Introducing: SESAMm MCP Server

Barcelona, QuantMinds International, November 2022

CEO Sylvain Forté joins QuantMinds correspondent Joanna Simpson in an interview highlighting the use of AI in ESG Investing and how we use it to detect greenwashing practices.

Below is an approximation of this video’s audio content. Watch the video for a clearer understanding of the topics discussed during the interview.

Joanna:  I'm Joanna Simpson here at QuantMinds International in Barcelona. Joining me now is Sylvain Forté, CEO of SESAMm. Thank you very much for being here.

Sylvain: Thank you.

Joanna: Tell me, how does it feel to be here at QuantMinds International?

Sylvain:  It feels very good, actually. We've been to the conference a couple of times already, so it's not our first year, and this time we brought several people from our team. We're all here together, presenting our technology and discussing some of the novelties in the space. It's very exciting and personalized.

Joanna: Great. And what role does artificial intelligence have to play in the future of ESG and ESG investing, in particular?

Sylvain:  ESG is a massive trend in the industry right now, not just in asset management and the quant space but also in private equity, in corporate space like tracking suppliers, clients, etc. And one of the key problematic themes that we see is data gaps. There's a lack of data in terms of coverage; small caps, mid caps, or even private firms are not well covered. The frequency of information tends to be lagging. There's a very low frequency, like quarterly updates or so. There's also a lack of transparency and the like.

So, I believe that AI is primarily a tool that can help build that information gap and, for example, cover millions of companies instead of just a few tens of thousands of companies manually. What we do at SESAMm is leverage a technology called natural language processing (NLP), where we screen text automatically to understand potential ESG controversies or positive impact events. This leads us to have a coverage of around 5 million companies, meaning every publicly listed company out there and private firms that no one else would cover otherwise. This enables many use cases.

There's also frequency; you can generate indicators every single day, more like a quantitative time series that people are used to, and this enables clients to get access to information even locally, like Raiffeisen, one of our clients, is tracking clients in Poland, in Austria, in Germany, or in Ukraine using NLP which would not be possible with traditional ESG metrics. I think that the key topic of AI is expanding the use, expanding the coverage in terms of ESG data, and making sure that data is systematic, follows a good process, and is transparent.

Joanna: What examples are there of ESG investing being enhanced by AI?

Sylvain:  We see two primary use cases.

The first one is more quantitative, where people are looking to leverage ESG NLP data in their systematic trading process. It's either for alpha generation; for example, we work with LFIS, an asset manager in France that created a fund based on ESG NLP data. Their primary goal is to enhance their strategy to generate outperformance, which is really a good use case in that space. This is the quantitative use case where you can use higher frequency data like daily data to leverage ESG like any other kind of alternative dataset and derive superior returns.

Then we have more discretionary use cases where we see large asset managers or private equity shops which are looking to perform risk management tasks or help their team prioritize the scoring of assets. Say they have a team that does their own proprietary scoring on assets with regards to ESG, but how do I prioritize? I have 3000 assets to follow, I need some kind of alert on that whole universe to make sure that I focus on the assets that could be most controversial today. That's one of the things that we provide; daily alerts using natural language processing where people can say okay, there is a massive shift right now; as an ESG analyst, I'm going to make a decision to look at this asset specifically to help cover it and update the score.

Joanna:  Can AI help with greenwashing in ESG investing, and if so, how?

Sylvain:  Yes, it's one of the other kinds of problems that you have in ESG is the lack of transparency on the methodology creates some anomalies in some cases. And one of the big anomalies is that there's this averaging effect where a firm that has both positive actions and negative topics is going to be, on average, neutral, which is really problematic.

We had a big example like this in France recently with Orpea, a listed company of nursing homes exposed to a massive scandal with regards to mistreating patients—so more like social washing than greenwashing. And the problem is their scores were pretty high because, at the same time, they had some positive impact. They were implementing new diversity policies and the like, so it was averaging up.

At SESAMm, we leverage NLP to completely differentiate positive and negative topics. So if a firm is doing good stuff that is aligned with SFDR, and they have positive actions, etc., great! That's going to be one score. But if, at the same time, they have very negative topics, there are a lot of risks we're going to still detect that's not going to be averaged. It's going to be very specifically focused on.

