SESAMm Provides its Services to ODDO BHF Asset Management in the Field of AI-powered Text Analytics

By Sylvain Forté (SESAMm) and Mariya Peykova (Scientific Climate Ratings)

Picture two infrastructure assets.

The first carries obvious physical exposure, sitting right where the climate is changing fastest. The second is operationally robust and is considered sustainable, but it generates a steady stream of fines, local opposition, and headlines.

Which one is riskier to investors?

The answer depends on which question you're asking.

Viewed through a climate model lens, the first asset appears more exposed. Viewed through real-time controversy monitoring, the second demands more immediate attention. Neither assessment is wrong. Each captures a different dimension of risk.

That's why leading infrastructure investors increasingly rely on multiple perspectives rather than a single measurement. Climate risk doesn't reduce to a single definitive answer. It unfolds across different time horizons, different datasets, and different types of evidence. Looking through multiple lenses provides a richer understanding of an asset's resilience and the risks that may shape its performance throughout the investment lifecycle.

Four complementary lenses help build that picture: physical, transition, controversy, and regulatory.

The first two, physical and transition, are forward-looking. They use models and scenarios to estimate how climate change and the low-carbon transition may affect an asset over years and decades. The other two, controversy and regulatory, are grounded in today's reality, tracking emerging events, stakeholder concerns, enforcement actions, and changing policy as they happen.

Together, these lenses provide a more complete understanding of risk. Physical and transition analysis explain where an asset is heading over the mid and long term. Controversy and regulatory monitoring reveal what is happening today and how quickly new issues are emerging. Rather than competing, they complement one another.

We explored exactly this approach during a recent live session co-led by Sylvain Forté, CEO of SESAMm, and Mariya Peykova, Sales Director at Scientific Climate Ratings, where they put a real infrastructure asset, a coal-fired power plant operated by LEAG, through each of the four lenses. The session demonstrated how decision makers can integrate Scientific Climate Ratings’ and SESAMm’s products to capture climate risk from all angles. Below, we’ve recapped key takeaways from that analysis.

The Long View: Physical and Transition

Start with the lenses that look across the life of the asset: physical and transition. Both are the domain of Scientific Climate Ratings, which translates climate science into financial metrics that investors can act on. Its Climate Exposure Rating runs on a standardized A to G scale (A is climate-resilient, G is structurally vulnerable), combines physical and transition components, and is forward-looking offering various time horizons from 2035 to the end of an asset's operational life. Each grade is benchmarked against a stable universe of more than 6,000 private infrastructure assets across 25 countries, and the methodology is deliberately transparent, with no black boxes.

The physical lens asks what a changing climate does to the asset itself. For the Schwarze Pumpe plant, the answer is reassuring. Its headline physical exposure rating is A, the most resilient grade, with asset-equivalent damage of just 0.09%. What little exposure there comes mainly from manageable flood risk, with heat stress limited.

However, the model flags one hazard that needs monitoring: drought. It rates F, with water demand projected to be four times the available supply and drought conditions covering three months of the year, for an asset that, like much heavy industry, depends on water. That signal does not yet include a financial damage figure because a peer-reviewed drought damage function is still being developed, but it is a real exposure that the model is flagging for the future.

The transition lens asks a different question: how does the asset perform as the economy decarbonizes? Here, the same plant tells a starkly different story. Under a net-zero pathway toward 2035, it rates G, the worst grade on the scale. The pressure intensifies sharply from around 2030, driven by Germany's legislated coal phase-out under the KVBG, with projected revenue approaching near-total devaluation. Both sub-components sit at the bottom of the scale: direct carbon costs, as carbon prices climb toward roughly $700 a tonne under net zero, up from today's levels near $76, and market demand, which collapses to the point of total demand destruction. On this trajectory, the asset is, in effect, stranded.

To be fair to LEAG, this is not a company simply waiting to shut down. Backed by the federal government, it is already planning an 850-megawatt hydrogen-ready gas plant at the same site to replace half of the retiring coal capacity. That is a genuine transition story, and exactly the kind of forward plan the modeled lenses are built to weigh.

These grades are not abstract scores. They translate physical and transition exposure into comparable financial metrics, such as annualized expected damage and revenue at risk, projected forward to 2050 and beyond, so one asset can be weighed against thousands of others on the same terms.

Taken together, these long-term perspectives paint a nuanced picture. The Schwarze Pumpe plant is physically resilient today, yet its economic model faces a steep, policy-driven decline within the decade.

What they don't capture is what may already be unfolding around the asset right now.

