Pedro Baiz Ph.D. is a Data Scientist with experience in academia, non-for-profits and commercial organisations. Pedro is an AI, IoT, Blockchain specialist working on sustainability, FinTech and standardisation particularly in support of the 17 UN Sustainable Development Goals (SDGs).
What motivated you to start a career in sustainability and technology?
I have always been a geek with a keen interest in maths and science. I moved to London 20 years ago to complete a Ph.D. in aeronautical engineering, then I did my postdoc and became a Lecturer at Imperial College London. Overall I stayed in academia for 12 years. I always loved experimenting and working out how things functioned. We can say that innovation is ingrained in my DNA. I learn things relatively fast and get bored after a while if no innovation is involved. In 2014, I left academia to work for an engineering consultancy (Amey) and started working on projects for London Underground, National Grid, Heathrow, etc. At uni, I had focused my research on aircraft failure prediction. With AI and data, you can predict things in pretty much every area of life. As a consultant, I learned that in digital transformation programs, the tech is the easy part. The challenge was to predict how people would react to the technical results. I was working in innovation so the question was, was this good, do we scale? These considerations brought me to finance and to reflect on the current/old ways of considering return on investment. We were delivering smarter assets that were bound to appreciate in value which went against the grain of traditional finance. This baffling situation is fundamentally what aroused my interest in finance and sustainability. I realised that it is difficult to attach a monetary value to everything. The definition of value needs to be revisited and expanded to make room for other considerations i.e. social and environmental.
Tell us briefly about your current focus and your ongoing projects.
My work focuses on technology and data. We use IoT sensors to capture data, AI to analyse it, and Blockchain to store the most valuable information. I know how to do the tech but as mentioned the financial side of things is a critical dimension to scale projects. I realised the significance of standards and minimum requirements in order to define project sustainability and to make them comparable. I started working with the British Standards Institution on ISO Green Bond Standards, then I joined the Sustainable Finance Technical Committee at ISO (TC322), where I am the UK representative to the Chairman to the Advisory Group, and within this group, also the convener for the Fintech subgroup. I was also the first Royal Society Entrepreneur in Residence which aims to bridge the gap between research in academia and industry. I have now been appointed as an honorary senior research fellow at Imperial College where I will support an initiative on sustainable tech at Imperial X. I have also been the Director of Research at the Blockchain Climate Institute for 2 years. These positions, which include paid and pro bono roles, and encompass academia, NGOs, standardisation bodies, and industry, are all conceptually linked and seek to muster collaboration and intelligence to address current sustainability challenges on both tech and sustainable finance.
What is the role of data and technology to facilitate a smooth transition to a sustainable economy?
A critical part of sustainability success relies on the ability to define KPIs and measure progress and tech can be a catalyst in that process. I will illustrate this point with an example of an area where I am working on, i.e. Blockchain Green Bonds. The first Green Bond was issued in 2008 and it has been a very successful product as it continues to grow. When something works everyone wants to jump on the bandwagon. However, not all green bonds are what they purported to be and that’s why we need standards. Various organisations are coming up with green bond standards (ICMA, CBI, ISO, etc). Green bonds have two additional characteristics beyond traditional bonds. 1) Use of proceeds (i.e. how the money is spent) 2) Impact verification (how much social/environmental impact it has generated). These two things require data and that’s where tech comes in. In the last year, we have seen the emergence of sustainability-linked bonds and they have become the hottest thing in town. Green bonds have traditionally been too black and white and inflexible to support sustainable transitions. Additionally, there were major gaps in terms of impact reporting. It’s been 12 years and data is scarce and not properly standardized. With these new types of sustainability-linked bonds, the focus is shifting towards OPEX (instead of just CAPEX) to be able to distinguish for example a sustainable farm from one which is not. The cow might be the same but the farms are run differently. The promise is that when the data is fundamentally OPEX-driven we will be able to benchmark sustainable businesses more accurately.
