation, social inequality. So fundamentally it's unsustainable. Every time you go to the bank, it's unsustainable.
Dallas Campbell
I put my card in, I get £20, not that I do that anymore. Does anyone, I mean, we're kind of, cash has sort of vanished of late, but anyway… and is that because profits traditionally have come, have trumped everything else? So people have concentrated on making money and not really thought about the effects of that.
Daniel Dias
I think people generally, a lot of people think about it, but once the money is in the system, it is a complicated system and it is allocated to the outcomes that deliver the financial returns without thinking about the kind of environmental and social consequences. So I think most of us in the room would be hoping that every time you are involved in a financial transaction, it wouldn't lead to an unsustainable outcome, but it does because it's such a complicated global system.
Dallas Campbell
That's the keyword here, isn't it? Complicated. I mean, the financial system just seems like a great Gordian knot of interconnected things. I don't know, how does one navigate through all this?
Christophe Christiaen
I don't know anyone who does. You know, it's complicated and interconnected, but I think we need to start somewhere in different parts of the system about lending, which is a very different activity to when you invest in a company on the stock market or when you provide insurance to someone and these different types of financial activities, they ideally should all take into account not just the financial impact or the financial gains or losses of what they're doing, but equally the environmental, the social, and the governance considerations that come alongside this as well and I think that's, in theory, the definition and point of sustainable finance is how do you integrate sustainability issues or the thinking around those in day to day financial decision-making be it as a bank beat as an insurer etc. And that's what we're trying to get to It's a very very long way.
Dallas Campbell
Yeah, what do we mean by sustainable finance? I mean, why do I care?
Daniel Dias
So you just go and imagine you deposit £10 in your high street bank, you know, not that anyone does that anymore. It will be probably you know, a portion of your wage you can divert to your Monzo account. Yeah, you're £10 and then The question then is what happens to your £10? What happens to your £10 and what happens to your £10?
Dallas Campbell
Well, tell me what happens to my £10 at the moment. Because I don't, you know, I had a site out of mine, my £10 and then I go off and do something else. I'm not thinking about it.
Daniel Dias
But what do you think happens to your £10?
Dallas Campbell
It's a really good question. I don't know. Banks do what banks do, which is invest and I hope wisely so my bank doesn't collapse and my £10 at some point will be there if I need to get my £10 out with a little bit of interest.
Daniel Dias
Yeah, but they typically will then pass that responsibility on of that £10 and investing that £10 into say, you know, an institutional investor, potentially, you know. So now your bank is handing over your £10 to another party to invest that £10 somewhere for you.
Dallas Campbell
With sustainable finance, for me as a customer, will I have a choice? I mean, I have a choice already about which bank based on kinds of factors. Is the idea to have banks, for example, I mean other things as well, investment companies, the banks, to have a clearer picture of what happens to my £10 so that they can say, well, actually, we don't invest in companies that chop down trees in Brazil, for example, and we can see that. Whereas at the moment, it's a little bit hazy. We're not too sure.
Daniel Dias
Yeah, exactly, I think it is very hazy. People don't fully understand that, both the banks and the consumer putting their £10 in the bank. But even if you don't invest in that company that is going to chop down the trees, is that they have a supply chain, and the companies that they need could possibly be doing the chopping down of the trees. So it is such a complicated network. What we need for high-strict banks to take more responsibility to, in my opinion at least, to kind of understand the trail of money and the impact of it.
Christophe Christiaen
And I think understand and communicate to the clients who ask for it. So you can go and ask your bank, you cannot go and ask your pension fund where is my money invested in, or ideally they should be able to give an answer because if you are a caring consumer on a high street and actually you care about animal rights, so you actively consume certain things, that's a conscious decision you make as a consumer, but if you don't think about what your savings and your pensions are, they're probably invested in companies that do animal testing. They're probably invested in companies, if you don't eat meat, that produce meat or in those supply chains.
Dallas Campbell
But guess what? We've got this new tool, Earth Observation. We can actually see things and rather than companies just saying, oh yes, we're all very ethical, we can actually hold companies to account and go, well, actually, we can see and we can…
Daniel Dias
It's not a panacea though. You know, it's one tool and it improves what we do but it requires it needs to be one tool in a complement of tools that allow us to achieve that goal.
