Discover our whitepaper highlighting the power of web data on predictive analytics for the financial industry: how alternative data strengthen the market, the challenges of collecting web data and case studies presenting different approaches, such as ESG, showcasing TextReveal features and capacities for investment purposes.
In the past, investment management institutions relied mostly on traditional data to gain an edge in investing. Traditional data ranges from SEC filings to earnings reports and pricing information any type of data produced by the company itself. The rise of the digital age, however, has opened up new sources of data for investors beyond the scope of traditional data. The seemingly infinite scope of alternative data includes data produced from credit cards, satellites, social media and perhaps most importantly the web.
With the additional integration of alternative data, investment management institutions and hedge funds in particular that once relied only on traditional data now have an edge in predicting the rise and fall of the markets. As increasing numbers of financial institutions jump on the bandwagon of alternative data, spending on alternative data by trading and asset management firms is set to exceed $7 billion by 2020.[1]
What was only a few years ago a question of when institutions should start using data has shifted to the question of howthey can organize and structure these mostly unstructured datasets. And with 4 billion webpages and 1.2 million terabytes of data on the internet estimated to be generated globally by 2025, there is no shortage of web data to sort through. As increasing numbers of investment management institutions incorporate alternative web data into their predictive algorithms, it will change the face of investment as we know it.
This white paper is intended to be a guide for investment management (IMs) institutions to better understand how alternative web data is quickly becoming an essential component for generating alpha and mitigating investment risk. In addition, it explores different models of web data crawlers and what IMs need to look for as they incorporate alternative web data into their predictive analytics models.
Section 1: Beating the Market with Alternative Web Data
“Your company’s biggest database isn’t your transaction, CRM, ERP or other internal database. Rather it’s the Web itself…Treat the Internet itself as your organization’s largest data source.” — Gartner
As previously mentioned, alternative data includes any type of data that is beyond the scope of traditional data: satellite imagery, social media data, and web data (which includes news sites, blogs, discussions and forums) along with credit card data. Alternative web data, which falls under the broader category of big data, is typically unstructured and demands a process for structuring it in order to deliver insights.
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Alternative data for investment decisions: Today’s innovation could be tomorrow’s requirement.
Deloitte Center for Financial Services. 2017.
2018 proved to be an eventful year for SESAMm with multiple renowned customers acquired, our A series fundraising campaign, numerous prizes won and milestones reached. Here is a look back at our rewarding year 2018 followed by our next steps for 2019.
Successful market entry in the US and around the world
The rapid growth of the alternative data industry and of SESAMm
As a Fintech company specialized in alternative data for Asset Management, 2018 represented a thrilling year in our industry and 2019 already promises to be even more exciting.
During 2018, after our very first business trip in the United States, our international sales development beyond Europe began accelerating. In just one year, we already signed contracts with multiple clients. These include major hedge funds in the US and a major global trading company managing $100 billion in financial assets and part of the Top 10 in its market. The US market represents a powerful strategic growth driver and we are already preparing to open an office there soon!
SESAMm signed its first contract with a client in Africa: Ipro Investment, renown asset manager established for 25 years specialized in emerging markets. Finally, we also signed a contract with our first Japanese client, Nikko Global Wrap, one of the subsidiaries of Sumitomo Mitsui Asset Management which is a major asset manager in Japan managing JPY 1.7 trillion.
Strengthening and developing our position in Europe
At the European level, SESAMm has also extended its customer portfolio:
Groupama AM: new major clients and leading French Asset Management players managing €103 billion Asset under Management (AuM);
Société Générale: leading French bank present all over the world;
Raiffeisen Bank International: one of the leading banks in Europe with more than 50,000 employees servicing over 16.5 million customers and possessing around 2,400 business outlets;
GT Patrimoine : the largest consulting and private management firm in the Lorraine area and based in France for 12 years.
