Dive Brief:
- The International Finance Corporation, a member of the World Bank Group, said Tuesday it had launched a tool powered by artificial intelligence called MALENA which uses natural language processing to break down complex ESG information into “actionable insights for sustainable investments.”
- The IFC — which offers investment and advisory services to facilitate the private sector in developing countries — said the tool was developed by its ESG experts and utilizes over 15 years of emerging markets data.
- MALENA, which the global development institution describes as a “machine learning ESG analyst,” seeks to simplify the extraction of meaningful ESG information. The tool has the capability to evaluate unstructured text from annual reports, sustainability reports, news, and impact assessments and identify over 1,000 ESG-relevant risk terms, according to the IFC.
Dive Insight:
Though the AI-powered accelerator can be utilized to generate ESG insights and direct sustainable investing decisions, its use isn’t only limited to investors and financial institutions. MALENA can also be adopted by banking regulators, capital market authorities and environmental ministries to assess ESG disclosures at scale and enable better oversight and faster turnaround times.
As climate-related disclosure regulation gains momentum — with the European Union’s Corporate Sustainability Reporting Directive, the passage of two California climate disclosure bills last year, and the impending climate reporting rule from the Securities and Exchange Commission due in April — gathering, assessing and reporting ESG data is top of mind for most companies.
The IFC also noted the tool can help drive the investment needed to meet the $4 trillion annual target for UN Sustainable Development Goals by making analysis of ESG data more accessible and efficient which, in turn, encourages sustainable investments.
"MALENA is more than a technological advancement; it's also a catalyst for sustainable investment in emerging markets," Emmanuel Nyirinkindi, IFC's vice president of cross-cutting solutions, said in a press release. "By equipping investors and analysts with this tool, we're enhancing their ability to make informed decisions and contribute to meaningful, sustainable development."
The tool allows users to upload documents onto its site and view outputs such as greenhouse gas emissions, gender data and sentiment insights. According to its website, the tool can generate sentiment analysis results with 92% accuracy.
The AI-powered tool was tested by asset management company Amundi — which also helped the IFC develop the project — and New Development Bank, in addition to an export credit agency and a capital markets regulator, the IFC said.
This development by the IFC falls in line with the World Bank Group’s larger goal of backing sustainable projects. Last year, during the COP28 climate summit, the World Bank Group said it would devote 45% of its annual financing to climate projects for the fiscal year between July 1, 2024 and June 30, 2025. The bank previously set a goal to use 35% of financing for climate-related projects by 2025, but has already surpassed it with an average of 36.3% of funding being used for climate projects as of July 2022.
