New opportunities in the data revolution
“Fintech” has become a buzzword in recent years ‒ headlining conferences and becoming a crucial investment focus for many establishment financial institutions. But fintech itself is not a new concept.
Technology has long been a key part of the financial world, it is how companies use it, particularly when it comes to data, that has developed and morphed rapidly.
Just look at Refinitiv, one of the world’s oldest fintech companies. Refinitiv’s foray into the data world started more than 160 years ago, with Paul Julius Reuter using carrier pigeons and the then-new trans-Atlantic cables to share stock market quotations. Fortunately, today’s information moves significantly faster than those original 40 carrier pigeons, and Refinitiv services more than 40,000 institutions in more than 190 countries.
As technology changes, so too does the way in which it is used. Technology and automation free up the time spent on more mundane tasks to allow companies to concentrate more on the value-add insights, analysis and risk management that is needed to succeed in a complex and ever-changing world. Refinitiv’s business, for instance, has gone from stock market quotes to providing data and insights, trading platforms and open data and technology platforms. These facilitate the performance of financial services players ‒ driving trading, investing, wealth management and more.
The technology being used in the financial world is now growing at an exponential pace. Some of the most recent changes in the market are happening around artificial intelligence (AI) and the use of the “cloud” for data. Part of the impetus for these changes has come from the entrance of millennials into the wealth market. These younger players expect efficient digital answers to their needs. Disruptor companies are creating new technology, forcing legacy companies to keep up. All of this is creating challenges and opportunities for the shifting of business models, including the urgency of transitioning to low carbon economies and remaining relevant in a new sustainable finance marketplace.
Looking to a green future
global head of ESG
proposition at Refinitiv
One of the benefits of the use of new technology, such as predictive capabilities, is that it allows firms to become more creative in their approach to solving complex business challenges. One of the most pressing business issues is sustainability, which can be framed within the 17 United Nations Sustainable Development Goals (SDGs). An increasingly important part of this is the need to engage in and measure the environmental, social and corporate governance (ESG) initiatives, impact and performance of businesses. Financial and ESG data that can help companies and investors to make better and more intelligent decisions will play a critical role in achieving the goals of the sustainable agenda. For Refinitiv, ESG data is fundamental data.
Reliable and trusted ESG data allows companies and the investment community to make sound, sustainable investment decisions, responding to the growing customer demand for sustainable solutions and ultimately keeping its licence to operate.
ESG standards are increasingly becoming a risk management and mitigation tool. Such data can reveal the risks and opportunities in a company’s performance, as it is linked to things like climate change, executive pay and corporate diversity and inclusion. These are investment characteristics that are being challenged by millennials and drawing the attention of regulators, as well as being accepted indicators of long-term company performance.
To meet the increasing demand for high quality and reliable ESG data, Refinitiv has carved out its ESG offering, providing insight into 70% of global market capitalization and more than 8,000 companies. Its data, for instance, shows that 63% of companies in the Refinitiv database have a policy to reduce emissions, a 56% growth from five years ago.
“With Asia set to lead global economic growth in the coming decade, the region’s companies will play a prominent role in the sustainable development agenda,” says Elena Philipova, global head of ESG proposition at Refinitiv. “Research proves that strong corporate sustainability credentials present a wide range of benefits for stakeholders.”
“Beyond the ethical imperatives, ESG bonds offer stable and predictable returns, which attract investors with a ‘bigger picture’ perspective seeking diversification and positive impact,” she adds.
While sustainable investing is still a niche sector in some Asian markets, it is growing rapidly. Green bonds raked in $86 billion in the first half of this year, showing 26% growth over the same period in 2018. Technology companies are also contributing to the raising of green funds. Apple, for example, has sold $2.5 billion worth of green bonds and contributed to 40 environmental initiatives globally.
Connecting China to the world
Another important aspect of data use is transparency. China is a prime example of the data transparency challenge. As the country continues to open up its financial markets, global investors want a clear view on the risks and opportunities the market presents.
The Belt and Road Initiative (BRI) focuses on building significant infrastructure projects across Asia, Europe and Africa. Officially launched by China’s president Xi in 2013, it is already considered the largest investment programme in history, accounting for more than $500 billion of spending on infrastructure projects across more than 70 countries.
Asia Pacific at Refinitiv
“As Belt and Road reshapes global commerce and China continues to internationalize, being able to unlock the investment opportunities and navigate the risks they present is crucial for the financial community,” says Alfred Lee, managing director, Asia Pacific at Refinitiv.
“We believe the financial community has a significant role to play in allocating capital to high quality infrastructure that will make a difference in raising living standards and sustainably supporting the planet’s growing population. The BRI is an important example of where that role is vital.”
In response, Refinitiv launched its BRI Connect tool at the start of 2019, providing the investment community with tools to identify investment opportunities with trusted information, including project, market, financing and operational risk data. This also incorporates a necessary look at up-to-date country risk ratings, allowing for a better understanding of where to invest in BRI.
The attention on this initiative will only continue to grow, as China has made clear that it will be pushing ESG considerations and sustainability standards for its projects. BRI-related green bond sales ‒ excluding China ‒ hit $23 billion this year, as of the end of August, compared to the $5.2 billion raised in the whole of 2015. Looking beyond BRI, Chinese companies have sold almost $30 billion worth of green bonds.
Globally, ESG and BRI-related investment opportunities are at the forefront of people’s minds. As the technology around data mining and sharing continues to develop, companies like Refinitiv will be essential for investors looking for cutting-edge information to make smarter decisions.