In addition, after our 1st successful collaboration, a new contract was signed with Candriam, leading Asset Management firm and members of the New York Life Group, managing more than $112 billion AuM worldwide.
We are very proud to see how much traction we gained in just a year. The growing use and interest in alternative data for the Asset Management industry, both for quantitative and fundamental funds and asset managers, lead us to prepare for new opportunities of growth & business development.
Cutting edge solutions to respond to market needs
Big Data & AI for Cryptocurrencies
Our first cryptocurrency project began in early 2018. Initially, we started tracking the evolution of the most popular cryptocurrencies, such as Bitcoin (BTC) and Ethereum (ETH) and we analyzed their social data to produce social sentiment & emotions indicators. These indicators have since been integrated into our visualization platform of market sentiment, L’Humeur des Marchés.
This led us to establish a unique partnership based on L’Humeur des Marchés with NapoleonX, a major player as the leading French cryptocurrency manager: the first sentiment and emotion cryptocurrencies analysis destined for the general public. Since then, ETH and BTC sentiment, emotions & opinion value from SESAMm has been available to individual investors and the general public on NapoleonX platform.
The evolution of L’Humeur des Marchés
Our platform L’Humeur des Marchés is an essential tool to guide companies in their investments. During 2018, multiple improvements were added into L’Humeur des Marchés to further enhance its insights & analytics. For example, users have now the possibility to build automated strategies which can generate daily trading signals. Multiple new features were also added such as a strategic backtesting system, daily alerts with 3 years of history and day+1 signal to forecast market movements giving asset managers an edge over competitors.
"L'humeur des marchés" is SESAMm's data visualization platform to analyze market sentiment & emotion for asset management
L’Humeur des Marchés, our data visualization platform
Finally, additional filters have been added to better study & analyze market sentiment: there are now 6 different filters for data sources (sort by sources from web & press, news, blogs, discussions, social trading or all of them) and 9 languages covered (sort by English, French, Spanish, Chinese, Japanese, Portuguese, Italian, German or all of them). These new filters allow for a wider and more accurate coverage of assets, leading to improved tools & insights for investment decision.
Global recognition & awards for SESAMm
To accomplish our worldwide ambitions, we have started being more and more present abroad, especially at international events. They represent great occasions to promote SESAMm, demonstrate the unique benefits and advantages brought by our technologies & solutions and finally create business opportunities.
This year, we participated in many international events in the US and in Japan, including New York and Hong Kong for Eagle Alpha’s Alternative Data event, Canada, Africa and even London at the French Fintech Tour.
Having been selected for unique international awards reinforces our confidence in the benefits of our solutions for the Asset Management industry, for example with “Talk data to me” by Neudata, Elevator Lab Competition, and Groupama’s award “Créateur de confiance” (Trust Creator) among others.
SESAMm won the pitch "Talk data to Me" of Alternative Data Summit event by Neudata
SESAMm pitch “Talk Data to Me” winner during Alternative Data Summit by Neudata
Moreover, SESAMm has competed in several acceleration programs, in which we were selected in the following ones:
Fintech Business Camp Tokyo, the Tokyo Metropolitan Government accelerator program by Invest Tokyo and powered by Accenture;
Elevator Lab, Acceleration program of Raiffeisen Bank International where SESAMm competed and was selected;
French Tech Tour America, IMPACT USA’s program to prepare and discover North America’s markets & opportunities;
Pass French Tech, La French Tech’s highly selective program for hyper-growth startups & companies.
SESAMm’s Demo Day Presentation during Fintech Business Camp Tokyo
SESAMm’s plans for 2019: recruitment, development and growth
This year, we are very proud to see our team grow so much in so little time: we had 16 collaborators at the beginning of January 2018 and we are now a team of 28 members! Talented profiles have joined SESAMm team with NLP, AI & Quant engineers & experts from world-renowned schools. New collaborators will join SESAMm in the first quarter of 2019 and we are still recruiting in various fields such as Data Science, Quantitative Analysis, IT and Natural Language Processing among others. You can find all our offers on our dedicated page SESAMm Career!
