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In This List

Beyond the Map: Building Competitive Advantage Through Leveraging Geospatial Data

S&P Global Platts

Energy: What to Watch in 2019

S&P Global Ratings

COP24 Special Edition Shining A Light On Climate Finance

S&P Global Ratings

S&P Global Ratings' Global Outlook 2019

S&P Dow Jones Indices

Considering the Risk from Future Carbon Prices


Beyond the Map: Building Competitive Advantage Through Leveraging Geospatial Data

Geographic Information Systems (GIS) offer a framework for understanding information in relation to its physical location in space. And GIS technology today takes us far beyond traditional cartography to providing key dimensions of location and interconnectivity to every data point. New GIS tools and techniques help organize layers of spatial data with related attributes, empowering users to better understand the physical world.

Of course, businesses and investors have long employed data to inform decision making. And for the majority of that history, primary analysis was performed by interrogating clues from the recent past, from the rearview mirror. What were profits like last year? What was the yield from the last production run? Which suppliers delivered for us last quarter? Those who best quantified outcomes exploited an information advantage and were rewarded.

Today’s technology produces data that reveals far more rich, detailed insight into both economic activity and financial results than ever before – much of it with a spatial component.

Connected devices track our location and behaviors; Internet of Things (IoT) sensors are infiltrating commercial and consumer goods; more satellites are launched every year, with increasingly powerful imaging capabilities. Pair this explosion of data with plummeting cost of storage and awesome processing power delivered through cloud computing, and there is massive potential for the creation of new information advantages.

Those who harness the best predictions in their operations will find an edge, and data is the fuel.

Nate Haskins, Chief Data Officer, S&P Global

But data in isolation has limited value. It’s when disparate data sets are combined that new actionable insights are delivered. Data science techniques such as machine learning and deep learning are being used to correlate massive, previously intimidating data sets, allowing them to be used in new and creative ways, often ways that were not necessarily intended when the data was produced. Operators and investors alike are now using data in alternative ways to create predictions and inform decisions. Those who harness the best predictions in their operations will find an edge, and data is the fuel.

Nowhere has technology had a larger influence on what is possible than in the field of GIS. A recent report by Bryce Space & Technology noted a 53% increase in satellites launched between 2012-2016, averaging 144 launches per year. Advances in imaging and radar deliver higher resolution outputs and three-dimensional renderings, in some cases independent of cloud cover. As a result, we can now understand the location of ships, levels of reserves in oil terminals, forest health, construction progress, impact of natural disasters, car and foot traffic, and much more -- in near-real time.

What advantages can be created using this new data? Let’s look at a few examples:

  • Understanding global oil supply
    Businesses are using new data to understand the massive, complex global oil markets. Machine learning techniques can be used on imagery to estimate weekly crude oil inventories otherwise not reported; monitors on tankers reveal proximity to ports and refineries. Together with an understanding of refining capacities, this data offers a timely view into global supply. Layering on advanced demand forecasts accounting for weather, economic growth and consumption trends, traders are gaining new predictive insights into the future price of petroleum products. S&P Global has invested in Ursa Space Systems, a firm that specializes in leveraging radar satellite imagery while S&P Global Platts customers have access to sophisticated trade flow analytics through the Platts cFlow tool.
  • Maximizing the impact and returns of renewable power
    Advances in photovoltaics - the process of converting sunlight to electricity - wind turbine efficiency and large-scale battery storage efficiency have unlocked the viability of renewable power sources. GIS data is being employed to inform site selection to maximize impact. For example, imagery can be used to identify areas with high recurring solar exposure, suitable slope and terrain, and proximity to low-voltage transmission lines, roads and populated areas while avoiding conservation areas. Machine learning algorithms can be used to identify the pitch and surface conditions of commercial roofs, identifying the best candidates for rooftop commercial installations.
    Similar conditions apply to siting of wind farms using factors such as typical wind speeds and directions. All of those are helping bright down the cost of renewable power and accelerating the shift to clean energy sources.
  • Gaining advantages in insurance underwriting
    Savvy insurance companies are improving their underwriting practices using detailed imagery. An understanding of changing climate as well as forestation and underbrush levels help predict the likelihood of wildfires. Detailed topographical analysis dramatically improves upon ancient or incomplete flood zone maps previously used to price flood insurance products. In both cases, GIS is becoming an intrinsic part of risk modelling which gives insurance companies the knowledge to price the policies according to the risk they are undertaking.
  • Mastering markets with custom demographics
    Businesses now use GIS to answer the question of “what do my markets look like?” by building custom demographic tapestries within drive time areas around their locations. Demographic information, including historical and projected data, combines with road infrastructure and traffic data to define detailed trade areas for analyzing market potential, market penetration, and competitive threats. Gaps and overlaps in market coverage drive decision making for closing or opening additional locations.