Scientific Climate Ratings already offers Climate Risk Ratings (CRR), the next step beyond the Climate Exposure Rating (CER) featured here. Where the CER quantifies climate exposure and potential average annualized damage, the CRR translates it directly into impact on key financial metrics: revenues, cash flows, probability of default, and enterprise value. The step from 'how exposed is this asset?' to 'what does this cost?' in the financial language that investment committees can act on. 

The Signal View: Controversy and Regulatory

Now switch to the lenses that focus on the present: controversy and regulatory. 

Both are the domain of SESAMm, which uses AI to detect ESG controversies on private assets, often before they surface in traditional ratings. Drawing on one of the industry's largest data lakes, it reads more than 35 billion documents (news, regulatory filings, local press, NGO, and court reports) and distills them into a Controversy Exposure Score on a 0 to 100 scale. Individual events are aggregated into cases, each with a timeline, its sources, and a severity rating that reflects how material the issue is: financially, legally, and by the number of stakeholders affected.

The controversy lens, then, monitors how the outside world is responding to an asset in real time, surfacing meaningful developments as they emerge.

For LEAG, that real-time read is substantial. The operator carries a high Controversy Exposure Score spanning environmental, social, and legal topics. There is proven legal action against one of its mining operations, flagged at the highest severity as a potential UN Global Compact violation, alongside criminal complaints over environmental breaches and a record of legal, regulatory, and community pressure built up over the years. A notable cluster of those signals concerns water, both consumption and pollution, including challenges and complaints over groundwater pumping and water permits.

That last point is telling. Recall the drought exposure the physical model flagged but could not yet price. Here it is, already materializing as legal and community pressure on the ground, picked up in real time. None of this appears in a physical climate model or a transition scenario, yet each development can influence permitting timelines, financing conditions, operational flexibility, or reputation.

This is where real-time signals become especially valuable. Controversies often emerge long before they are reflected in annual ratings or financial models. Public opposition, regulatory investigations, and stakeholder disputes can develop over months or even years before they result in fines, project delays, or impairments.

Alongside controversy monitoring sits the regulatory lens, which captures how policy is evolving and being enforced on the ground. For infrastructure investors, this may include relicensing requirements, water rights, environmental compliance, or expanded disclosure obligations such as the CSRD. In many ways, the regulatory perspective bridges long-term transition trends with today's operational reality.

These lenses answer a different set of questions from climate models. Rather than forecasting where the asset is heading decades from now, they reveal what requires attention today.

Four Lenses, One Richer Understanding

The Schwarze Pumpe plant is, at the same time, physically resilient, economically stranded on a net-zero path, and under active legal, regulatory, and community pressure today.

Each lens highlights a different aspect of the same asset, operating across different timescales and using different types of information. Physical and transition analysis explain long-term structural resilience and exposure. Controversy and regulatory monitoring reveal how emerging issues are unfolding in real time.

It's tempting to combine these perspectives into a single score, but doing so risks losing the context that makes each valuable. The four lenses aren't multiple measurements of the same phenomenon. They're answers to different questions.

Viewed together, however, they become considerably more powerful. The drought finding captures it: a hazard the physical model can flag but not yet price, becomes far easier to weigh once real-time monitoring shows the water-related legal and community pressure already building around the asset. Long-term climate modeling helps investors understand whether a controversy reflects a temporary challenge or an early signal of structural risk. Conversely, real-time controversy and regulatory monitoring provide context for long-term scenarios by indicating whether projected risks are already beginning to materialize.

No single lens tells the whole story.

Together, they provide a far clearer picture of infrastructure risk.

‍

[SESAMm and Scientific Climate Ratings operate as independent platforms. This analysis reflects a collaborative session designed to illustrate how complementary approaches to climate risk can be combined to provide a holistic risk assessment across both short-term and signals and long-term risks.]

Environmental challenges, such as climate change, biodiversity loss, and resource depletion, rapidly increase daily. The urgency for a coherent and actionable framework to promote sustainable investments has never been more important. With all of the terms and claims surrounding sustainability, it is a struggle for investors, companies, and consumers to identify which activities and projects are genuinely beneficial for the environment. This is where the EU Taxonomy is a guiding instrument to illuminate the path toward a sustainable economy.
Introduced by the European Union, the EU Taxonomy is a green classification system designed to provide criteria for identifying environmentally sustainable economic activities. Offering a common language and set of standards, the Taxonomy helps mitigate the confusion surrounding sustainability claims and enhances the transparency needed for informed investment decisions.

Understanding the EU Taxonomy

What is the EU Taxonomy?