Following our international success, especially in the US and in Japan, we are now preparing to open an office in the US in the following months and are already considering this option for Japan. Next month’s promise to be exciting and we will be participating in multiple events such as AI & Data Science for trading in New York in March, Machine Learning in Quant Finance by GFMI in April, and many events & conferences on alternative data, data science, Artificial Intelligence and Big Data for Asset Management around the world.
As you can see, 2018 represented SESAMm an exceptional year for its growth with new customers, including global companies, technological improvements for our solutions & services and a bigger and even more motivated team! Our major event in 2018 was the accomplishment of a €2.6 million Series A fundraising campaign, which enabled us to continue our international development, mainly in America and Asia, and the recruitment of many profiles. 2019 will represent another step for SESAMm to become a leading company in the alternative data solutions in the world. Stay tuned: SESAMm news will arrive soon!
Over the past decade, many organizations have improved their carbon footprints, from recyclable and biodegradable packaging and single-use plastic to planting trees and reducing their greenhouse gas emissions. However, some businesses and companies looking to boost their eco-friendly image without committing to serious changes and addressing environmental issues have been associated with false green marketing. We call this "Greenwashing."
What is Greenwashing?
Greenpeace and the Environmental Protection Agency define greenwashing as making false and misleading claims about a product's environmental benefits or practices, services, technology, or company practices. Greenwashing typically involves companies spending more money on advertising and marketing than on implementing sustainable business practices that minimize environmental impact. These false green claims can deceive consumers into believing that a product or company is more environmentally friendly than it is, leading to increased sales and profits. As a result, false advertising, misleading initiatives, and groundless claims have increased green investors' exposure to risks emerging from potential lawsuits from activist groups, image deterioration, and some heavy loss in assets invested.
Why is Spotting Greenwashing Important?
Greenwashing is a growing concern for investors as they look to make sustainable and responsible investments. Therefore, spotting greenwashing practices is important for these firms. Here's why.
The deceptive practices used by greenwashers can have significant implications for the integrity of investments made in what investors believe to be sustainably operated companies or sustainable funds. In other words, greenwashing makes it difficult for investors to distinguish between genuinely committed to sustainability companies and those merely making false claims about their environmental practices. As a result, investors may unknowingly invest in companies that are not as sustainable as they claim to be, which can harm their financial returns and the environment. Therefore, it's essential for investors to be aware of greenwashing tactics and to carefully research companies before investing in them to ensure that their investments align with their values and contribute to a more sustainable future.
What Are the Challenges to Detecting Greenwashing?
It's challenging to produce an accurate assessment of environmental, social, and governance (ESG) factors, which gives companies the opportunity to cover or hide ineffective and fake green initiatives. According to Regtank, some of the main challenges to detecting greenwashing practices are the following:
Lack of reporting standards: some investors believe that we haven’t universally agreed upon a set of standards to determine whether a product is ESG compliant.
Lack of transparency: greenwashing companies don’t disclose the specificities of their “green campaigns,” which makes it difficult for investors and consumers to fact-check and evaluate their sustainability claims.
Limited consumer awareness: false marketing strategies could be based on a combination of the consumer’s eco-consciousness and brand loyalty. As a result, consumers become less aware of the misleading strategies greenwashing companies use to sell their products.
Ultimately, these factors may contribute to the inaccuracy and limitations of ESG data and scores, which makes it easier for greenwashers to get away with their false marketing campaigns. Consequently, detecting greenwashing requires scrutiny of environmental claims made by companies and an understanding of the complex supply chains and manufacturing processes involved in producing products and services.
To learn more about greenwashing and have access to real-life case studies, download this comprehensive report:
How Does Artificial Intelligence Detect Greenwashing?