Cristian Rossi
Yeah, if I want to spend my £10 in a chocolate bar for example I'm looking on the chocolate bar where there are some certification whether you know the chocolate has been sustainably produced without deforestation and so on how do they do that without observation they use our technology for that right and that's that's it that's the power of it.
Dallas Campbell
Yeah do you think, I mean, our institutions becoming more receptive to the idea of parking, just making money as a goal and actually trying to expand, but in a way that's less environmental and more socially responsible?
Cristian Rossi
That's a good question. That's why we're here. So we're trying to educate institution, financial institution in understanding, for example, How can we use this data, satellite data, in driving their decisions, so in getting environmentally good decision. So are we investing in a company that is doing good or is doing bad? So we can see this from space, which is a fascinating thing. So we can have a picture of what is happening and then this can be used for decisions, right? And at different levels, so government, investors, industry, that's the power of it.
Dallas Campbell
I'm going to come into space in a minute. I just want to start on the ground. Route2, this is your company, Daniel. Just explain the origins of it. I'm interested in why it happened in the first place. Did you notice, did you sort of sit down one day and go, you know, crikey, this isn't working. We need to fix all this.
Daniel Dias
Yeah, pretty much. But it was driven by deficiencies in accounting systems because that's the kind of systems in which capital typically is allocated. Money, not capital, try and de-jargonise this a little bit. So within financial accounting, it's very myopic, it only captures everything that has a kind of price and a transaction within a kind of formal marketplace and the result of that is that everything that's actually brilliant about the planet goes missing. So if that is the case, if accounting is flawed, then how do you kind of correct it? And you can correct that by quantifying and integrating all these impacts that companies have back into their P&L, their profit and loss and into their balance sheet and create a whole new picture of accounting.
Dallas Campbell
How do you measure that? How do you measure? I mean, impact seems to be quite a, well not vague, but an imprecise term. How does one quantify something like impact?
Cristian Rossi
That's a challenging question. There are some frameworks, those are also called ESG, Environmental Social Governance where rating agencies are giving scores to companies.
Dallas Campbell
And who decides the score? Like who says, "Right, you've done that, that's a nine."
Cristian Rossi
The rating agency. And that's the issue actually, that we have the different agency, they have different scores. So there is a sort of like a disagreement here.
Dallas Campbell
Well, that's what I'm curious, is there a kind of a unified way of approaching scores? Is there a sort of central body that says that, okay, this is…
Daniel Dias
There is increasing level of convergence around how you quantify certain impacts. So for example, greenhouse gas emissions that contribute to climate change, you've got a standard out there called the greenhouse gas protocol and more and more companies reporting according to that guideline, which allows you then to compare to some level. But the problem is, is that there are so many categories in that and it's self-selection. So companies can say that they will just be quantifying this part of my greenhouse gas emissions and they won't bother about these other parts. So I think the key point is that guidance is forthcoming, it's still, to the most part around the easier things to measure, such as greenhouse gas emissions and what we're talking about here is our impacts that are more diverse, wider than just greenhouse gas emissions and in that area you don't have that level of standardized reporting and so it becomes more difficult.
Dallas Campbell
No, that's interesting. And companies or people who invest, is there a genuine desire to do good? How much of it is greenwashing? How much of it is virtue signaling? Look at us, how much of it is real?
Daniel Dias
Who wants to take that one first?
Dallas Campbell
Everyone's looking at each other.
Christophe Christiaen
We know the answer, maybe we shouldn't say it, but I think a lot today is either definitely virtue signaling and to some degree greenwashing. I think you asked earlier, yeah, to what extent are companies or investors actually, you know, starting to care beyond the purely financial? And what they've gone really good at or become everyone's become really good at is saying they are pretending they are or committing to nice goals and commitments either to be in a zero by 2050 or to be nature positive by, I don't know why.
Dallas Campbell
But that reputation is a good currency now presumably.