The EU Taxonomy is a systematic framework that translates the European Union's climate and environmental objectives into specific criteria for economic activities. It assists investors and companies in recognizing which investments qualify as “green,” ensuring that capital flows toward activities with a positive environmental impact.

Main Objectives

The EU Taxonomy is built upon several objectives aimed at transforming the economic landscape:

1. Supporting the transition to a sustainable economy: The Taxonomy enables businesses to align their operations with the EU's environmental goals by providing clear definitions and criteria for sustainable activities.
2. Mitigating market fragmentation: The Taxonomy aims to provide uniform standards across EU member states, reducing inconsistencies arising from different national interpretations of sustainability.
3. Protecting against greenwashing: In an environment where misleading claims about sustainability are prevalent, the Taxonomy offers a reliable benchmark, ensuring that companies cannot misrepresent their environmental practices.
4. Accelerating financing for sustainable projects: By identifying what constitutes a sustainable activity, the Taxonomy directs investments toward projects that contribute to the EU’s climate and environmental objectives, promoting the development of green technologies and practices.

The EU Taxonomy in Sustainable Finance

The EU Taxonomy is a key component of the broader sustainable finance agenda. By providing a systematic approach to sustainability, it helps guide financial flows toward investments that will foster real environmental progress. This initiative is particularly significant as global investors increasingly seek to align their portfolios with sustainability goals.

Understanding the EU Taxonomy

What is the EU Taxonomy?

The implementation of the EU Taxonomy is facilitated through the Taxonomy Climate Delegated Act. This act sets the criteria for activities concerning climate objectives, recognizing those contributing to achieving climate neutrality and enhancing climate change resilience. It represents the first step towards establishing a comprehensive set of criteria applicable to various sectors.

Sectors Covered

The Taxonomy initially focuses on sectors with significant contributions to greenhouse gas emissions. These sectors include:

• Energy: Emphasizing renewable energy production and energy efficiency improvements.
  
• Forestry: Promoting sustainable forest management.
• Manufacturing: Aiming for reduced emissions and efficient resource use in manufacturing processes.
• Transport: Encouraging the adoption of lower-emission transport options.
• Buildings: Focusing on energy-efficient design and construction methods.
  

Technical Screening Criteria

The Taxonomy includes strict technical screening criteria that define acceptable thresholds for sustainability. These criteria are based on scientific evidence and best practices, ensuring that activities meet established environmental standards.

Defining Green Economic Activities

The Six EU Environmental Objectives

At the core of the EU Taxonomy are six environmental objectives that guide the classification of economic activities:

1. Climate change mitigation: Activities that significantly reduce greenhouse gas emissions.
2. Climate change adaptation: Actions aimed at preparing for and adjusting to the impacts of climate change.
3. Sustainable use and protection of water and marine resources: Strategies to ensure long-term viability and health of water resources and marine ecosystems.
4. Transition to a circular economy: Practices that promote efficient resource use, waste reduction, and recycling.
5. Pollution prevention and control: Efforts focused on minimizing pollution and managing waste effectively.
6. Protection and restoration of biodiversity and ecosystems: Initiatives dedicated to conserving biodiversity and restoring ecological systems.

Conditions for Taxonomy-Aligned Activities

For economic activities to be recognized as taxonomy-aligned, they must fulfill four critical conditions:

1. Make a substantial contribution: The activity must significantly contribute to at least one of the environmental objectives.
2. Do no significant harm: It must not adversely impact any other environmental objective.
3. Comply with minimum social safeguards: Activities must meet criteria protecting social and labor rights.
4. Meet technical screening criteria: These are established through scientific methodologies, ensuring that activities genuinely contribute to sustainability goals.

Integrating the EU Taxonomy with Other Regulations

Corporate Sustainability Reporting Directive (CSRD)

The CSRD complements the EU Taxonomy by requiring companies to disclose comprehensive information about their environmental performance. This regulation aligns closely with the Taxonomy by mandating that organizations within its scope report on the extent to which their activities are taxonomy-aligned, promoting transparency and accountability in corporate sustainability efforts.

Sustainable Finance Disclosure Regulation (SFDR)

The SFDR mandates that financial market participants disclose how their financial products align with the Taxonomy standards. This regulatory framework aims to provide investors with insights into the sustainability impacts of their investment options, fostering greater trust and informed decision-making.

Implementation and Compliance

Corporate Mandatory vs. Voluntary Disclosure

• Mandatory Disclosure: Large companies and financial market participants are obligated to disclose the alignment of their activities with the Taxonomy. This requirement enhances transparency and ensures stakeholders have access to key information regarding corporate environmental performance.
• Voluntary Disclosure: Companies can also engage in voluntary reporting to highlight their sustainability strategies and progress. This allows businesses to strategically utilize Taxonomy criteria in their planning and investment decisions.