Joanna: Sylvain Forté, thank you for your time.

Sylvain: Thank you very much.

To learn more about how SESAMm uses Text Reveal to find ESG data, contact a representative today.

Join SESAMm for breakfast in Midtown during Climate Week NYC on September 23rd from 8:30 am - 10:30 am. We'll give a short, informal walkthrough of what's new on the platform and what's coming next, then open it up for coffee and conversation with the SESAMm team and other users in ESG, risk, and compliance.

This is a small gathering for SESAMm clients and prospects. Space is limited - looking forward to seeing you there!

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In an era where global supply chains span continents and consumer goods can travel through dozens of hands before reaching store shelves, the challenge of ensuring ethical production has never been more complex. Against this backdrop, the recent warning from Parliament's Joint Committee on Human Rights should serve as a wake-up call for policymakers, businesses, and consumers alike.

The committee's stark assessment that the UK risks becoming a "dumping ground" for goods made using forced labor comes at a critical juncture. As other major economies implement increasingly stringent measures to block exploitative products from their markets, Britain's relatively lax approach threatens to make it an attractive destination for goods that can no longer find entry elsewhere.

The Hidden Reality of Modern Supply Chains

The scale of forced labor in global supply chains is both vast and largely invisible to end consumers. When we purchase everyday items, from clothing and electronics to food products, few consider the working conditions of those who produce them. Yet the uncomfortable truth is that forced labor affects virtually every industry and touches supply chains that ultimately reach consumers.

The British Joint Committee on Human Rights has identified a critical vulnerability: while other nations strengthen their regulatory frameworks to combat forced labor imports, the UK appears to be falling behind.¹ This regulatory gap creates a concerning dynamic where goods rejected by more stringent markets could increasingly find their way to British shores.

International Developments and Competitive Disadvantage

The committee's findings become particularly significant when viewed against recent international developments. Major economies have been implementing increasingly robust measures to prevent forced labor goods from entering their markets, creating higher barriers for ethically questionable products. This trend places the UK in a precarious position, potentially becoming the path of least resistance for exploitative goods seeking entry into Western markets.

The economic implications extend beyond moral considerations. British businesses operating in global markets face growing pressure to demonstrate ethical supply chain practices. Companies that cannot adequately address forced labor risks may find themselves at a competitive disadvantage as international standards continue to evolve.

The Committee's Clear Recommendations

The parliamentary committee's primary recommendation, implementing import bans on goods linked to forced labor, represents a significant departure from the UK's current approach. The existing framework, which relies heavily on voluntary corporate reporting and due diligence measures, has proven insufficient to address the scale and complexity of modern forced labor.

This recommendation aligns with best practices emerging globally. Governments are taking more direct action to prevent exploitative goods from entering their markets. The question is no longer whether such measures are necessary but how quickly they can be implemented effectively.

Practical Challenges and Solutions

Implementing comprehensive anti-forced labor measures presents genuine challenges, particularly for small and medium-sized enterprises that may lack the resources for extensive supply chain monitoring. However, these challenges should not deter action; they should inform the design of practical support systems.

Businesses need access to reliable tools and guidance for identifying forced labor risks in their supply chains. Government agencies, industry associations, and civil society organizations must collaborate to develop accessible resources that enable companies of all sizes to participate meaningfully in ethical sourcing practices.

The Path Forward

The parliamentary committee's warning represents more than a policy recommendation; it calls for Britain to reclaim its position as a leader in human rights protection. The government faces a clear choice: implement robust measures to prevent forced labor goods from entering UK markets, or risk Britain becoming known as a soft touch on fundamental human rights issues.

The urgency of this situation cannot be overstated. Each day of delay potentially allows more exploitative goods to enter British supply chains and undermines our credibility in international human rights discussions. The time for voluntary approaches and gentle encouragement has passed; decisive action is now required.

SESAMm’s AI Technology Reveals ESG Insights

Discover unparalleled insights into ESG controversies, risks, and opportunities across industries. Learn more about how SESAMm can help you analyze millions of private and public companies using AI-powered text analysis tools.