Cooking Sustainably with Big Data

    Stockholm (NordSIP) – In this day and age, enormous amounts of data are readily available. But more often than not, too much data is useless without powerful analysis. Good news is, London- and Frankfurt-based asset manager Arabesque has done the job for you or at least a good part of it. A few weeks ago, Maria Mähl, Director, Sustainable Investing at Arabesque, spoke to NordSIP about her firm’s S-Ray tool, the philosophy behind it, and how it is now available to all investors.

    Mähl starts by defining the terms arabesque itself. The name represents the geometry of patterns, and the importance of symmetry in nature. Through big data and machine learning, Arabesque’s technology integrates ESG information with quantitative investment strategies. “Our investment process starts with the S-Ray, what we call our sustainability engine.”

    The cornerstone of the S-Ray is the normative principle of the UN global compact, explains Mähl. In this first step, the system analyses 7,000 companies and pulls together analysts ratings, news, analysis, as well as self-disclosed data. “We feed the system with raw data from 50,000 sources, across 15 languages.” The first result is a global compact (GC) score, which covers Human Rights, Labour Rights, the Environment, and Anti-Corruption. “When we go on to the next step, what we call the ESG score, the S-Ray analyses industry-specific criteria, so that companies are not penalised relative to others, just because they belong to a certain sector.” The ESG score provides an industry-specific assessment of companies’ performance on financially material sustainability criteria. “The system looks at combined data points of about 200 metrics. It takes into account what is material for each sector and how this links to financial performance.”

    As Mähl points out, this is where big data becomes a real differentiator. “The algorithm-based technology of S-Ray uses self-learning quantitative models to process vast data sets that a human analyst couldn’t possibly process. What is interesting when you look at quantitative analysis, is that it is rules-based. There are no biased perceptions. We are using it almost as a mirror, to see what the world is saying about a particular company, not to reflect what our biased view of that company is. We know that the valuation of stock prices depends on what people’s perception is.”

    Following its launch earlier this year, Arabesque are now seeing a huge amount of interest in the market for S-Ray, and this week announced a partnership with State Street, one of the world’s largest custody banks, to integrate it across its service offering.

    Mähl goes on to show us the exciting features the S-Ray provides and how to customise the different screenings. One can look at geography, capitalisation size, themes such as water, for example, etc. Current data can be plotted and compared, as well as trends, so that one can find improving or deteriorating companies. But the most exciting feature is that S-Ray is now available to anyone free of charge (with a three-month delay and some limitations when it comes to the more refined features). For Arabesque, it is a crucial part of the firm’s mission, to make sustainable investment available to all. “If you want healthy food, it’s really the ingredients that count,” concludes Mähl. “When you cook a meal we help you find the right ingredients, then you get to choose your own ingredients and how you cook them.” In need, of course, you could always see if Arabesque will cook the meal for you.


    Picture (c) – NordSIP

    Aline Reichenberg Gustafsson, CFA
    Aline Reichenberg Gustafsson, CFA
    Aline Reichenberg Gustafsson, CFA is Editor-in-Chief for NordSIP and Managing Director for Big Green Tree Media. She has 18 years of experience in the asset management industry in Stockholm, London and Geneva, including as a long/short equity hedge fund portfolio manager, and buy-side analyst, but also as CFO and COO in several asset management firms. Aline holds an MBA from Harvard Business School and a License in Economic Sciences from the University of Geneva.

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