The Role of Member States and Financial Entities

Member States and the EU are expected to leverage the Taxonomy in their regulatory frameworks. This includes establishing public labels for green corporate bonds and financial products aligned with SFDR, thus fostering market acceptance and stimulating demand for sustainable investments.

Challenges and Opportunities

Market Fragmentation

While the EU Taxonomy aims to unify standards across the region, differences in implementation and interpretation among member states could lead to market fragmentation. The EU must maintain a cohesive approach and address any differences that may arise.

The Risk of Greenwashing

With the growing popularity of green investments, there is an increasing risk of greenwashing, where companies may exaggerate or misrepresent their sustainability claims. The EU Taxonomy provides a valuable tool to combat this risk by establishing clear and robust criteria for what constitutes a sustainable activity.

Benefits for Companies and Investors

For companies, engaging in taxonomy-aligned activities can attract institutional and retail investors, banks, and other financial entities that prioritize sustainability. Investors, on the other hand, benefit from improved clarity and assurance about the environmental impact of their investments, allowing them to align their portfolios with their sustainability values.

Future of the EU Taxonomy

Expansion of Coverage

The EU Taxonomy is not static; it is designed to evolve over time. While it currently focuses on sectors with the highest emissions, plans are in place to expand its coverage to include additional sectors and activities as the regulatory framework matures and new technologies emerge.

Adaptation to Technological Changes

As technological advancements grow, the EU Taxonomy must remain responsive to new developments in sustainability practices. This adaptability is crucial for ensuring that the criteria remain relevant and effective in guiding investments toward genuine environmental sustainability.

The Role of the EU Taxonomy in Achieving Sustainability Goals

The EU Taxonomy serves as a cornerstone for sustainable finance within the European Union. By providing clarity and consistency in defining what constitutes a sustainable activity, it empowers both companies and investors to make informed decisions that contribute to environmental preservation and climate goals.

Conclusion

The EU Taxonomy is an initiative aimed at redirecting investments toward environmentally sustainable activities. By establishing clear criteria and creating a common understanding of sustainability, the Taxonomy not only assists companies in navigating their transitions to greener practices but also safeguards the integrity of the environmental finance market.

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.

In our most recent webinar, "Unmasking Greenwashing: How to Identify Genuine and Deceiving Sustainability Initiatives with AI," Sylvain Forté, SESAMm’s CEO and Co-founder, discussed our recent ebook entitled with the same name focusing on the vital role of AI in identifying and understanding ESG controversies, focusing on greenwashing and reputational laundering.

Greenwashing, the act of misleadingly portraying products or services as environmentally friendly, and reputational laundering, where companies create a facade of ethical behavior, are increasingly prevalent challenges. These practices mislead investors and consumers, obscuring the reality of a company's environmental impact. Our webinar highlighted the complexity of these issues and their relevance across various industries.

We discussed how AI technology is revolutionizing the detection of greenwashing and reputational laundering. By analyzing vast amounts of web data, including news articles, social media, and public records, AI uncovers patterns and red flags that might indicate deceptive practices. This is particularly pertinent for stakeholders in the financial sector, such as private equity firms, who must navigate the intricate landscape of ESG compliance and sustainability.

Our recent research study underscored the importance of this technology. We found that mentions of greenwashing and related controversies have grown exponentially over the years. This increase aligns with a rising global awareness of environmental issues and the demand for corporate transparency. AI's ability to sift through and analyze this growing body of data is invaluable in providing accurate, timely insights into potential ESG risks.

We also noted an interesting trend: while greenwashing mentions are increasing, their growth rate is slowing down. This suggests that as regulatory frameworks around ESG become more formalized and the market becomes more educated, instances of unintentional greenwashing decrease. It's a sign that clearer rules are helping companies avoid these pitfalls.

Our analysis also revealed that different industries experience varying levels of exposure to greenwashing claims. Sectors like food, drug retail, and oil and gas have seen significant increases in accusations of reputational laundering. However, we also observed a positive trend in the fashion industry, where regulatory frameworks have led to a decrease in greenwashing mentions.

Lastly, we highlighted the importance of distinguishing between negative and positive ESG mentions. While it's crucial to identify and monitor greenwashing allegations, it's equally important to recognize and support genuine sustainability initiatives. Our analysis showed that positive ESG initiatives often have a more significant impact on public perception than negative ones.

Watch the webinar replay now:

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 request a demo, contact one of our representatives.