Christophe Christiaen
You would think but still there's a lot of kind of announcement and virtue signaling happening and then particularly alongside some like coalitions of investors or companies once they move from announcements to okay actually this means we're going to take this in that action you're starting to see a lot of either reluctance or pushback from many of those signatories. There was a good example I think after COP26 in Glasgow where a lot of investors and being international banks signed up to be in a zero by 2050, one of the first things that they would then kind of sign up to in their race to zero or however it's called, would be to stop financing coal power stations, which is one of the relatively easier things to do and is the most polluting source of electricity generation and already kind of having to commit to something tangible as part of that, being part of that alliance, quite a few banks actually didn't feel comfortable anymore and decided to pull out. when things become serious and are actually impacts on how they're operating, you do see a lot of kind of a hesitance at least and the masks fall off to some degree. So there's a lot of work to be done in that space and actually the point of greenwashing that you mentioned is also increasingly becoming of interest to the various regulators in different countries and jurisdictions. In the UK, for instance, HSBC was recently fined for an advert that they put out where I think they made out to do that they invest really sustainably, but it actually was to do on a tiny fraction of their investment portfolio or their lending portfolio, and therefore the marketing or advertisement authority actually decided that this is deceptive, this is not correct, and they fined them and that's on a kind of just purely marketing side of things. There are financial regulators starting to crack down on greenwashing, which is also starting to link to what does it mean to be sustainable and green, which is more and more becoming put in frameworks and policies etc. So there's some interesting developments happening there for sure.
Dallas Campbell
Let's talk about space then. So how can space and Earth observation, how can that help to do what you do to create more sustainable finance?
Daniel Dias
From our perspective, one of the biggest problems is data. When you're trying to quantify impacts, the data tends to be of a low resolution and pretty much out of date. So if you're thinking about impacts on the ground, whether it be water pollution, deforestation, even greenhouse gas emissions, air pollution, all these kind of things.
Dallas Campbell
Just to be clear, you're using that data in order to see bad things happening or whatever?
Daniel Dias
Specifically, that's exactly what we do. So we're trying to quantify impact and you're using these data sets to estimate the impacts on the ground created by companies and entities. That's what we do as a company, Route2. The data that we typically lean on is generated from organizations like the FAO, Food and Agricultural Authority, the World Bank, or ONS, the UK's statistical department and that data tends to be not very spatial. So you don't actually, it's more of a national statistic versus it being a kind of spatially resolute statistic, and quite often or not, they're reasonably out of date. So it's impacts that happened, say, two, three years ago. So the interest for us, working with the catapult, is one of, like, actually, there's these new data sets that are coming from Earth observation technologies that could provide greater spatial resolution. So the impact's happening right here at this spot on planet Earth, which is fabulous and it happened, you know, maybe two months ago and that's such a huge improvement in the data that we would then be able to deploy, that it would then improve our analysis and the result of that is you would improve or exert greater pressure on the stakeholders of sustainable finance.
Christophe Christiaen
But Daniel, actually, do you in your analysis also use the information the companies themselves report?
Daniel Dias
Yeah, we do. But we use it carefully. You know, so company disclosures around impact. Again, you have to be reasonably cautious about because it goes back to the point we made earlier to what standard are people reporting this information on. So you have to be careful of what's disclosed and how you interpret that and it's always better then to have a reference point, which is what the data from Earth observation gives you. You reconcile those two things and you come up with a more accurate picture of impact on the ground.
Dallas Campbell
So from a technological point of view, better the cameras or better your satellites, the more resolution you have, the better job that you can do.
Daniel Dias
Personally for us, yeah.
Cristian Rossi
Yeah, this is very powerful. So at the moment there are thousands of satellites flying over us, over the world. And they can capture really almost every information that you can think about the Earth. So Daniel mentioned forest, water, soil is another, air, so at all levels, right? And we can see every spot on earth almost at any time, day, night and you can think this being like super powerful, no? There is a potential issue that Daniel was hinting, which is like the quality of the data, right? So is this good? Is this bad? Which is what we are trying to figure out right now within these frameworks, the financial, the sustainable finance framework and this is part of our job. For example, the project that we will do together is just looking into what can we do with this sort of data. But this data is there and it's really powerful. It's there for free also. Everybody can have it, you know. It's a…
Dallas Campbell
Is it, am I right in thinking that the more resolution, the more resolution, the more expensive it becomes and anyone can access fairly low-resolution data, but if you want to get, you know, tens of centimetres, then it suddenly becomes a bit more expensive.
