Deutsche Börse leads $15m round for sustainability start-up Clarity AI

Written by Ruby Hinchliffe
24th November 2020

Deutsche Börse has led a $15 million investment in Clarity AI, an environmental, social, and corporate governance (ESG) investment platform.

The start-up says Deutsche Börse approached its CEO, Santander’s former digital transformation head, Rebeca Minguela, on LinkedIn to initiate the deal.

Co-investor, Mundi Ventures’, a Madrid-based fund, also took part in the round.

“Our purpose is simple: to measure the impact of companies on our society and planet.”

In the last six months, the start-up claims it has seen a “significant increase in demand” for its services. This includes signing clients with eight times the assets under management as clients it’s signed previously.

The fresh funding will be used to scale-up Clarity AI’s investments in proprietary and artificial intelligence technology. As well as to integrate with “the world’s largest financial services platforms”.

This, the company says, will help to speed up the time it takes investment firms and corporates to produce analysis and reports on their sustainability impact.

How Clarity AI works

Founded in 2017, Clarity AI’s team of employees come from NASA, World Bank, Netflix and JP Morgan.

The fintech’s platform allows investors to manage the impact of their investment portfolios.

It leverages big data and machine learning, assessing the sustainability metrics for all societal stakeholders.

“Our purpose is simple: to measure the impact of companies on our society and planet,” says Minguela in a statement.

“Investors attempting to evaluate impact have faced fragmented and unreliable data, inconsistent subjective definitions, and a lack of standards and tools for comprehensive analysis.

“Historically, it has been too hard and resource-intensive to get accurate and transparent insights.”

The fintech sits on a client network with more than $3 trillion of assets and funding from investors.

Some of these network members include Kibo Ventures, Founders Fund, Seaya Ventures and Matthew Freud.

Through these members, Clarity AI analyses some 200,000 funds, spanning 198 countries.

Sustainable investment market

At the beginning of this year, BlackRock CEO, Larry Fink, wrote a letter to CEOs focusing on climate change. He wrote that this has become a “defining factor in companies’ long-term prospects”.

He also said a significant reallocation of capital was on the horizon much sooner than the industry might have anticipated.

Today, investors are willing to pay $0.7 more for a share in a company giving one more dollar per share to charity. That’s according to a January 2020 study by experts at HEC Paris Business School, Toulouse School of Economics, and MIT Sloan.

The study also showed firms operating with a negative social impact were valued at $0.9 less per share than those considered socially “neutral”.

Last year, the world saw a record number of bonds issued. They raised $185 billion in total to fund environmentally sustainable projects. That’s according to data from law firm, Linklaters.

Experts only predict sustainable investments to grow in popularity. In five years, almost one in five investors say they will allocate between 21% and 50% of their portfolio to ESG funds.

The 2020 Global ETF Investor Survey, conducted by US private bank Brown Brothers Harriman (BBH), revealed this.

Clarity AI and Deutsche Börse are looking to grow their partnership beyond just investments. In line with this boom in sustainable investments.

Qontigo, Deutsche Börse’s indices and analytics provider, will work alongside Clarity AI on joint projects.

“This partnership reflects our mutual commitment to the ongoing enhancement of sustainable investing,” says Sebastian Ceria, Qontigo’s CEO.