Clarity AI raises $15m for sustainable investment platform
Spanish fintech Clarity AI has raised $15m to further develop its platform that analyses the societal impact of investment portfolios.
Clarity AI was founded in Madrid in 2017 by Rebeca Minguela, who last month featured in our rundown of Europe’s leading women in fintech. The platform uses in-house technology to leverage big data and machine learning (ML) to assess and provide a transparent image of the impact of investments on society and the planet.
“Investors attempting to evaluate impact have faced fragmented and unreliable data, inconsistent subjective definitions, and a lack of standards and tools for comprehensive analysis,” says Minguela. “Clarity AI provides a solution for that.”
Led by Deutsche Börse AG and co-investor Mundi Ventures, capital from the latest funding round will drive Clarity AI’s sustainable expansion plans to scale up investment in new technology and AI, as well as further integration with other leading finserv platforms. The approach will make it simpler and swifter for investors to access reports on sustainability and impact.
Sustainable market growth
Growth in the ‘sustainable investments’ market has soared by some 34% in the past two years, primarily as millennials demand greater transparency over the social impact of their portfolios. Sustainable investments now represent around a third of global assets under management (AUM), a figure that will likely grow motivated by asset managers’ “desire to minimise risk and improve financial performance over time”.
Minguela believes “it has never been more important for investors to have accurate insights on the true impact of the companies in which they place their trust and their money”.
The COVID-19 pandemic has been partly responsible for this leap, but other high-profile social issues such as the Black Lives Matter movement, demonstrations for bodily autonomy and gender equality around the world, have played a big role.
Clarity AI has witnessed this over the past six months, with significant increase in demand for its services, including signing clients with eight times the AUM as in the preceding period.
“That is why we are scaling up our business to enable investors to identify and support those companies helping to solve society’s biggest challenges,” Minguela ad
AI and the future of global trade
Artificial intelligence (AI) is becoming entrenched in our daily lives, but the technology is still surrounded by misconceptions and skepticism. Ask the public and they may jump to dystopian scenarios where robots have taken over the world.
While this makes for a good sci-fi blockbuster plot, the reality is different and more benign. Those products that Amazon suggested you buy? AI. That TV series you were recommended to watch on Netflix? AI. That self-driving Tesla car you crave to take for a spin? You guessed it: AI.
There is no single industry that is not being re-shaped by technology. Until recently, however, there was one noteworthy exception: global trade. Fortunately, that is slowly changing.
The mechanism that underpins global trade – trade finance – is an industry that remains largely paper-based and reliant on manual processes. This US$18tn a year industry is now being influenced by a new wave of technological innovation, including AI.
Exploring the potential of AI in Trade Finance
AI refers to the use of computer-aided systems to help people make decisions or make decisions for them. It relies on large volumes of data and models to make sense of information and draw intelligence.
In trade finance, AI is helpful in analysing quantitative data, and the repetitive nature of trade finance means that there is a lot of non-traditional data at our disposal.
This means that when trade finance providers need to assess the risks of funding a transaction, AI models can be a very efficient tool for data analysis and reveal intelligence and risks relating to small companies.
AI helps the industry move beyond traditional credit scoring processes, which are often outdated and remain reliant on historical accounting entries – a barrier that prevents small companies from accessing trade finance and has resulted in a $1.5tn global shortfall.
Overcoming the barriers
AI can tackle this shortfall by creating accurate credit scoring models. This can include a company’s payment history, measure the risks of funding a transaction, identify supply chain risks, and benchmark them against their peer group.
Trade finance providers can use this information to communicate effectively with their SME clients, ultimately helping establish better business relationships.
Towards a technological utopia?
The adoption of AI has the potential to do a lot of good in the industry, and the industry is in the early stages of radical transformation.
Advances are driven by fintechs as well as a willingness to change. The industry is working together to create new infrastructure for distributing trade finance assets to other investors in a transparent, standardised format.
The creation of infrastructure is possible due to improvements in technology and integrated across the trade ecosystem in cooperation with banks, insurers, and other industry participants.
It’s collaboration at its best: together, the industry is using technology to re-shape global trade as we know it.