Cristian Rossi
That's correct. So we typically split the word into public data from space agency and commercial data from companies and the main difference is into this resolution. So centimeter electric resolution, literally, you know, 20 centimetre, is very expensive. So while tens of meters, it becomes free. Also here, we need to figure out, maybe it's enough to have like tens of meters if you're looking at something big. But then if we want to see the single car, then we need to go into another type of data.
Dallas Campbell
That's interesting. I thought maybe it'd be useful to take an example. Do you have an example that we could look at to say, okay, well this is a company that we're working with, we use this kind of data and we've seen this and therefore that leads to that.
Daniel Dias
Yeah, I mean.
Dallas Campbell
You two are working together.
Daniel Dias
We are beginning to work together. The interesting thing for us is that, so you can take an area of land and you can see how that area of land is changing in its land cover, its composition, the quality of the land, right? So if you take a pristine forest and then you've got earth observation data It just is showing you that that forest canopy is changing. It doesn't necessarily have to be, and this is the correct me when I'm going wrong here, but it picks up qualitative changes as well as quantitative changes. So it's not just deforestation, but the data would be able to tell you, actually the canopy isn't as healthy as it was maybe a year ago.
Dallas Campbell
So we can actually look at the quality, the quality of something like the tree canopy and is that just looking at the color, for example, or are we looking into the soil or what?
Daniel Dias
I really don't know how they do it, but I'm…
Dallas Campbell
'Cause that's crazy.
Cristian Rossi
We look at some physical parameters. We look at the quantity of chlorophyll in leaves, so which tells us, yeah, the color, for example, how green is the plant, but also how healthy. How healthy. So it's linked to this specific parameter, which we can measure from space, not looking only at the colors, but looking at different part of this data.
Dallas Campbell
And water as well, presumably you can look at soil moisture as well as that's.
Daniel Dias
Well, I mean, that's it. So there's, so you can see an area and then how refined that area is depends on, as you say, the power of the satellite and stuff like that. But from our point of view, from a kind of understanding business impact point of view is that you can see something is changing. Then the question is who is responsible for that? And that is also not an easy question to answer sometimes when you have say four or five different kind of companies operating in the area, doing slightly different industry activities.
Dallas Campbell
Yeah, how do you navigate that?
Daniel Dias
So exactly, so there are a number of things that we're working through of, you know, so who would be more likely to be responsible for that change in that land cover is the question you then ask yourself and then it becomes more of a statistical analysis to some point. So you know something's changing, you've got five or six actors that could be responsible and that's the extent of the work that we'll be doing with the catapult is trying to figure out a robust method to do that.
Dallas Campbell
And obviously the better your data, the more precise your detective work can be in trying to sort of understand things.
Cristian Rossi
Yeah, that's correct. I'm looking, it's on a coal mine in Russia. That's the largest one. I'm just writing a paper about scientific research about that. And that's a huge coal mine, right? So what I'm looking at is that I'm looking in time how lands changed and what has been, let's say, moved from something that was natural to something that was not natural. So for example, a forest that becomes a mine or a crop that becomes a group of houses, right? So this is something that I'm monitoring. So the land changes is one thing. But not only also is this mine operation polluting the water, which is then downstream through a city around there. So this is another area. Is the soil where this area is present degraded? So we can look at soil carbon. So it's another parameter that you can see from space and what about the atmosphere? Is there lots of emissions like methane emission, carbon dioxide emissions, so big greenhouse gases. Combining all of this together, we can create sort of environmental scores and this is a work that we will do together. So just looking at this mine, I found out, for example, that this mine was polluting in 2020. But then I suppose the government or somebody said you're doing something bad and just looking at 2022, the pollution decreased a lot.
Dallas Campbell
Decreased?
Cristian Rossi
Yeah. That was a good environmental outcome. But we have to observation we could see this like a big polluted area in 2020 and basically in water and no pollution in 2022. So that's good. But on the other side, we have seen deforestation, which is bad and we've seen also lots of meat and emissions. So it's solid balance of understanding how an operation like this mining area behave in the environment and what you're trying to do is to score this, for example.
