Transforming investment strategies with geospatial intelligence
Environmental Finance: Why has location-based intelligence become so important for investors and lenders?
Lisa Eichler: Location-based intelligence is becoming a game-changer for investors and lenders, and it’s easy to see why. Investors often focus on companies, but the underlying risk lies at the location level. Understanding local impacts is crucial for accurate risk assessment and effective resilience strategies.
Geospatial intelligence of where a company operates is becoming more essential than ever. Imagine being able to pinpoint exactly where potential risks and opportunities lie, down to the very coordinates. This kind of precision allows for a much more nuanced understanding of investments and lending.
For instance, knowing that a property is in a flood-prone area or that a factory is near a protected natural habitat can significantly influence decision-making. It’s not just about mitigating risks; it’s also about identifying opportunities for sustainable investments.
With the increasing frequency of extreme weather events and the growing importance of environmental sustainability, having detailed geospatial data at your fingertips is expected to become even more invaluable in the future. It should help investors and lenders make more informed, responsible, and ultimately profitable decisions.
EF: What are the challenges around gathering and collating location-based data?
LE: Gathering and collating geospatial data involves many complex challenges and hurdles, which can be broadly categorised into data volume, data quality, technical, and operational challenges.
First off, the sheer volume of data can be overwhelming. We are talking about satellite imagery, geocoding of company addresses, climate models, topographical maps, and more — all of which need to be integrated, cleaned, and analysed. At the same time, achieving comprehensive coverage on a specific aspect, say collecting all asset locations for a specific company, can also be difficult.
Then, there is the issue of data quality and accuracy. Not all data sources are created equal and ensuring that the information is reliable is crucial. Verifying data from multiple sources to ensure consistency and accuracy can be complex and time-consuming.
Collecting and maintaining high-quality geospatial data can be expensive. Specialised knowledge and skills are required to collect, process, and analyse geospatial data effectively. Navigating the legal and ethical considerations around data collection can also be complex, especially in different jurisdictions.
Finally, there is the technical aspect of it all. Combining data from different sources and formats into a cohesive dataset requires sophisticated data integration techniques.
These challenges highlight the need for robust methodologies, advanced technologies, and skilled professionals to effectively gather, collate, and utilise geospatial data.
EF: How has MSCI responded?
LE: We developed our proprietary asset location dataset years ago as the base layer for enabling our physical risk and biodiversity analysis. To generate detailed and accurate physical risk exposure and financial impact data, we needed to know where a company’s physical assets are located, what activity is being done at the site, and other attributes about the asset and its surroundings. As the market asked for more granular asset-level data to access drill-down insights from portfolios or loan books to corporates and all the way down to individual asset locations, we decided to support our clients and deliver our issuer-linked asset location dataset for clients to use. This saves them the time and effort to go through the tedious, challenging, and expensive data collection process themselves.
EF: How can the MSCI GeoSpatial solution help clients?
LE: MSCI GeoSpatial Asset Intelligence offers an extensive solution for understanding location-based risks and opportunities across investor portfolios or loan books. By providing continuously expanding access to global location-based data for around 70,000 public and private companies plus additional coverage for corporate and real estate assets, on request, for total portfolio coverage, MSCI GeoSpatial Asset Intelligence is designed to enable investors and lenders explore location-specific exposure to physical hazards and nature risks. This data is crucial for quantifying the financial impact of physical risk and for uncovering climate-resilient opportunities.
For risk managers and sustainability officers who need to understand where their portfolio or loan book’s assets are located and their relationship to climate hazards and nature-related risks, MSCI GeoSpatial Asset Intelligence helps them align with regulation and integrate asset-level risks into their financial frameworks. Our datasets are delivered flexibly for on-premise integration into clients’ own data lakes and financial models.
MSCI’s solution has been developed by leveraging our experience in climate change and geospatial engineering, climate expertise, rigorous data collection, and innovative partnerships with Fathom, part of Swiss Re, and Google Cloud’s gen AI technology.
Learn more here: MSCI GeoSpatial Asset Intelligence - MSCI
