Fintech Start-up of the Year, Hong Kong
Cutting-edge natural language processing provides ESG market intelligence solution
3 Mar 2020 | The Asset
When Jason Tu and Tao Liu co-founded Miotech and moved back to Asia in 2016, the two ex-Silicon Valley specialists sensed an unprecedented opportunity in the ESG space, which was not yet developed in the region at that time.
“We have a huge opportunity because while ESG started in Europe and spread into North America, now it’s coming to Asia, and East Asia needs to have its own standard,” says Tu in an interview with The Asset.
MioTech’s current product offerings provide ESG data, real-time risk monitoring, ESG ratings, indexes, as well as research and consulting services. Its existing customers include large global asset managers, top research houses, as well as commercial and investment banks.
On the back of growing awareness of ESG in the financial industry, regulators in Asia such as Hong Kong Exchange (HKEX) and China Securities Regulatory Commission (CSRC) started to require more stringent disclosure on ESG reporting over the past few years.
However, a relatively low frequency of sustainability reports as well as CSR reports means that investors have to seek alternative data sources to determine the ESG performance on corporates.
“There’s an abundance of information online not being analyzed, especially regarding company and individual risks from non-traditional sources,” explains Tu.
In 2018, Miotech launched its flagship market intelligence solution called AMI that analyzes business profiles, supply chain, shareholders, and online narratives to help its clients understand the potential vulnerabilities of companies or industries. As of the end of 2019, Miotech has data on over 200 million companies, 65 million individuals and 90 million online narratives on AMI.
“Our Natural Language Processing capabilities and knowledge graph allow us to map together entities and individuals through complicated networks and to measure the impact.”
Despite the consensus of setting up an ESG standard in Asia among all industry players, Tu believes ESG factors also need to be flexible in different markets. To illustrate, the chairman is not a critical factor in China’s state-owned enterprises while in Singapore the cleanness of the palm oil is a key ESG factor.
“So, there is lots of localization that needs to be taken into consideration for standards to make sense in each different market,” continues Tu.
As ESG continues to make its way into the investment space, an increasing number of asset managers in the region are incorporating ESG elements into their investment portfolio and analysis.
“One of the things we found was that asset managers have very different investment philosophies and mentalities. So, it is very hard to unify data and product requirements in the absence of any standards. This is why ESG is a good opportunity because it is an emerging standard,” says Tu.
“One of the most important things we are trying to avoid is heavy integration, and clients are also usually reluctant to do it as well. Especially when you serve the financial services industry, integration can take a lot of the time and resources of a startup.”
In January, Miotech announced that it closed its Series A+ funding round led by existing investor Horizons Ventures, the private investment arm of Li Ka-shing. The amount of the latest funding round was not disclosed, but the financing will be used to recruit more talents and invest in R&D. Tu believes Miotech is set to benefit from the growing demand for ESG data, despite the increasing competition.
“Competition means real market need and sufficient market size, which allow different competitors to get revenue and foster healthy competition,” adds Tu.
Currently, Tu’s team is made up of technical and financial experts from Silicon Valley, New York, Mainland China and Hong Kong, including former employees of Oracle, LinkedIn, Lufax, Morgan Stanley, Standard Chartered and Deloitte.