Dallas Campbell
That sort of impreciseness. Would you get like a kind of a traffic light system or something like you might get on food like a sandwich, for example, that kind of encompasses lots of things. I'm just because there seems to be so many different bits, like one score for one thing doesn't necessarily mean it's all terrible because you might get a good score for something else. I just wonder what the format might be.
Daniel Dias
I mean, within our company, then each impact is quantified and then we assign values to it. So economic value, so a negative impact, we assign a cost to it and there's this, you know, with carbon, there's social cost of carbon. I don't know. This is getting technical now. But it's similar to what you're talking about in as much as that it's an economics or an orientated weighting system so some impacts are worse than others and some are better than others and that is all signified by economic values that you assign to the impacts, but the outcome is kind of what you're talking about I this is good. This is medium. This is really bad.
Dallas Campbell
Something like land, you know coal mines forests I can envision how that would work I can see how that would work. But what about sort of inner cities if we're talking about social equality, for example, how on earth can space data identify problems and solutions?
Daniel Dias
Housing, so like quality of housing is also a pretty interesting.
Dallas Campbell
So you can actually look at, and then go, crikey, that area looks… Well, yeah, I mean… A new build's gone up, therefore, good things are happening
Daniel Dias
Yeah, but those new builds don't necessarily have to be like what we class as a new build. It could be an extension of an area of low-quality housing where you understand the living conditions are pretty poor. So you can see how urban expansion and the form of that urban expansion can be picked up through Earth observation as well. As far as I understand it as well. It's not just Urban environments but actual social movements as well, which I think is fascinating So migrations and stuff like that can be picked up through.
Cristian Rossi
Yeah, something else that you can see is the temperature so we can see how hot is the city right And in my department in geography here in Oxford, several students did the correlation between areas in a city that are like poorer than other areas and this temperature, right? And we found out that there is a really good correlation there. Like the poorest area, they're the hottest. I guess it's because there are less parks, housing are heating more. But again, with Earth Observation technology, we can see just looking at the temperature, can scan the city and understand which areas are poorer.
Dallas Campbell
That's really interesting. And presumably as well, you can just look at the way cities form. I mean, a favela in Brazil is going to look very different to, you know, modern, you know, city in industrialized Europe or America. Wow. And so you as experts in this field, I mean, I'm interested because it's it's such a new thing and I'm just interested in your experience and working in it How is it to be involved in something that is so new and trying to create something that works and is it's going to be a value Is it just an absolute minefield or do you have a kind of clear path of? Where you want to end up and what it wants to what it should look like.
Daniel Dias
I mean you know, we've been working in sustainable finance for 25 years. So I wouldn't say that that's you I think it's becoming more of a topic but with that it loses a lot of its gravity because everyone's talking about it and it loses some of the teeth That is necessary for finance to become sustainable with Earth observation specifically it has huge potential and from a data perspective, but that is the project that route to working on with catapult this is so I'm no expert in how we integrate this I just see huge potential for it as I think you know both Christophe and…
Dallas Campbell
Well it's the tool suddenly yeah this tool which actually works and correct me if I'm wrong 25 years ago you wouldn't have had that then so that journey from 25 years ago is this the thing that's going to really revolutionise the way that we do finance on earth.
Daniel Dias
Yeah I think it's one of them I think it but there's so much data, so there's a lot of machine learning, AI, and all these other kind of technologies that the catapult would bring to the table, as well as our own internal team as well. So it's not that on its own. It needs to be combined with other technologies. But compared to 25 years ago, the tools we have at our disposal today give me much greater hope that actually these ideas that we're developing could be deployed and we'll actually get the outcomes we want. So that's encouraging.
Dallas Campbell
Yeah, and is the direction of travel for finance companies or investment banks etc are they aware of all this is it like you know electric cars it's like all car companies are now getting rid of petrol we're gonna have batteries it's just that's that's the way it's going is this the way it's going for banks?
