Client Introduction

WWF (World Wide Fund for Nature) is a prominent independent conservation organization dedicated to preserving the environment and promoting sustainability. As part of its work, WWF-UK focuses on policy advocacy, pushing for enhanced due diligence for companies, including financial institutions, at risk of exposure to deforestation and conversion.

The Challenge

WWF-UK aimed to advocate for better financial sector nature due diligence legislation in the UK and hold UK financial institutions accountable for their financial relationships that contribute to deforestation risk. To make a compelling case, they needed accurate and insightful data to delve beyond superficial analysis and understand the complex web of relationships between supply chains, traders, legal hierarchies, financial instruments, and financiers. Their mission was to assess the scale and channels of the UK financial sector's exposure, both direct and indirect, to deforestation risk in Indonesian palm and Brazilian soy and beef. They also sought to gain a deeper understanding of major UK banks' financial relationships with high-risk commodity traders, particularly in the less scrutinized area of investment banking services and the due diligence standards surrounding 'know your customer (KYC).

Our Solution

Neural Alpha provided a powerful solution to WWF-UK's challenges by leveraging the Trase Finance database. This allowed for comprehensive mapping of not only direct exposure to risk names but also indirect exposure through other investors, funds, and passive investment vehicles. Analysis of investment banking deals, such as bookrunning, revealed key channels of exposure for major UK banking entities beyond asset management. Additionally, desk research and data on fines and violations provided insights into the implied risk of exposure to illegality and proceeds of crime. By utilizing the Trase Finance graph database, Neural Alpha thoroughly explored the extent of both direct and indirect financing exposures to traders and their export flows linked to deforestation risk. Detailed finance deal analysis was conducted to understand UK bank exposure and how it differed from asset manager risk.

Results

The collaboration with Neural Alpha significantly enriched WWF-UK's understanding of the scale of UK financial exposure to high deforestation risk contexts, supporting their vital work in driving the agenda on UK legislation regarding forest-risk and holding UK banks accountable for their financial relationships with high nature-risk customers and nature-based illegality. The outcomes of Neural Alpha's contributions to the research efforts included:

1. In-depth Analysis: Neural Alpha facilitated a deeper dive into the extent of UK direct and indirect exposure to deforestation risk associated with Indonesian palm and Brazilian soy and beef.

2. Identifying Key Relationships: The research helped WWF-UK understand which major UK banks had significant financial relationships with key commodity risk names and the specific channels through which these relationships operated.

Conclusion

Neural Alpha's involvement in WWF-UK's research demonstrated the company's commitment to nature-positive outcomes and policy progress. It showcased their ability to handle a diverse range of complex data and relationships, producing richer, more accurate, and tailored analysis to support WWF-UK's advocacy efforts effectively. By leveraging the Trase Finance database and applying expertise in data analysis, Neural Alpha contributed valuable insights that empowered WWF-UK's mission to promote sustainable financial practices and combat deforestation risks in the UK financial sector.