According to OS, the UK’s national mapping agency, combining geospatial and EO data could help bridge information gaps for financial institutions as they try to identify the location of their assets worldwide.
The organisation’s database, used by more than 5,000 partners and with 20,000 daily updates, can provide investors with a holistic view of a location, providing essential data to monitor and assess climate and sustainability risks.
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OS’ principal consultant Mark Tabor spoke with Investment Monitor about the potential of geospatial and EO data to inform investment decision processes. Tabor has been working at OS for close to 40 years, during which time he has worked on commercial overseas consulting, mapping production and product development.
The organisation was recently commissioned by the UK Space Agency to undertake a feasibility study to assess how EO data can provide value for the financial services sector to support improved outcomes for investors, environment and society.
Eugenia Perozo: What are the differences between geospatial data and EO data? What happens when you combine them?
Mark Tabor: EO data is the remote collection of information about the Earth. Geospatial data in this context is the creation of real-world features in a vector digital format in the form of points lines and polygons.
Here is an example of EO data. We have a new satellite with a feature called SatVu, which can show heat variations in the form of land surface temperature across the surface of the Earth. This could be applied to financial asset and economic monitoring, as it allows you to map the ambient surface temperature of an environment. We can show that a property exists at that location through linking it to geospatial data. Then, linking it to ownership potentially enables banks to target those properties for green loans.
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By GlobalDataIf you think of some of the challenges of global warming such as urban heat events, then it is evident how this information can allow you to conduct a thorough spatial analysis in an urban geography.
If you are an asset owner in the financial services sector, you won’t fully understand the susceptibility of your assets from raw observation data. EO can provide that context when combined with geospatial data. It would tell you if a building is particularly warm, whether it is reflecting or absorbing heat, whether it is on a different type of land cover, and so on.
A different type of EO is called synthetic aperture radar, which can automatically monitor natural disasters such as flooding. Recent archive data can identify the most recent impact trends of climate change on assets.
EP: Can you walk me through an example of what using these data sets would look like for a financial institution as it analyses an investment decision?
MT: I think it is one of the key assets. A big obstacle for the financial services sector is knowing the physical location of all of their assets, which may well be global. That is a concern for the sector given the requirements of the Task Force for Nature-related Financial Disclosures (TNFD), which has a framework called LEAP – L stands for locations. To comply, companies have to locate assets in order to understand their impact on nature. TNFD is likely to become regulation and therefore increase the reporting requirements regarding asset location.
The great advantage about EO data is that it is frequently capturing the Earth’s surface, sometimes on a daily basis, so you can create a monitoring, reporting and verification tool that tells you where the asset is and how it might be impacting on, or being affected by, its local area or environment.
So regardless of whether regulations call for reporting on a daily, monthly or annual basis, you are getting an objective perspective on those regulations using EO data. This would then make it harder for companies to trust other sources of information if they are not using EO data. TNFD is going to become regulation and they will be measured by it. So, I think that is a major benefit.
EP: What is the geographic scope of Ordnance Survey’s database?
MT: Ordinance Survey’s major responsibility is Great Britain. However, we are thought leaders as far as how that combination of EO data and geospatial data can be used. We have many partnerships that allow us to influence how other mapping agencies work, because most countries have their own equivalent. We have also worked on creating a proof of concept to support transparency in supply chains. We have forged global partnerships to see if we can create a global registry of verified asset location with global thought leaders such as Planet Labs, Deloitte and ESRI.
The concept tests whether a facility location such as a processing plant, storage or distribution centre, for example, can be independently validated to provide confidence in the data used by multinationals with complex supply chains. Whilst regulations are a clear incentive to do this, businesses also need to understand their climate resilience and ability to withstand geopolitical shocks, and this will ensure their future viability. For example, a farmer could register his or her assets in a global database so that it can be recorded and later verified that there is no greenwashing going on.
We need to work with our global partners to provide context and methodology so that organisations understand where their supply chains are, and they can map it onto geospatial data.
EP: Are there any financial institutions already using these tools to make investment decisions?
MT: There is a really good article that the Bank of England wrote called the Biennial Exploratory Scenario, which looked at how EO can be used in the financial services sector. There are some key themes. One is understanding climate risks, which is particularly pertinent for the insurance sector.
The insurance sector is probably the most advanced user of EO data at the moment. There is a lot of work on parametric insurance risks; that is the probability of loss caused by climate change through heat events, earthquakes, floods, etc. Insurance companies insure businesses against supply chain disruption, so it can become a real problem if multiple companies use the same asset and that gets damaged.
The Bank of England also noted transition risks, which were looking at those economies transitioning from carbon-intensive practices to net zero, and so EO can help identify where companies are adapting to cleaner energy sources or facing challenges due to policy change. You also have scenario modelling, where you can actually use EO data to inform scenarios to stress test financial institutions. That part of legislation has been done by CBES, and this sort of scenario modelling is possible because of the use of EO data. You can go back to the 1980s with EO data and you can look at trends and how they are changing.
It is used universally, but I would say that the insurance industry is the most mature.
EP: How can this data be applied, practically, in order to deal with climate disasters?
MT: A great example is California; think about all the forest fires that they go through and they are the fifth-biggest economy in the world. In California, a lot of the houses are uninsurable because of the high risk to insurers. Traditionally, some parts of the financial services sector might have thought that this doesn’t concern them because it is an issue for insurers to deal with, but if assets are becoming uninsurable, then it becomes an issue for all different parts of the financial services sector. If you could start using EO and geospatial data to look at what those trends are, in conjunction with existing tools such as NASA’s fire tracker, it would be very helpful in terms of determining risks.
If you look at the latest information, for the first time the Earth can’t absorb all the carbon because of the amount of forest fires that there have been and that has an impact on all of the financial services sectors. So the ability to be able to identify those fires, to try and prevent them, and look at where they are likely to happen would be hugely beneficial.
EP: Will financial services institutions integrate these tools as part of their processes willingly? Or will higher regulatory requirements be necessary for the incentive to be strong enough?
MT: I think number one is regulation, but I also think the financial services industry is beginning to recognise that people, particularly young people, are really interested in how they invest. New investors are increasingly interested in ethical investing and are more likely to prioritise ESG [environmental, social and governance] factors. For there to be a trusted, authoritative way to prove that institutions have an ethical footprint background could be quite useful. EO and geospatial data can provide that independent authoritative voice.