Christophe Christiaen
No is the short answer to that I think that while this is I think it's all very new and interesting potential is huge it means the challenges on making a potential materialize and there's a few challenges, I think, both from the financial services side as well as on the geospatial data side. On the financial services side, there's an awareness issue, but I think that's getting better. People are becoming more aware of the fact that they need to understand environmental sustainability in a much more granular way. I mean, everyone's talking about it, but it means that many people who talk about it don't know what they're talking about. So it's trying, how do you get some of that deep…
Dallas Campbell
They need to get a study at Oxford in the geography.
Christophe Christiaen
I mean, they should all come and study at Oxford, of course. But the, so I think, so as that kinda, as the market becomes a lot more, or says they're becoming a lot more green, it means they actually also need to build the capability and capacity in banks, in pension funds and whatnot, to actually understand sustainability issues properly, understand the data sets that can inform them properly and deal with those, so there's a capacity and awareness issue in the financial services side, which is being built, but there's a long way to go still.
Dallas Campbell
Are they sort of nervous? Are they worried that we're not going to make as much money if we go down this route as we would do? I mean…
Daniel Dias
Yeah.
Dallas Campbell
And can we get sustainable finance to a point where everyone's happy?
Daniel Dias
I don't think that will ever be the case. I think it's impossible. But I think the very nature of sustainable finance means that you're going to have to be paying for things you weren't paying for before, okay? And therefore, if everything else remains equal, that has to mean that profit margins will be smaller. But finance is, there are clever people within finance, so there are some very interesting new instruments that are being developed in securities and all the other kind of methods and tools of finance. So it doesn't… there are ways to drive capital to sustainable outcomes that are profitable and I think that's what the three of us around this table believe, but we are nowhere near that and what I think at least is that the tools that we're talking about with Earth observation, geospatial, will provide the information that makes that more likely.
Dallas Campbell
Yeah.
Daniel Dias
Does that make sense?
Dallas Campbell
That makes sense. But also presumably you're all in the job of trying to persuade as well that actually this is really important. And then it becomes, as we said before, a kind of reputational thing where for financial companies to not do this would be seen to be bad, you know?
Daniel Dias
Yeah, but then the other thing about finance is if you just take pension funds, for example, and the amount of money that's in pension funds and the kind of fiduciary duties of the people that are managing those funds, which is to ensure that in 20 years time, there is a retirement fund for the person that's been saving or been contributing to their pension and to do that, effectively, you just try and reduce risk, which means this idea of diversifying your portfolio and basically, it means that your money is everywhere to try and de-risk these pension funds and the result of that is it's very hard for, say, a fund manager or a pension fund to look for this sustainable finance when there's risk involved versus the kind of conventional finance that will deliver the retirement fund in 20 years. It is complicated. I think our job, the three of us sitting around here, is trying to put a circle around that square a bit because there are so many moving parts, but it's driven by signals in the marketplace and those signals are all price at the moment. If you can augment that with real data that's about the impact.
Dallas Campbell
Yeah, and that helps.
Christophe Christiaen
I think one thing that we definitely need to either convince the financial sector more of is to kind of counter the excuse which you often hear from either pension funds or banks or asset managers that the data to do sustainable finance or sustainability data is either not there or it's not good enough. We talked about ESG ratings earlier and there are many studies that show that these ratings are not actually very good or they contradict each other. So everyone says, oh, we don't have good sustainability data to actually incorporate those into financial decision-making. What we have here with these data sets and technologies is an example and proof that we can find alternative data sources that are transparent, that are comparable, that are a lot more scalable and timely as well, which can provide an awful lot of information on sustainability, risks, and impacts, and that they can be incorporated if we, as the geospatial community, can translate them and offer them in a format that is also relevant and useful for finance. I think another challenge on the space supply side is we often like to talk about how cool the things are we can see on a satellite image. But you don't answer so what question for a bank or an investor. It's not because for instance you can see urban sprawl that if I'm a bank in the UK like what does that mean for me and my mortgage portfolio here? It doesn't mean anything. So there's a convincing kind of awareness-raising piece to be done but equally how do we get the geospatial space sector in gear and in line and offering solutions and products that fit, or to answer the question, that fit the requirements of the financial services sector?
Dallas Campbell
Which bits of the industry are most accepting of this new technology, would you say? And maybe which are the ones that are a bit more resistant?
