Prototype to detect greenwashing

-Project plan-

Sony Computer Science Laboratories, Inc.

June 15th, 2023

INTERNAL USE ONLY 1

Objective and goal

Objective:
• Use technology to assess whether disclosures (corporate/fund/FoF) are aligned to
responsible investment (RI)/sustainability related regulations and performing as
stated.

Goal:
1. Upgrade prototypes to a practical level in light of RI regulations.
2. Find out potential users of the prototype:
(Current hypothesis)
ü Asset managers to check if their investees are doing the same as described in their
RI/ESG disclosures.
ü Exchange market to check if the listed companies are doing the same as described in
their RI/ESG disclosures.
ü Regulators to verify asset mangers comply with regulations.

INTERNAL USE ONLY 2

Competitive advantages of the model

It can be applicable to:

ü Any geographic location

RB
I
ü Any criteria
FS SFDR
A
ü Any regulation
FR
FC C ü Any stakeholder
A

SD
R

INTERNAL USE ONLY 3

Proposed approach

Level¥criteria WEF (4 criteria) SFDR (EU) SDR (UK) ESG objectives (any ESG rating (any Data sources
jurisdiction) jurisdiction)
Firm Examples: Net zero B Corp. Website, legal documents and social media,
commitments, SBTI, news etc.
Fund or Fund of Funds Article 6, 7, 8, 9 Labels Q3 Funds or FoFs claiming Morning Start ratings, For example Mutual and UCITS funds legal
2023 EG objectives in their MSCI funds ratings, documents available in the public domain.
mandate etc. Website and social media channels. ESG
ratings and PRI ratings, RI policies, TCFD
reports, stewardship reports

Company (listed and MSCI, S&P, For listed companies all information is
non-listed) Sustanalytics, etc. available in the public domain. For private
B Corp. companies 3rd party data providers such as
Prequin, eVestment etc.

The current model covers the World Economic Forum criteria (governance, planet, people and prosperity).

INTERNAL USE ONLY 4

Fund level - Greenwashing Detection
Detecting anomaly change in time-series rating value for greenwashing

Input data The detailed indicator and XAI The summary for human The greenwashing detection
★ Pre-process to detect greenwashing by data tracking.

• Fund disclosure is the
primary data source.
• Sustainability reports
and securities reports,
etc., are used as the
secondary data source
Evaluation of which the company
process invested in the Fund.
• News or SNS about the
(Overview)
Fund or companies as
an external (the
tertiary) data source.
• The system outputs • The system outputs the • The system stores the
probabilities for the rating score as the previous score and
detailed indicator. summary of detailed probabilities as time-
• It evaluates indicators. series data.
probabilities by using • The report uses the • It outputs consistency
information related to rating score for analysts in the long term (at
the ESG reported. For belonging to an least yearly) for ESG
example, TCFD criteria organization or activities.
are used as indicators, regulatory authority. • The time-series
but the metrics can be anomaly detection is
changed. applied to detect the
• XAI uses the detailed greenwashing for the
indicator, and it can Fund.
explain why AI rates
the fund to that score.

Guarantee of credit information quality

Implication (Data tracking for long term)
Scale-out
(Increasing efficiency of ratings)

INTERNAL USE ONLY 5

 The architecture
It continually stores rating scores by internal and external information as
time-series data to detect anomaly change.

multi-label and multi-class Time-series

Historical rating scores
• Fund disclosure is
the primary data classification anomaly detection
source.
• Sustainability
reports and
securities reports,
etc., are used as
the secondary
Network

Network
Neural

Neural
data source of Evaluate score change
… … 情報
which the as Greenwashing
情報
company invested Rating scores
in the Fund.
• News or SNS
about the Fund or
companies as an …
external (the
tertiary) data
source.

The model outputs consistency in the long

term (at least yearly) for ESG activities.

INTERNAL USE ONLY 6

 Schedule for GFiN TechSprint
Jun July Aug
Define the criteria and
data source

Annotate the labels

for Fund disclosure

Select data source and

develop database

Train and fine-turn

NLP models

Test the model and

Assess outputs

Backtest the model and

Provide feedback to the model

Identify greenwashing
INTERNAL USE ONLY 7
Q&A

■ What level we should focus testing the model?

■ What other data sources can be used to test the model?
■ Would you agree with the timelines propose?

INTERNAL USE ONLY 8