AI and Blockchain Applications for ESG

AI & Bl k h i
AI & Bl k h i
AI & Blockchain
AI & Blockchain
Applications for ESG
April 28, 2021
April 28, 2021
Alex G. Lee
Alex G. Lee
©2021 TechIPm, LLC All Rights Reserved www.techipm.com

ESG Ecosystem
ESG Ecosystem

The risk in ESG investing is the difficulty in measuring how well a company is doing with ESG
ESG Trends to Watch in 2021 (AI Summarization)
g y g p y g
issues because of a lack of standard terminology. Leading ESG standards organizations have
declared their intent to collaborate to develop ESG Standards . The IFRS Foundation is forging a
path toward a global common language for sustainability .
Financial market participants are now required to make mandatory ESG disclosures: EU
Sustainable Finance Disclosure Regulation (SFDR). The requirements are designed to make it
easier for investors to make informed investment decisions, improve industry-wide
comparability, and prevent greenwashing (a false impression or misleading information). The so-
y g g ( g )
called level-1 disclosures must be complied with as from March 10, 2021 . Asset managers must
publish on their websites information about their policies on the integration of sustainability
risks in their investment decision-making process or their investment advice or insurance
advice . They must also provide information on certain features of financial products that promote
environmental or social characteristics.
When the COVID-19 pandemic hit, it brought widespread social unrest around income inequality
and worker safety . The death of George Floyd while in police custody put a necessary spotlight
on the ugly systemic racism in the U.S. The ESG conversation evolved rapidly to give more
priority to social issues.
President Joe Biden pledged to set the U.S. on the path to net-zero greenhouse gas emissions
©2021 TechIPm, LLC All Rights Reserved
by 2050 . The Federal Reserve recently joined the Network for Greening the Financial System, a
group of central banks and supervisory authorities from around the world that are collaborating to
develop climate risk management tools for the financial sector.

Ref. https://www.slideshare.net/alexglee/esg-knowledge-map
ESG Knowledge Map (AI Topic Modeling)

ESG Scoring Automotive v. Financial (AI Classification)

The Role and ROI of ESG in Private Equity (Mike Spaeth)

ESG: Jumping across the Chasm
©2021 TechIPm, LLC All Rights Reserved 7
7

ESG Across Private Equity
Limited Partners
(LP)*
General Partners
(GP)*
Portfolio
Companies
*Logos used for illustrative
purposes.
Companies may not be EcoVadis
customers.
Exports &
reports from
GP
Enterprise
Ratings
Measure
Improvement
s
8
*Logos used for illustrative purposes. Companies may not be EcoVadis
customers.

Private Equity ESG ‐ Timeline
Due Diligence
Enhanced risk visibility;
Portfolio ESG
Improvements
quantify ESG impact on
portfolio; prioritization of
opportunities
Improvements
Quantify and monitor ESG
performance at portfolio
and company levels
Performance
Reporting
Risk Monitoring
360° Watch for
Reporting
Annual auditable
reporting to LPs on ESG
performance of portfolios
360 Watch for
monitoring between
ratings
9

ESG Investing
Momentum
Momentum
Across the
Globe
Proporti
on of
Global
Responsible
i t t i
Global
SRI
Assets
by
investment is an
approach to investing
that aims to
i
by
Region
incorporate
environmental, social
and governance (ESG)
f i
Sustainable
and
Responsible
factors into
investment decisions,
to better manage risk
d
UN PRI
Responsible
Investing in
the United
States
10
and generate
sustainable, long‐term
returns”
1995‐2018

1 Thanks, I was not aware of these. I just sent you a couple other decks I've found recently which you may or may not be aware of.
Greg Bouchard, 10/27/2020
1 @gbouchard@ecovadis.com came across these value prop slides for private equity (from this slide onwards) - not sure who owns
them?
_Reassigned to Greg Bouchard_
Christy Cooke, 10/28/2020
1 @ccooke@ecovadis.com Lucas owns this deck if you have questions.
_Reassigned to Christy Cooke_
Alexandrine Borges, 10/28/2020

Growing Demand from a Younger Generation of
Individual Investors
Younger generations of individual investors (millennials)
are more concerned with ESG issues than their elders
(800% increase from 2013‐2017
(
Morgan Stanley, 2017).
11