Cristian Rossi
Ethical investing, obviously. So investors that are looking at ethics in general. So some pension funds, the Church of England, example as a pension fund.
Dallas Campbell
Which one?
Cristian Rossi
Church of England.
Dallas Campbell
I've heard of them. I'm going to start investing. I'll put more in the collection box.
Cristian Rossi
So they're obviously they're investing ethically.
Dallas Campbell
But that becomes a selling point doesn't it? For presumably for some investment companies.
Daniel Dias
Yeah I think there are components within all of the subsectors of of finance that are very excited about the potential of this. The issue is they are still such a tiny minority. But if we as a group here can really prove the utility and show how it works and how it can actually allocate capital and it does this, "Oh, look, it's a profitable activity," and it's actually benign with regard to then people will follow that, obviously. So I think that's what we're trying to do here is prove it.
Cristian Rossi
Yeah, the education is fundamental.
Dallas Campbell
That's it. It always comes down to education and companies, it always seems they want to do what is the thing, whatever the zeitgeist is. If this becomes the fashionable, fashionable is the wrong word, but if this becomes the important thing for consumers, then...
Cristian Rossi
Yeah, exactly. That's why we need success stories. We need like something that it's like there to be shown.
Dallas Campbell
Yeah, I mean Christophe, 18 months ago you did, had a similar conversation on this podcast and I'm interested what changes you've seen in that time, if any, negative and positive?
Christophe Christiaen
So I think on the market side, on the finance side, I think we've really seen, as well as a growing number of commitments, a growing level of scrutiny and the greenwashing examples I gave earlier are part of that. So this inherently is going to create, because the demand for green or sustainable finance either from clients or people with pensions is only growing. So while it's becoming harder to do with greenwashing risks or reputation risks, it needs to happen anyway and there's a demand so there's a market. So I think this is creating the demand and the need also for genuinely transparent, impactful products and funds and services and to do those, those are going to require more robust data sets to underpin their analysis and their reporting, etc. So there's these various pressures and constraints are going to create the market demand for geospatial products, I think. Another thing we've seen in the last 18 months particularly is, you know, in sustainable finance traditionally, a lot has been around climate risk and climate change. You know, many people have used those kind of interchangeably in climate risk, particularly around emissions and how do we understand which companies emit more or emit less. But what we're seeing now is actually a growing interest from the finance and corporate communities, not just on climate and emissions but equally nature and biodiversity and we're losing nature at an alarming rate and actually we're also realising that a lot of economic sectors are very much dependent on nature, services that nature provides, be it water or pollination, all these kind of things. So if we lose them we're at risk of also having economic damages and losing financially, etc. So that awareness of the problem is growing in finance and the economy and many people are starting to also make great pledges around those and the kind of the analytical frameworks that are coming online to look at understanding nature risks and issues, they inherently build from the starting point that to analyse this properly you need to know where your operations are, you need to know where your supply chains are. They start from a location-specific analysis perspective, which is inherently going to drive the demand for spatially based green finance analytics and products. So that's really the first time I think in a framework that's globally got an awful lot of buy in the task force for naturally the financial disclosures, which starts from the premise of locate all your operations and your assets and look at these things spatially. So this is going to create a huge demand for any spatial products and any derived satellite information so I think this is really exciting for the sector and something they should.
Dallas Campbell
And you've seen this change in the last sort of 18 months have you seen the speed of change have you?
Christophe Christiaen
I think DNFD, sorry that's the task force for National Data Financial Disclosures was announced was 18 months ago roughly around that time and they set themselves I think roughly a two-year timeline to iterate different versions of that framework and they're now about to publish I don't know when is it in November or something I think later this here their final version of the framework. So that has evolved. There have been a lot of financial institutions testing this out and there's also various case studies you can now find online. So the awareness of that framework and the need for spatial and location-specific analysis is really growing rapidly, driven by that as well.
Cristian Rossi
If I can just add two more things that's changed. One is the data. So we have new missions now that are focusing on greenhouse gas, for example, at high resolution. They weren't there 18 months ago so…
Dallas Campbell
New missions as in new satellites?