As greenwashing practices increase, activist investors, experts, journalists, and even the general public are spreading awareness of the issue using social media, news outlets, forums, and blogs, among other means. Recently, artificial intelligence (AI), particularly natural language processing (NLP), has proven to be effective in the early detection of greenwashing by analyzing vast amounts of qualitative data publicly available on the web. At SESAMm, for example, we apply our NLP capabilities to identify companies likely to engage in greenwashing practices by analyzing text in billions of web-based articles. Our data lake contains over 25 billion web–sourced articles, sourced from four million news, blogs, social media, and forum discussions on five million public and private companies in more than 100 languages. We run these articles through our AI platform tool, TextReveal®, and systematically craft reliable, timely, and comprehensive insights to detect greenwashing, generate ESG alerts, and identify related risks.
The Rise of Greenwashing
Greenwashing, the deceptive practice where companies claim to be more environmentally friendly than they actually are, has become a growing concern in recent years. By analyzing the frequency of web mentions of greenwashing over time, we can observe important trends and understand the factors contributing to this phenomenon.
Recent analyses indicate a significant increase in greenwashing mentions since late 2019. This rise aligns with a growing public awareness of the climate emergency and the increase in media outlets and social media accounts dedicated to exposing greenwashing. The number of mentions escalated from fewer than 200 to over 23,000 in the last quarter of 2023, highlighting the increasing scrutiny of corporate environmental claims.
A noteworthy pattern is the regular occurrence of spikes in greenwashing mentions during the third quarter over the past three years. This timing corresponds with the "pre-COP" periods, leading to critical international climate change management conferences. These periods see heightened discussions around sustainability, with increased attention on companies' environmental practices.
Figure 1: Greenwashing mentions over time.
Greenwashing in the Energy Sector
The energy sector, particularly the oil industry, has faced significant scrutiny regarding greenwashing. In this context, companies like Shell and ENI have been prominent due to the frequency of greenwashing mentions associated with them.
Figure 2: Examples of greenwashing mentions in the energy sector over time.
For Shell and ENI, the volume of greenwashing mentions has fluctuated, with notable increases in specific quarters. For example, Shell saw spikes in mentions during the second quarter of both 2021 and 2022 while experiencing a drop in the third quarter of 2022. ENI has faced similar fluctuations, often linked to legal actions and publicized environmental issues.
Shell's Greenwashing Mentions, ESG Risks, and Initiatives
Shell, a British multinational and prominent player in this sector, has faced considerable scrutiny for such practices. The company has experienced notable spikes in greenwashing mentions and has been involved in several ESG-related risks.
Figure 3: Shell greenwashing and ESG mentions over time.
Greenwashing Mentions
We can see an increase in greenwashing mentions in the first half of 2023. Around that period, Shell faced allegations and lawsuits concerning its environmental claims. The company was criticized for misleading U.S. authorities and investors about its energy transition efforts. Additionally, Shell faced public backlash for labeling fossil gas as 'renewable' while reporting record profits. A notable incident involved a shareholder suing Shell's executives over climate risks.
ESG Risks
Shell has faced several ESG-related risks, including legal challenges and pollution issues. In 2021, the company was sued by New York City over climate change-related advertising and filed an arbitration claim against Nigeria concerning a spill dispute. In March 2023, Shell faced another oil spill, this time in another region in Nigeria, Rivers State, and also saw institutional investors backing a lawsuit against its board over climate risks. The mid-2023 period saw Shell agreeing to pay $10 million for air pollution violations at a Pennsylvania petrochemical plant. Despite its net-zero pledge, the company announced plans to increase fossil fuel production.
ESG Initiatives
Despite its challenges, Shell has also engaged in various sustainability initiatives. In late 2021, the company announced plans to purchase power from the world's largest offshore wind farm. Mid-2022 saw a leadership change with the company's CEO stepping down as Shell aimed to align with its climate goals. The company also planned to deploy 10,000 EV chargers across India as part of its global strategy. In mid-2023, Shell committed to investing $10–15 billion in developing low-carbon energy solutions. Although the company abandoned its lower oil production target, it maintained its commitment to reducing emissions.
