Collaborations key to tackling global issues and advancing 'climate finance'

The Bayes Centre at the University of Edinburgh. It is the innovation hub for data science and artificial intelligence and home of the GOFCoE.

The Global Open Finance Centre of Excellence (GOFCoE), based at the Bayes Centre in Edinburgh, commissioned a study to examine the steps that would need to be taken for the concept of “climate finance” to be advanced. The report, Innovations in Climate Finance, was compiled by FreshSight, a student-led consultancy firm based at the University of Edinburgh.

The Scotsman’s annual fintech conference, Doing Data Better, held at the end of last month, heard how a lack of agreed metrics was hindering the advance of environmental, social and corporate governance (ESG) policies.

The FreshSight report highlights the need for common frameworks and standards, so firms and organisations can compare measurements of climate risks and classifications of sustainable activities.

With many Scottish fintechs already developing digital tools in these areas, the report also identified opportunities for GOFCoE to work with regulators by using the data-sharing principles that underpin open finance to help develop the necessary frameworks and standards.

Rachel Dunn, one of the students who compiled the report, says: “It was exciting to see so many fintech companies already operating in the climate finance field, channelling their expertise into something that will help the planet and help other people.

“It was also good to see the collaborations that are already taking place between academia and the public and private sectors. Those collaborations are really important for tackling global problems such as climate change and mobilising finance.”

The need for greater collaboration between the private sector, the public sector, and academia was also identified as a key theme in the report. It also underlined the need to raise the profile of facilitators, such as the Green Finance Institute.

The report suggested GOFCoE could also help fintech companies working on climate finance products and services by creating open finance data assets and compiling a library of application programming interfaces (APIs), the chunks of code that allow one piece of software to exchange data with another. APIs are already underpinning the open banking movement and will go on to fuel the open finance revolution.

Increased regulation, investor interests and consumer demand has driven the need for companies to improve their ESG credentials in recent years.

Individuals want to know their pension funds are supporting companies in the low-carbon economy and to understand the carbon footprint of their spending habits, using tools such as the carbon footprint tracker developed by CoGo for NatWest’s mobile banking app.

Governments, on the other hand, want to raise the finance that they need to fund infrastructure projects and work with the private sector to cut emissions.

Climate finance is one of the emerging sectors that is being explored by the GOFCoE, whichwas launched in 2020 by the Financial Data and Technology Association, industry body FinTech Scotland, and the University of Edinburgh. GOFCoE forms part of the Edinburgh and South-East Scotland City-Region Deal’s Data-Driven Innovation (DDI) initiative, which aims to establish the area as the data capital of Europe and as a leading global data hub.

Damien McGarrigle, interim chief operating officer at GOFCoE, says: “The intersection of open finance and climate change is a very new area because open finance is still a relatively new concept. It’s all about data-driven insights and that’s why it’s of interest to GOFCoE.

“The way open banking was developed in the UK involved a set of standards, which helped third parties like fintech companies to come in and engage with the banks securely and with customer consent to access their data.

“The next step is to have a global framework for standards, so that countries’ standards are inter-operable with each other, and there are lessons there that could be shared when it comes to a framework of standards for climate finance too.

“We’re starting to build a global library of APIs for open finance, which researchers will be able to access. Eventually, that API library could help fintech companies to develop apps for individuals, such as measuring their carbon footprints or examining their investment portfolios to assess their sustainability – and all of that will need standardisation to bring in data about energy usage or mobile phone data.”