Cristian Rossi
New satellite missions, yeah so this is so the data availability it's much better because some companies private companies decide to send satellites that are just focusing on our issues right so this is the thing that I think is the algorithms the advance that we have in artificial intelligence so we all know chat GPT now for example…
Dallas Campbell
Don't get me started on Chat GPT
Cristian Rossi
Yeah it's just you know like it's just something that we were not thinking about it months ago, right? So we can do the equivalent translation into our sector. So how can we use it with data? And there are so many new algorithms that we use those two.
Dallas Campbell
Well, just give me a sense. How important is, okay, if we fast forward five years time and we've got ever more robust data sets because we've got better technology and we've got AI and machine learning processing things, how much easier will your jobs be?
Daniel Dias
A lot, a lot easier. I think having an impact profile that is underpinned by concrete data would be incredible.
Dallas Campbell
Are we going to get to a point where we get some real-time earth observation data?
Daniel Dias
I mean, even if it was just six months out of date, that would be brilliant. So I mean, yeah, I hope one day, you know, it would be real-time, there's kind of some negative consequences of that but just something more timely would be brilliant but that I think in five years' time if we can get to that place it'd be brilliant.
Christophe Christiaen
I think even though we don't think necessarily to wait five years if you just look at the kind of the status quo today or the in sustainable finance the bulk of the data and information comes from what companies report themselves and that is typically in sustainability reports which they publish once a year at the end of the financial year or a few months after that which tell you what the company has achieved sustainably over the 12-month period that was kind of six months before they released reports so what we have at the moment is in a way of the baseline is so low that even if we have information every six months it's already a huge improvement as well as you know there's granularity issues because companies will report they say we have used 10,000 cubic meters of water is less than you last year. Well congratulations, but what does it mean? Where have you used less? Where have you used more? The granularity of these reports are also really really low and again this is where increased granularity and resolution of additional data sets is already really helpful with what we have today compared to what we know in the future. It's just compared to what there is now available to finance, it's so not fit for purpose that anything is better anyway.
Dallas Campbell
So better technology, that becomes better and then the visibility of that information in terms of customers, in terms of people, people will be able to see them and go, okay, I want to put my money there because I can see very clearly that things are getting better for that particular investment.
Daniel Dias
Exactly. At the moment, if you were to invest some money into a sustainable investment fund, it would be very qualitative. It would be based on a few reports and a fund manager saying, look, this is why it's a sustainable investment fund whereas in the future you'll be able to have that report and it will yeah bang bang, you know, that's awesome, yeah.
Dallas Campbell
Just finally where am I… where should I put my money? Not that I have any money. But I have a…
Christophe Christiaen
Church of England, we agreed.
Dallas Campbell
That's where the smart money goes, forget about investing in Twitter or whatever or I don't know… Church of England.
Daniel Dias
No. Not yet, not yet.
Dallas Campbell
Yeah, maybe one day, you’re being very cagey about…
Daniel Dias
Because we know well and also is that it's… we know the kind of how evolved sustainable finances So an ethical investment fund is not a sustainable investment fund. It's ethical. It means that you know, somebody is making a decision not to invest their money in an unethical activity What's unethical to you Dallas?
Dallas Campbell
What's unethical? All kinds of things are unethical.
Daniel Dias
Precisely but what you class is ethical and what Christophe will think is ethical and what I think is ethical it so it's very subjective, right?
Dallas Campbell
It's difficult to put a pinpoint, but you know it when you see it.
Daniel Dias
Well, there you go exactly. So I mean, I think that's the problem is that you know, ethical investing is different from sustainable finance We're talking about something systemic. Okay with sustainable finance ethical investing has its place is the kind of early, the kind of seedling of sustainable finance, but we need a lot more than just ethical investing.
Dallas Campbell
Great. Daniel, Christophe, Cristian. Thank you so much for coming by. It's a really difficult one. I mentioned Gordian knots at the beginning, but actually just from a technical point of view It seems to be the consensus as ever the more resolution we can get from space that more reliable data sets are from space the better your work becomes. Thank you very much for coming in. Thank you very much for listening. Thank you for your company. To hear future episodes of In-Orbit, be sure to subscribe on your favourite podcast app and to find out more about how space is empowering industries between episodes, you can visit the Catapult website or join them on Twitter, LinkedIn, or Facebook.