“ImpactScope has applied some very sophisticated machine learning NLP models. They have solved an incredibly difficult problem by synthesizing different information sets, tagging them in a structured way, which means that information is very readily accessible.”
Steve Cracknell, Chief Product Officer & Founder, Insig AI plc
According to a February 2023 report by BEUC, the European Consumer Organisation, greenwashing is “rife” in retail financial services because there is a “mismatch between demand and supply for financial products with a positive sustainability impact.” When it comes to making vague or unsubstantiated claims about the sustainable attributes of their products, BEUC believes that the asset management industry is “the biggest culprit”.
Many financial supervisory authorities are ill-equipped to identify cases of greenwashing committed by banks and asset managers. To accelerate the development of new tools to help regulators monitor the green claims of financial services companies, in June 2023 the Global Financial Innovation Network (GFIN), an umbrella group of financial regulators from over 70 countries, launched its first ever virtual greenwashing TechSprint. The 10-week sprint was hosted on the UK Financial Conduct Authority’s Digital Sandbox, “with the purpose of bringing together international regulators, firms, and innovators as a collective priority. The aim is to develop tools or solutions that can help regulators more effectively tackle or mitigate the risks of greenwashing in financial services.”
A total of 15 international regulators participated and 14 companies from around the world were invited to propose solutions. ImpactScope was honoured to be among the innovators participating in the program and we are delighted to announce that during the Showcase Day we were awarded the prestigious Eureka Prize for “the most original adaptation or development of a technology”.
In collaboration with the World Bank, the Malta Financial Services Authority and the National Bank of Bahrain we designed Greenwashing Identifier (GWI), an AI & blockchain powered application capable of identifying inconsistencies in statements and numbers across multiple datasets, including annual reports, ESG reports, earnings call transcripts, social media posts, and carbon offset purchase transactions.
In initial tests GWI displayed a high level of accuracy. When tested on several leading European and North American asset management companies and banks the tool successfully flagged multiple potential instances of greenwashing, for example when a bank uses the terms net zero and carbon neutral interchangeably, when in fact the two terms mean very different things. GWI also looks for cases where asset managers allocate outsized percentages of their advertising budget to market products which account for less than 1 % of their assets under management. Finally, GWI has been trained to identify cases where banks make claims to have compensated for a certain amounts of carbon emissions by purchasing offsets, but no corresponding records exist of these carbon offset purchases in the most reputable CO2 registries, such as Verra or Gold Standard.
GWI 2.0 is currently under development. If you are an asset manager and you would like to test drive it contact us today for a free trial.