Paloma Baena Olabe Vice President of Global Partnerships, Clarity AI
WE NEED A COMMON LANGUAGE TO ALIGN INVESTMENT TO IMPACT
Clarity AI encourages sustainable investment through a unique sustainability platform powered by a global database.
The company was founded three years ago in response to a gap in the market and now has offices in New York, London and Madrid.
The business is the brainchild of former Young Global Leader Rebeca Minguela, a successful entrepreneur who first experimented with similar ideas at Harvard Business school, setting up the Global Impact Rating start-up.
Today, with 95 employees and providing a scoring system – not ratings – for asset managers and investors, it has been doubling in size every year. As a company, Clarity AI prides itself on its mission to bring social impact to markets.
Over $80 trillion in global assets – both public and private capital – must be mobilised if the world is to achieve sustainable economic growth, the company says.
To make this an axis-shifting transformation, the world’s investment community will need methodologies that can help them align their decisions with environment, social and governmental factors, as well as measure the impact of those decisions, in real economic terms.
With employees from Harvard, the World Bank, NASA and MIT, among others, Clarity AI is built on a strong technological and financial component. It leverages technology, data science and artificial intelligence to enable investors optimise the sustainability and societal impact of their investment portfolios.
It provides results based on a curated database of over 50 structured and unstructured data sources, supplemented by the company’s own data research and estimation models – allowing investors to access the world’s largest sustainability data at a granular level.
The subsequent proprietary scores, developed in house, allow investors to tailor their investment decisions in ways that assess different aspects of sustainability, for instance the impact of investing to limit temperature rises to 2C, or the impact of investing in the Sustainable Development Goals.
Vice President of Global Partnerships, Paloma Baena Olabe, herself a former Harvard graduate and veteran of the OECD and World Bank, says: “Over 50% of asset managers are already trying to report using the SDGs or actively engaging with how they can do that, but they lack the methodology and mechanisms in how to do it.
“Standards, targets and global regulation will mean an important change in reporting, but they are not here yet from a methodology or data perspective. At Clarity AI, we can help investors assess and assign a numeric value – or a score – to their investment, which allows businesses to align their investment to impact.
”It’s about finding a common language and common targets.”
The most powerful feature of the technology is to be able to look at whole portfolios and rebalance them based on investing preferences and impact calculations with a high degree of granularity and reliability, she says.
Paloma highlights that Clarity’s mission, to bring social impact to markets, “has permeated much of our business and strategy.”
“We have been very transparent about our methodology, because we want to empower people to make the right decisions”, she says. “We offer access to our sustainability platform to companies for free so they can see how investors are looking at them and work to improve. We also have chosen a focus on impact, rather than ESG ratings, to really help quantify, in economic terms, the impact of investment decisions.”
The company has clients in both the US and the UK, several of which include the world’s top asset managers and asset owners as its clients. It expects to be economically sustainable by the end of 2021.
One of the attractions of the firm is its commitment to a path that aligns with the personal values and sense of mission of many of its employees, says employee of just three weeks Victor Fernandez, a Stanford graduate with a Ph.D in Nanophysics.
Victor says: “When I heard about the project it sounded like a win-win situation. It’s a way of solving capital allocation by finding a way of allowing the market to shift by itself. Clarity AI offers the tools to do this in a sustainable way.
“It is essential that the private and public sector and entrepreneurs can figure out solutions together. But until today, we have always seen a divide in ways of working and even language. This way allows us to engage with partners that share the same goal – it’s a great unifier.”
The company says that climate and the environment is often more tangible for most investors today, with more metrics and entry points for sustainable investment, and many bonds and index funds tied to those types of investment.
It also ensures there is a strong independent research component to avoid any attempts at ‘greenwashing.’
However, in the future they expect this focus to expand to social and governance topics. Through our platform, Paloma says, investors will be able to see how they contributed to society as well as respond to regulation.
The company says the lessons of the SDGs is that engaged companies can encourage their employees to bring their values to work, attracting a more motivated staff of a higher level than many similar companies would be able to attract.
While externally they offer a ‘common language and goals’, and a strategic concept that aligns with the ideals of both developed and developing countries, across issues including women, diversity, employment and sustainable growth and many more – “they’re, internally, a consistent source of opportunity for innovation,” Paloma says.
That has been the experience at Clarity AI where the SDGs are “at the centre of a new, proprietary methodology that will help investors willing to go further to align their portfolios with specific SDGs goals and metrics.”