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Can Linux-led open source collaboration solve the financial sector’s data problem?

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Linux Foundation, the non-profit technology consortium, has launched a climate data initiative, OS Climate (OS-C). The platform, providing ‘pre-competitive’ layers of data and technology for tools and analytics development, should help meet the financial community’s need for data that is transparent, consistent and interoperable.

Truman Semans, CEO of OS-C, said: that “These tools will generate the refined data and actionable insights needed for pension funds, asset managers, and banks to rapidly align their investments and loans to net zero and resilience goals. They can be used not only by the leading members within the Glasgow Financial Alliance for Net Zero (GFANZ) but the rest of the global financial community.”

Open source collaboration drove vaccine development – can it work for climate?

OS-C is taking the open collaboration approach that delivered rapid COVID vaccines, applying that to solve data gaps now blocking rapidly scalable transition of capital toward a resilient net zero economy. This is an important development considering the need for standardised data and approaches in dealing with climate change and risk, and the short space of time for action available.

There are less than 30 years to complete transform the global economy if we are to hit the Paris net zero goals, and to stay on track emissions must be cut by 45% by 2030. The IEA has estimated that the cost of achieving that transition will be over $5 trillion a year. If that goal is to be achieved then every part of the global economy will need to be aligned.

Three tools form the basis for future tools and data development

The initiative has released three main tools for public collaboration, which it calls “critical to tackling the climate crisis.” The three tools, Physical Risk & Resilience, Portfolio Alignment and Transition Analysis, were developed co-operatively by OS-Climate members, led by BNP Paribas, Allianz and Airbus respectively.

Enabled by cloud services contributed by Amazon and Microsoft, the goal is to create ‘a transparently governed, non-profit public utility of climate data and analytics’, built through collaboration with insurers, banks, academia and software developers.  The plan is to build out a suite of new tools as well as a ‘Data Commons’, a library of data and metadata suitable for use with OS-C’s toolset.

All members contribute data, models and software for co-operative projects

Members of the OS-C initiative will contribute their data scientists, modellers, and software developers to cooperative projects building the OS-Climate Data Commons, a federated library of libraries of corporate and factor data, plus analytics tools to derive the actionable metrics crucial for asset allocation, portfolio construction, security analysis, credit analysis, corporate engagement, strategic planning and transition investment by corporates, and financial sector supervision.

Such collaboration, backed by open-source giant Linux, will not only speed up development of necessary commercial tools, but also is likely to drive greater transparency and trust in the system. It is becoming increasingly clear that no one actor on their own can address the challenges faced by corporates, countries and the financial system and collaborations of this sort are likely to accelerate.

Data is critical to successful climate action

Laurent David, Deputy Chief Operating Officer at BNP Paribas, said: “Robust and accessible data are essential to implement material climate policies and make sustainable finance credible. They are essential to allow financial institutions to set priorities, define objectives, and control their achievement.” Allowing financial institutions to do this is critical, but trust needs to be built across the market.

Members of OS-C will contribute their data scientists, modellers, and software developers to cooperative projects building the OS-Climate Data Commons, a federated library of libraries of corporate and factor data, plus analytics tools to derive the actionable metrics crucial for asset allocation, portfolio construction, security analysis, credit analysis, corporate engagement, strategic planning and transition investment by corporates, and financial sector supervision.

Robert Litterman, former chair of the Commodity Futures Trading Commission’s (CFTC) climate-related market risk subcommittee, added, “This platform could be a real game-changer. The Linux Foundation’s approach is uniquely able to build public goods that serve a wide range of public interests… It also can help advance multiple goals of financial regulators for managing risk in the financial system, especially in terms of generating meaningful and comparable climate-related risk disclosures from corporations.”

Initiative members include industry, finance, tech, academia and NGOs

There are a range of corporate and financial institutions that contribute to OS-Climate’s financial services sector and asset management approaches. They will be providing technology, bank and financial data as well as ‘real economy’ corporate information. Members include Airbus, Allianz, Amazon, BNP Paribas, BNY Mellon, EY, Federated Hermes, Goldman Sachs, KPMG, London Stock Exchange Group, Microsoft, the UN-convened Net Zero Asset Owner Alliance ($10.6 trillion AUM), Ortec Finance, Red Hat and S&P Global.

NGO and academic Members include CPI, Open Climate Foundation, Polytechnique, and the World Benchmarking Alliance. Research NGOs sharing human capital and world-leading insights with OS-Climate include the World Resources Institute, RMI, and the London School of Economics through the Transition Pathways Initiative. Other data partners include Jupiter Intelligence, riskthinking.ai, and Urgentem.

 

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