Regulatory Landscape
Until recently, ESG regulations have targeted Number of ESG
y, g g
companies rather than investors, but this has
changed.
regulations has
increased since 2000
Categories of regulations:
• Reporting obligations
Reporting obligations
• Definition of fiduciary duty (in
particular in pension funds regulation)
• Setting standards for sustainable
investing
Some examples:
• France’s Article 173 LTE (2015)
• EU Action plan on Sustainable Finance
(2019)
(2019)
• UK regulation on pensions funds’
fiduciary duty (2018)
• US Department of Labor guidance
(2018)
H ff ti th
• Chinese Guidelines for establishing the
green financial system (2016)
How effective are these
regulations?
• PRI‐MSCI study (2016) shows
significant correlation between
regulatory constraints and ESG
regulatory constraints and ESG
integration maturity
• Regulations start as a “tick‐the‐box”
exercise then become more
meaningful once absorbed by the

AI Applications for ESG
AI Applications for ESG

AI Innovation Frontline
3D Image Recognition

Top 100 AI Technology Innovation Entities

AI Technology Innovation Entities HQ Landscape

AI Innovation State of the Art Demos
Mobileye's Autonomous Car Open AI’s AI Avatar
TechIPm’s Disease Diagnostic System Emotion AI Chatbot
TechIPm s Disease Diagnostic System Emotion AI Chatbot

Ref. Link: https://www.slideshare.net/alexglee/nvidia-gtc21-ai-conference-
hi hli ht
NVIDIA GTC21 AI Conference Highlights
highlights

Text summarization for ESG trend analysis
AI Applications for ESG Demos
Text summarization for ESG trend analysis
Topic modeling for ESG knowledge map development
Text analytics & classification for ESG performance scoring & opportunity/risk
scoring
ESG scoring with respect to Stock earnings & volatility analysis
Sentiment analysis for Greenwashing detection
Semantic sentiment search & analysis for advanced ESG scoring
- ESG Data Augmentation-Text Translation
ESG Data Augmentation Text Generation
- ESG Data Augmentation-Text Generation
- Supervised learning for ESG classification via auto-labeling

Weave.AI's Spectrum ESG Demo (Nosa Omoigui)

Weave.AI's Spectrum ESG Demo
If you are interested in the demo, please contact Tara Shuler (tara@weave.ai)

EcoVadis’ Business Sustainability Ratings Practices (Mike Spaeth)

Blockchain Introduction
Blockchain Introduction

Blockchain Components
Source: Building Blockchain Apps using Ethereum & Hyperledger@Udemy

Top 100 Blockchain Technology Innovation Entities
AI, Blockchain, IoT Convergence Insights from Patents:
https://www.slideshare.net/alexglee/ai-blockchain-iot-
convergence-insights-from-patents
convergence insights from patents

Blockchain Technology Innovation Entities HQ Landscape

Blockchain Innovation Frontline: Issues with Public Chain
Directed Acyclic Graph (DAG): IOTA, Locus Chain
Source: Blockchain for Business: The New Industrial Revolution @Udemy

Blockchain Innovation Frontline: DID(Self-Sovereign Identity)
publicKey
Verifiable
Credential
Verifiable
Presentation
DID AUTH
DID Document: DID/publicKey
DID Document: DID/publicKey
Source: https://www.w3.org/TR/did-core/

DID(Self-Sovereign Identity) Use Cases
Healthcare Insurance Claim
Open Banking –
One click KYC, Self-Enroll and Onboarding
Source: Mohanty, Debajani. Blockchain for Self Sovereign Digital Identity: With use cases and comparative study of Digital Identity
protocols as Ethereum’s uPort & Civic, Hyperledger’s Indy & Aries and Microsoft’s. Kindle Edition.
Credit Rating and Loan Approval COVID-19 Vaccination Verification

Patent applications in the USPTO/EPO/IPO during the period of January 1, 2010 -
Convergence Technology Innovation Insights from Patents
Patent applications in the USPTO/EPO/IPO during the period of January 1, 2010
September 30, 2020 in priority date that specifically describe the major
AI+Blockchain+IoT integrated technologies are searched and reviewed. 1,288 published
patent applications that are related to the key AI/Blockchain/IoT technology innovation
l t d f d t il l i
are selected for detail analysis.

AI+Blockchain+IoT Convergence Reference
AI, Blockchain, IoT Convergence Insights from Patents:
https://www.slideshare.net/alexglee/ai-blockchain-iot-convergence-insights-
from-patents
from patents
AI, Blockchain, IoT Convergence Use Case System Implementation Insights
from Patents: https://www.slideshare.net/alexglee
p g

AI+Blockchain System Demo for Medical Data Sharing

AI+ Blockchain System Demo for E-Commerce Use Case

DeFi Introduction
DeFi Introduction

Blockchain Innovation Frontline: DeFi
DeFi is an ecosystem of Decentralized Applications that provide financial
e s a ecosyste o ece t a ed pp cat o s t at p o de a c a
services built on top of blockchain with no governing authority.
Source: DeFi Prime https://defiprime.com/#defi_projects

