The financial sector is one of the largest and most vibrant industries in the world. In a changing world, impacted by geopolitics, globalisation, ESG (Environment, Social and Government), and climate change, the financial services sector is changing fast. Surprisingly perhaps, space can play an important role in this change.
Climate change and the consequences from air and sea pollution, loss of biodiversity and deforestation are causing a strong pressure on industries to adopt sustainable growth policies and foster a green recovery.
The financial sector has committed to play a decisive role in the transition towards a sustainable global economy. Sustainable Finance, through the integration of ESG (Environmental, Social and Governance) factors in investment and decision making processes, has made important progress in recent years.
However, in the face of a clear desire to operate sustainably, there is often a lack of awareness of which actions to take. The adoption of ESG policies in recent years has helped identify the key issues and areas where improvements are needed.
Sources of ESG data
Historically, the main sources of ESG data have been voluntary disclosures by companies through Corporate Social Responsibility (CSR) reports. This practice has proved ineffective for several reasons:
- Companies have often shown themselves to be subject to positive bias, with a tendency to omit negative details (e.g. fines received) if not obliged by regulations
- Methodologies used by companies are different, causing difficulty in comparing data between different companies and sectors
- Most of all, the frequency of the emissions is too low, with most companies and private agencies issuing these reports only once a year.
To address these issues, ESG providers have tried to use other, independent datasets and machine learning to analyse the large amount of public data. The major difficulties of this type of study are not technological, but related to data quality and availability. For example, corporate asset registers as reported by industries are often not publicly available or incomplete.
Remote imagery and machine learning algorithms are therefore very helpful to identify assets all over the planet. With the exponential growth of space-based remote sensing, computing power and complexity of machine learning algorithms, these systems will be increasingly useful for this type of analysis.
Applications of satellite technology in finance
Verification of accountability
Satellite technology can support the verification of accountability of companies, which too often manage to engage in evasive behaviours of their environmental responsibilities. Satellites independently collect large amounts of data, without the need of sending people in-situ. Artificial intelligence and machine learning algorithms support the analysis of these large amounts of data.
Data from the Copernicus programme can be used to track emissions of companies, deforestation, and loss of biodiversity, but also natural heritage protection, the ‘blue economy’ (monitoring of overfishing, coral reef deterioration, plastic pollution and oil spills), and climate risks. Time series analysis, either from optical or radar observations can track the impact of human activities in specific areas over time. Satellite monitoring provides frequent data on environmental and climatic performance of company assets.
Insurance risk and damage assessment
Space technologies traditionally support the insurance industry for climate related physical risk and damage assessments, but also portfolio and project monitoring. Increasing risk awareness and changes in regulations have led to the development of climate risks assessments, which are now also used in the investment and banking industries.
Banks are increasingly testing large scale project-based investments or their portfolios on related climate risks. Central banks are building models with climate related risks scenarios and publishing guidelines. The process of matching portfolios with potential climate related risks such as sea level rise or droughts is becoming more common.
Space for insurance
The insurance sector is already familiar with the use of space data. Insurers like Generali, Swiss RE and Allianz have strong internal capabilities in the exploitation of satellite imagery for improving their underwriting and risk modelling. Space data supports analysing, monitoring, and forecasting natural disasters and extreme weather events, which helps the insurance industry to anticipate and provide better potential damage assessments and faster compensation.
Index-based insurance policies are expected to increase in demand, for example in agriculture. In comparison to traditional policies, these policies are customised towards the specific situation of the policy holder and provide transparency and efficiency of pay-outs.
Space data is often an important factor in these policies, by including for example climate and extreme weather related risks. Other examples of the added value of space data are environmental and air quality data for health and life insurance, GNSS enabled trackers fitted to cars for providing more tailored, real-time usage-based insurance policies, or providing connectivity for insurance services in areas with insufficient terrestrial coverage.
In times of increased awareness for climate change and consumers demand for digitalisation, the insurance sector now more than ever benefits from space enabled services and applications.
ESA partnerships with insurance providers
The ESA’s experience in the past through partnerships with insurance providers like AXA and the managing of insurance related projects such as e-Drift and CASSIA gives it the needed expertise to support this sector in its transition.
ESA calls for space for financial services
The European Space Agency (ESA) has two open calls in relation to financial services:
NAVISP open call for proposals
Under NAVISP Element 2, the Agency issues this permanently open Call for Proposals for the development of innovative competitive products in the Satellite Navigation and wider Position, Navigation and Timing domain. The objective is to boost Member States’ industrial competitiveness in the fast- evolving navigation sector. Proposals are welcome from space and non-space companies, from large and small enterprises and start-ups. Products can address satellite space segment, ground infrastructure and user segment including applications and services. Industry and research institutions of interested participating States are therefore invited to submit Outline Proposals for the development of pre-operational products matching their strategies and plans. Upon positive assessment of their Outline Proposal, they will be invited to submit the Full Proposal which will be evaluated once a Support Letter from the relevant national Delegation is received. The Tendering process details and the guidelines for preparing the Outline and Full Proposals are described in the AO.
This is a call of the Navigation Innovation and Support Programme (NAVISP) Programme Element 2.
For more information and access to the open call for proposal documents see the esa-star webpage.
Open call for proposals on the future EO-1 programme
The objective of the call is to provide a framework to rapidly respond to new innovative ideas.
The scope of the call covers elements of Block 4 of Future EO-1 Segment 1.
The particular focus for innovative activities under each element is as follows:
- Grand Science Challenges
- EO for a Resilient Society
- Artificial Intelligence for EO
- Regional Initiatives
- EO for Civil Security
Any individual contract will be limited to a Firm Fixed Price of up to 150KEuro and to a maximum duration of 12 months.
Bidders will be required to demonstrate the innovative content of their proposals and, where appropriate, the engagement of relevant stakeholders. For proposals related to Grand Science Challenges, bidders will be also required to demonstrate scientific excellence of the proposed activity.
Learn more about this Invitation To Tender on esa-star.