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German quartet takes stake in ESG data provider Arabesque S-Ray

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DWS Group and three other German investors have acquired a minority stake in asset manager Arabesque’s proprietary technology for assessing corporates’ sustainability performance.

DWS, Allianz X – the digital investment arm of Allianz – Commerz Real and the federal state of Hessen have jointly invested $20m (€17.5m) in Arabesque S-Ray, a Frankfurt-based company. The state of Hessen recently signed up to the UN-backed Principles of Responsible Investment (PRI).

According to Arabesque, the “strategic partnerships” will help Arabesque S-Ray’s growth as a provider of environmental, social and corporate governance (ESG) data, with plans to launch a real estate product.

The terms of the transaction were not disclosed. It comes as demand for ESG data and services “is increasing exponentially”, as noted by Andreas Feiner, CEO of Arabesque S-Ray.

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“Our partnership with three of the leading financial institutions in Germany, together with the state of Hessen – with its focus on sustainability and technology – will enable us to meet this global demand from Frankfurt,” he added.

The planned real estate product was to be based on artificial intelligence (AI) technology and allow the evaluation of the “sustainability of real estate objects”, he said.

According to Arabesque, the technology “will use traditional data sources on an asset level, together with new emerging digital sources from Internet of Things sensors and devices within buildings”.

Commerz Real’s stake in Arabesque S-Ray is 4.9%. The real estate specialist manager said the planned new real estate tool could help improve the management of real estate and properties’ efficiency as well as support users in their investment decision-making or letting processes.

Additional DWS AI talks  

DWS, which acquired a 2.7% in Arabesque S-Ray, said it was also in exclusive talks with Arabesque about “a potential significant minority stake” in the asset manager’s AI “engine”.

“Together, the two partners intend to develop the AI engine further – combining DWS’ financial markets expertise with Arabesque’s digital and machine learning know-how – as the trend towards automation and digitalisation in the asset management industry continues,” said DWS in a statement.

“The collaboration could also lead to new investment strategy offerings including sophisticated AI products.”

Arabesque S-Ray uses data and machine learning to generate assessments of companies’ sustainability performance, captured in a variety of scores. It is licensed to a range of clients, including State Street, BNY Mellon, Japan’s Government Pension Investment Fund, and Swedish buffer fund AP1, which last year announced it was collaboratiing with Arabesque on the development of a human rights score based on compliance with UN guidelines.

Philipp Rösler, former German economics and technology minister and vice-chancellor, recently joined as an advisory board member of S-Ray, and partner at Arabesque.

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