Shell's journey underscores the challenges of aligning environmental claims with real actions, emphasizing the importance of transparency and genuine sustainability efforts.
ENI's Greenwashing Mentions, ESG Risks, and Initiatives
ENI, an Italian multinational oil and gas company, has faced scrutiny for such practices. The company has experienced fluctuations in greenwashing mentions and has been involved in a number of ESG-related risks.
Figure 4: ENI greenwashing and ESG mentions over time.
Greenwashing Mentions
ENI's greenwashing mentions are fairly low. However, the company has been featured in discussions about greenwashing, especially with recent developments. In early 2022, the company faced criticism for inconsistencies in emissions data and greenwashing activities, as highlighted by the Sereno Regis Study Center. Greenpeace also criticized ENI for using the Sanremo Music Festival as a platform for greenwashing. In May 2023, ENI faced a lawsuit for allegedly lobbying and greenwashing to promote fossil fuels despite being aware of their environmental risks. Greenpeace sued the company, accusing it of knowingly contributing to climate change.
ESG Risks
Over the past 4 years, the oil giant's ESG risks have been few but not inexistent. ENI has encountered several risks, including legal challenges and pollution issues. In 2022, ENI's environmental strategy was deemed a failure, and concerns arose about a pipeline spill into the East Irish Sea. The company also faced legal actions in 2021, including an appeal against a court ruling in an illegal waste case and warnings from the Legality Network to reduce greenhouse gas emissions or face prosecution.
The company faced a lawsuit in early 2023 for allegedly having prior knowledge of the climate crisis. In another incident, a report found that ENI and Shell were responsible for significant pollution in Bayelsa, requiring a $12 billion cleanup.
Shell and ENI both face the challenge of balancing economic interests with environmental responsibility. Despite allegations of greenwashing and environmental risks, both companies have taken steps towards sustainability, such as investing in low-carbon solutions and renewable energy projects. Their experiences highlight the importance of transparency, genuine commitment to environmental responsibility, and the role of public scrutiny in holding companies accountable.
Greenwashing and ESG Investing
In sum, certain companies advertise their sustainability and green initiatives, while in reality, they are making false claims and practicing greenwashing, as evidenced by our analysis using SESAMm's AI and ESG reports. We use AI through TextReveal to generate alternative data for use cases, such as ESG and SDG, sentiment, private equity due diligence, corporate studies, and more. Our technologies can reliably ensure the credibility of ecological initiatives and serve global investment firms, corporations, and investors, such as private equity firms, hedge funds, and other asset management firms, to enhance their investment strategies.
Conclusion
In conclusion, the issue of greenwashing represents a substantial obstacle in the journey towards genuine environmental sustainability, misleading consumers and investors and diluting the efforts of genuine sustainable enterprises. Nevertheless, the emergence of advanced technologies such as Artificial Intelligence (AI) and Natural Language Processing (NLP) indicated a new era of accountability. Innovators like SESAMm are at the forefront, deploying these technologies to effectively unravel and counteract greenwashing practices. This empowers investors, asset, and portfolio managers to discern and align their resources with legitimately sustainable entities. The call to action is clear: a collective demand for transparency and responsibility is crucial.
Reach out to SESAMm
TextReveal’s web data analysis of over five million public and private companies is essential for keeping tabs on ESG investment risks. To learn more about how you can analyze web data or to request a demo, reach out to one of our representatives.
Kotaro Hama will represent us at the conference and talk about our experience as an alumnus of the Plug and Play accelerator program. Come and say hello.
Join us on March 14 and watch Sylvain Forté’s live demo on stage, where he’ll present our latest ESG technology.
On the second day of the conference, March 15, Sylvain Forté will also take part in a panel discussion entitled “Fintech Founder Power Panel: We're In The Revenue - Now What?”
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