Fintech Meets Climate Data

We chat with our new Chief Development Officer, Frank Freitas, about his motivations to join Four Twenty Seven after almost 30 years in finance and fintech, and his vision for new products and markets in climate analytics.

Why did you decide to join Four Twenty Seven?

First and foremost, the fact that our firm provides data-driven analytics that quantify real issues facing our planet today is very attractive to me. I have spent my entire career in finance and, like others, have increasingly come to see the need for alignment of investment decisions with those that preserve the future of our planet. To me, Four Twenty Seven’s mission and vision exist at the center of this nexus.

When I encountered the Four Twenty Seven white paper on climate risk in equity markets, I was impressed by the level of thought-leadership embedded in the research, and by the high level of quantitative rigor applied to the development of its risk scores. The acceleration of climate’s influence on corporate performance are upon us, and investors are rapidly awakening to the risks that climate change brings to financial markets. Four Twenty Seven’s sophisticated climate data analytics are at the forefront of identifying the most exposed corporations and assets globally.

My career to date has been focused on the development of analytical solutions for institutional investors, ranging from multi-factor risk models at Barra (now MSCI) to the solutions we built in my previous company, Pluribus Labs, where we combined data science and natural language processing with quantitative modeling to distill a variety of unstructured data sources into investible signals.

In my subsequent conversations with Emilie and the Four Twenty Seven team, I quickly came to realize that Four Twenty Seven’s research methodology really resonated with me, and that the culture here is fabulous. It’s rare that you have an opportunity to do what you love and also provide solutions that impact the planet’s future — my role at Four Twenty Seven enables me to do just that!

How is technology spurring innovation in research around financial risk?

There are a number of drivers at play in this respect.  First and perhaps most obviously, the availability of computing power at our fingertips makes data analysis on large data sets more available and more affordable than ever before.  If you had told me when I started my career that I would be able to create an account on a cloud computing platform like Google’s GCP or Microsoft’s Azure and have massive amounts of compute power available within minutes, I wouldn’t have believed you!  Four Twenty Seven’s ability to distill terabytes of climate data from an ensemble of models into actionable insights at the asset level is a great way to leverage this computing power.

Relatedly, the ubiquity of meaningful data, both unstructured and structured, also provides a much broader set of lenses through which to view the world.  Financial research has always focused on the development of insights from any and all available data sources on companies, industries and economies.  Today, an ever-increasing volume of data sources are accessible for analysis.  For example, features extracted from satellite images of our planet can be used to arrive at estimates on a wide variety of metrics, ranging from crop yields to consumer brand sales changes.  Similarly, observations gleaned from the ‘Internet of Things’ (IoT) can provide us with insights into weather trends and CO2 emissions at the sub-city level.  Moving forward, opportunities afforded by organizations’ self-reporting of their climate risks and mitigation plans specifically related to climate change will provide additional data points for firms like ours to incorporate into our ground truth analysis of companies, industries and economies.

Couple these two trends with increasingly sophisticated machine learning and feature extraction techniques and you wind up with tremendous opportunities to develop insights into both the physical risks of climate change and the steps that companies are taking to mitigate these risks.

What are the priorities during your first year at Four Twenty Seven?

Emilie and the team have translated their broad and deep base of intellectual property into purpose-built solutions for a number of key market segments in the financial sector. These solutions enable asset owners and investors alike to understand their holdings’ exposure to the physical reality of climate change.

Our goals for this year are to continue tuning our existing offerings through engagement with our clients and to position the firm for its next phase of growth.  Thanks to entities like the Task Force on Climate-related Financial Disclosures (TCFD), market participants are increasingly aware of the need to incorporate climate risk analytics into their investment process, and we will continue to evangelize this message in our own interactions with the investment community.  We are currently in fundraising mode and will use proceeds from our capital raise to support plans to leverage our proprietary facility database to quantify the relationship between weather and company performance.  In addition, we intend to on-board additional data sources to inform our analytics and add desktop visualization tools to our client offerings. This promises to be a busy year!