Bringing societal impact to markets
Rebeca Minguela, founder and chief executive officer of Clarity AI outlines how the tech-driven platform aims provide investors with the tools to manage the impact and sustainability of their investment portfolios, leveraging big data and machine learning
Environmental Finance: Can you tell me about your journey to become CEO of Clarity AI?
Rebeca Minguela: I have always been interested in the concept of quantitative impact measurement, even at an early stage in my career, when I was studying engineering, and kept working on it over time. When I was at Harvard Business School, I did a field study on that topic, but at the time (2010-2011) impact and environmental, social and governance (ESG) investing were still very nascent. I went to work in investing at Bain Capital Private Equity instead and jumped into entrepreneurship soon after. I successfully exited my first company to Groupon and worked there as director of product and technology, until I was appointed global head of digital transformation at Santander Bank. During those years, I was working on the concept behind Clarity AI in parallel. But it was while working at a large bank that I identified the right opportunity and market, since sustainable investing was growing significantly.
EF: What differentiates your platform from others?
RM: We believe we are the only fully tech-driven platform for sustainability analysis and reporting. We provide technology and capabilities, not just data or just ratings. We would argue we have built the largest and most reliable database of environmental and social impact data, with approximately 30,000 companies, 198 countries, 187 local governments, 200,000 funds on our database. We did this by combining both structured and unstructured data, enhancing data quality with reliability algorithms and expanding coverage with estimation models. We have sought to develop transparent and science-based methodologies and frameworks that investors can leverage and customise to reflect their risk preferences or personal values and beliefs. Finally, we offer a cloud-based technology platform for sustainability solutions, bringing scalable tools to investors so that the adoption of sustainable investment can rapidly become mainstream.
EF: Can you outline the tenets of your strategy and UN Sustainable Development Goal (UN SDG) related methodology?
RM: Clarity AI's mission is to bring societal impact to markets and become the leading technology provider for impact solutions. Early on, we identified that despite growing interest in measuring the SDG impact of companies, there was no consensus on how to effectively allocate investments to generate impact on the SDGs. In fact, most solutions rely on qualitative assessments or revenue alignment, which prevent accurate comparisons between companies and reduce investor confidence in making investment decisions. At Clarity AI, we have focused on quantifying and monetising the impact a company makes in real world terms. So, for example, instead of looking at the revenue a company makes from the sale of a lifesaving drug, we quantify the impact in terms of the monetary value to the world of the lives saved by this treatment. Thus, in contrast with existing approaches, we believe Clarity AI's SDG Impact scores are more objective and quantitative
EF: How do you gather and interpret the data that you use on the platform?
RM: One of the key differential values added by Clarity AI is the validation and reliability of sustainability data, leveraging machine learning. We have developed our own proprietary reliability algorithms to bring the highest quality data to our users. We also use machine learning models to estimate material metrics not reported by companies and expand coverage. In addition, we have developed machine learning algorithms leveraging Natural Language Processing (NLP) that read and assess the severity of news every day, to track incidents associated with companies and include them in our ESG and impact scores.
EF: How do you maximise impact through strategic partnerships with other platforms?
RM: Our goal is to serve as many financial institutions as possible: asset managers, wealth managers and asset owners such as sovereign wealth funds, pension funds, and insurance companies. In order to better serve the entire financial system, we offer both end-to-end solutions (web applications) and ad-on capabilities that seamlessly integrate within their existing workflows, including internal tools or third-party platforms (asset servicing, fund distribution, risk management, etc). Partnering with the leading industry players, best data providers and 3rd party platforms keeps being critical to scale quickly and better cover our clients' needs.
EF: What are your priorities for the next few years?
RM: Our goal is to become the leading tech platform of social and environmental impact assessment for all society stakeholders (investors, companies, consumers, governments, NGOs, etc). To achieve that, we need to continue scaling in the financial industry, keep improving our platform and capabilities, and continue hiring the best team. We also need to gradually serve other society stakeholders (corporates, consumers, NGOs, etc.), following the same strategy of integrating with existing workflows and client journeys, and partnering with as many players and platforms as possible to increase speed and scalability in servicing those needs.