What are the most promising emerging technologies to combat climate change and help achieve the SDGs?
Innovation is buoyant at the moment leading to the emergence of many new technologies and I am confident that many more will emerge over the next 30 to 40 years. Governments are serious about achieving their carbon zero targets and many breakthrough technologies have not been invented yet. There is still plenty of room for innovation and that is why I am keen to continue to work for academia. Having said that, we need to be mindful that tech is not a one-size-fits-all solution. Electric technologies work well for cars but not for heavy trucks. In the future, emerging technologies will need to be analysed against three big tests in order to access sustainable finance: 1) ROI 2) Risks (financial and non-financial) 3) ESG impacts. Data through IoT, AI and Blockchain should be able to answer all three questions to allow investors to pick the highest impact, highest ROI and lowest risk projects.
Tell us about your work at the Blockchain & Climate Institute as Director of Research.
Over the last 2 years, I have been very focused on Real Estate-related projects.TCFD prioritises the following 4 key sectors. 1) Energy 2) Transport 3) Build/Materials 4) Agriculture. I singled out the real estate sector as it accounts for ⅓ of global carbon emissions and is the one which needs more attention in the UK as we are lagging behind in global rankings. It is also a huge asset class (one of an individual’s biggest investments is their property) which is very exposed to physical (floodings, wildfires, etc) and transition risks. BCI collects data for 70% of UK properties to identify transition policy risks as well as physical risks. Based on the data, we are designing a fixed income solution (e.g. loan/bond) attached to a blockchain to help fund households’ energy retrofits. We submitted our project to the “G20 competition” and we are very proud to be recognised with a financial award (our project was of the shortlisted projects).
BCI is internationally focused but we are UK-based and often start pilots in the UK due to its world-leading open data policies. However, Africa and emerging economies are a key areas of work for tech transfer projects and we have partnered with the UN Climate Technology & Network in order to further their mission. As part of this partnership, BCI will be leading tech transfer conversations in the run-up to the COP27, the “Truly African COP” which will have a distinctive agenda focused on climate finance, adaptation, loss, and damage.
You advise fintech on sustainability. What are your insights working with start-ups?
When I advise fintech and start-ups I am generally very picky about definitions, standards, and minimum requirements. Sustainability has become a marketing buzzword but it is not true that everyone under the sustainability banner is equal. We need to draw lines and boundaries and that’s the focus of my work in standardization. In this context, it is important to bear in mind that we are witnessing an ever-accelerating rate of change, both in tech and in finance, and very few people are sufficiently on top of these developments to advise their organisations.
I am working at the moment with a Singapore-based company on key sustainability standards and we are looking at the IFRS for guidance. There are multiple approaches from different regions – the EU has adopted a taxonomy while the US is not following that route. Never mind the different approaches, it is crucial to agree on minimum international standards and sectors data sets as companies operate globally. The good news is that the EU is heavily involved in the IFRS negotiations to ensure alignment with their own EU reporting standards.
What advice would you give to start-ups willing to start the sustainability journey?
There are many sustainability-driven start-ups breaking into the building sector which are changing the industry with innovative smart energy solutions. There is ample opportunity for startups to drive innovation and make whole industries more sustainable. It is worth bearing in mind that, unlike environmental solutions which are pretty universal, social solutions need to be cultural-sensitive and therefore adapted to the specific local context.
Are you optimistic about the future?
I am very optimistic. Sustainability work is indeed an uphill struggle at times but I would say the pace of innovation in tech keeps me hopeful and motivated. For example, I could not do what I do today with the tech of 2 years ago. At the time I needed bigger teams and more complicated coding. Today I can do work with smaller teams, in real time and cheaper! Tech is a huge enabler and for me a key differentiator in the work I do. It delivers more, better and for less over time. Governments and companies are investing increasingly in tech and science as it keeps delivering. Having said that, tech can bring challenges – combustion engines led us where we are today- but I am confident that as tech keeps improving it will keep fixing itself.