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Financial Institutions Able to Use NovA! For ESG Risk Assessment for Sustainability-Linked Loans

The Monetary Authority of Singapore (MAS) has announced the first use case of NovA! to help financial institutions (FIs) assess the sustainability performance of Singapore’s real estate sector.

NovA!, part of the National Artificial Intelligence (AI) Programme in Finance, is aimed at helping FIs harness AI to generate insights on financial risk. In the initial phase, the programme will focus on enhancing FIs’ ability to assess companies’ environmental impact and identify emerging environmental risks.

FIs would be able to tap on NovA! for their environmental, social, governance (ESG) risk assessment for originating, underwriting and servicing of sustainability-linked loans.

At loan origination, FIs can use NovA! to identify real estate corporate borrowers whose sustainability metrics can be improved, by comparing their historical environmental performance to that of their peers. During underwriting, NovA! will assist FIs to set appropriate sustainability performance targets (SPTs) for the borrowers, by comparing borrowers’ SPTs with the SPT Industry Benchmark generated by NovA!. For servicing of loans, NovA! will compare the actual sustainability performance indicators (through direct use of meters or sensors) against the borrower’s self-declaration to detect greenwashing.

The NovA! ESG use case will also reduce the amount of time it takes for FIs to collect, process, and analyse data through the use of natural language processing (NLP) technique to automatically extract relevant information from documents. This will reduce the overall cost of operations for FIs.

To support FIs’ sustainability journeys, NovA!’s ESG use case will be integrated with MAS’ Project Greenprint. Greenprint is a collection of digital data utilities and initiatives aimed at harnessing technology and data to aggregate high quality, consistent and granular sustainability data, to enable a transparent, trusted and efficient ESG ecosystem. Datasets collected via Greenprint will be used to supplement NovA!’s insights-generation capabilities, which will be accessible to Greenprint partners via APIs.

Since the announcement of NovA! in November 2021, 16 members have joined the NovA! consortium. The full list of members can be found in the Annex. A core team within the NovA! consortium is leading the development of NovA!’s ESG use case.

The core team will release a demo version of NovA!’s ESG use case during the Singapore FinTech Festival 2022 in November. In early 2023, a beta version will be released for testing by FIs, followed by further fine-tuning for eventual industry adoption of the solution. A white paper documenting the product design and AI features will be published in mid-2023.

Sopnendu Mohanty, chief fintech officer, MAS, said, “NovA! will provide a valuable tool to help FIs generate prompt and actionable insights using structured and unstructured datasets and advanced computing. This will better enable financial institutions to direct financing towards sustainable projects and companies that meet sustainability performance targets.”

Author

  • Francis is a journalist and our lead LatAm correspondent, with a BA in Classical Civilization, he has a specialist interest in North and South America.

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