DeFi Ecosystem
DEX (margin trading: dYdX; DEX for NFT: Rarible)
DEX (margin trading: dYdX; DEX for NFT: Rarible)
Money Market (flash loans: Aave)
Asset/Fund Management (yield farming: Yearn Finance; DeFi ETF: TokenSets;
DeFi HFT: Hulk.Finance)
Derivatives (synthetic assets: Synthetix)
Insurance (risk management: Nexus Mutual)
Curations (data tokenomics; off-chain asset DeFi)
Source: https://medium.com/@SeanLippel/decentralized-finance-is-a-continuum-179d43c6ef65

Part I Blockchain DeFi New Ecosystem
Data Tokenomics: Filecoin/Ocean Protocol/SingularityDAO
DeFi Reference
Data Tokenomics: Filecoin/Ocean Protocol/SingularityDAO
DeFi for Off-chain Assets: OpenDAO
Video Link: https://www.youtube.com/watch?v=9n2Bn8es3Io
Part II Blockchain DeFi Liquidity Pool & Mining
Bonding Curves for Liquidity Pools/Automated Market Makers/NFT
Bonding Curves for Liquidity Pools/Automated Market Makers/NFT
Constant Function Market Makers
Automatic Asset Allocation and Aggregation for Yield Farming
Video Link: https://www.youtube.com/watch?v=RmcHU5M_YMg
Part III Blockchain DeFi Token
Part III Blockchain DeFi Token
Crypto-Collateralized Stablecoins
Token Engineering/Monetary Policy: Pool token supply & distribution & pricing & incentive
Governance Tokens
Part IV Blockchain System
Blockchain interoperability/scalability/privacy/security
L 1 (Eth /C /P lk d t) & 2 (Pl /ZK ll ) S t /G F R d ti
Layer 1 (Ethereum/Cosmos/Polkadot) & 2 (Plasma/ZK rollups) Systems/Gas Fee Reduction
Money Legos/Composability
Patent Development
Video Link: https://www.youtube.com/watch?v=osvvEktjyBE
Part V Risk Management
Technical Risks: smart code vulnerability/front-running attack
Financial Risks: collateral risk/exploitation of flash loans/impermanent loss
Legal/Regulatory Risks: SEC/FinCEN/FATF/GDPR
Part VI AI Applications
AI for Blockchain System
y
AI & Blockchain for Finance
AI for DeFi Asset Management: yield farming optimization/AI advisor
AI for DeFi Trading: algorithmic trading/arbitration bots
Video Link: https://www.youtube.com/watch?v=0pK96t6fYWs

Blockchain Applications
Blockchain Applications
f ESG
f ESG
for ESG
for ESG

Blockchain platform for waste management that implements tracking of
Blockchain for ESG Management
Blockchain platform for waste management that implements tracking of
recycled materials (e.g., plastic packages) and token rewards for active role in
recycling.
Decentralized trading system for renewable energy (e.g., buy or sell solar
energy)/carbon offsetting (e.g., transact carbon credits between generators and
purchasers).
p )
Blockchain DID platform for tracking and measuring the carbon footprint (e.g.,
issuing DID verified credential of oil wells for their compliance).
Blockchain platform for improving corporate governance by offering greater
transparency in operation/esg compliance and better data protection/privacy.
Blockchain platform for fulfilling social responsibility by participating blockchain
for social goods programs (Ref. https://medium.com/blockchain-
positive/blockchain-for-social-good-195adb62b47f)
positive/blockchain-for-social-good-195adb62b47f)

DeFi Based ESG Financing Platform Development
Step 1. Tokenize ESG related assets (e.g., solar power plants, wind farms,
carbon credit) or projects (e.g., energy-efficient digital infrastructure
development) , as a Fungible (ERC20) Tokens or a Non-Fungible-Token (NFT)
(ERC721/ ERC1155 t k )
(ERC721/ ERC1155 tokens)
Step 2. For fungible tokens, use them as collateral for some money market
DeFi liquidity pools to borrow money values or monetize through fund raising of
DeFi liquidity pools to borrow money values or monetize through fund raising of
a specific ESG project
Step 3 For NFT put it into a specific bonding curve (smart contract) & anyone
Step 3. For NFT, put it into a specific bonding curve (smart contract) & anyone
can buy the shares in the ownership rights by sending collateral and receiving a
fungible (ERC20) bonded token. The price can be set by pre-selecting a
bonding curve that makes sense for the NFT/underlining asset.
g g

Thank you!
Thank you!

AI and Blockchain Applications for ESG

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