Every industry is now a technology industry, and every company a technology company. Your grocer, your cabbie, even your local pizza shop all use data to tailor and promote services, identify prospects, and inform their strategy. If you run into a company not thinking of themselves that way, my guess is they won’t be around for long.

Are you leveraging data fully, or are you destined for irrelevance?

Nate Haskins, Chief Data Officer, S&P Global

Those who master this information first will be rewarded. Are you leveraging data fully, or are you destined for irrelevance?


The following was originally published on CIO Review on August 22, 2018: Beyond the Map: Building Competitive Advantage through Leveraging Geospatial Data



Energy: What to Watch in 2019

Highlights

S&P Global Platts Analytics Issues Two Special Reports

Pricing across the global energy markets will face headwinds in 2019, with a weaker and more uncertain macroeconomic framework deflating price formation in general, according to two special reports just issued by S&P Global Platts Analytics. Such headwinds will require the industry and portfolio managers to take a big-picture approach.

See the Executive Summary of the S&P Global Platts Analytics special report 2018 Review and 2019 here. Access the full S&P Global Platts Analytics Top Factors to Look Out For in 2019 for Energy here.

"One of the key lessons learned in 2018, painfully by some, is that market sentiment can shift violently without much change in fundamentals, requiring a steady, holistic perspective," said Chris Midgley, global head of analytics, S&P Global Platts. "It is clear that this volatility will remain a feature across the energy markets in 2019, particularly as IMO 2020 nears."

Particularly blustery headwinds are in store for markets where prices finished 2018 at elevated levels, and well above costs, such as North American natural gas and global coal. However, if the supply side can adjust to the reality of slowing demand growth, energy prices can find support. For natural gas liquids (NGLs), the ongoing logistical constraints at the US Gulf Coast are likely to manifest on continued price volatility, particularly for ethane and liquid petroleum gas (LPG), over the next year despite strong global demand.

LPG, such as propane and butane and used in transportation fuel, refrigeration, heating and cooking, is rapidly facing US export capacity constraints, especially along the US Gulf Coast. For LPG feedstock propylene, there is clear potential for high volatility globally over the next 12-18 months.

Analysts at S&P Global Platts see weakening prices of Henry Hub natural gas. The slowdown in US demand growth will exceed that of supply. But if winter temperatures prove to be colder than normal, near-term prices will need to move higher to bring on enough supply to replenish depleted storage levels.

For global liquefied natural gas (LNG), it will be end-user-backed LNG demand that faces particular struggle to cope with the speed and force of new supply entering the market in 2019. Non price-responsive demand in Asia will be easily met and JKM spot physical prices (reflecting LNG as delivered into Japan, Korea and China) will sag next year.

Access the full S&P Global Platts Analytics Top Factors to Look Out For in 2019 for Energy here. Among the 22 key take-away themes:

  • NGL supply growth will strain the North American energy system
  • Saudi Arabia will need to be nimble to balance 2019 oil supply
  • US oil supply limited by pipelines
  • Oil demand slowing: trade war, industrial slump
  • 2019 LNG supply additions largest since the Qatari mega-trains
  • US gas supply growth to exceed demand growth even with LNG exports
  • Global solar growth slowing
  • Shipping disruption looming - IMO 2020
  • New Russian gas pipeline advantage over Ukraine
  • US coal demand to decline again in 2019
  • Growth in new refineries and complex capacity likely to weigh on refinery margins especially in Asia

Year 2019 will certainly be one of transition for crude and refined oil products as it will lead into 2020 when roughly three million barrels per day of high-sulfur fuel oil must be “destroyed” (including enhanced usage of HSFO in power generation) due to the International Marine Organization (IMO) mandate of eco-friendly shipping fuels in use at sea. A similar amount of middle distillate/low sulfur fuel must be created (by refinery changes and by running more crude oil. The increase in refinery capacity between now and 2020 is large, but mostly needed to cover normal demand growth. Expect prices of light sweet crudes to be bid up in 4Q19.



COP24 Special Edition Shining A Light On Climate Finance

Highlights

− Green loans are evolving, with the Climate Bond Initiative forecasting nearly $1 trillion in green bond issuance by 2020.

− Despite the uptick in green bond and loan issuance, the market still remains relatively small, especially compared to the universe of assets comprising CLO 2.0 transactions.

− In our view, a green CLO market has large growth potential, boosted by regulatory initiatives and emerging interest from both issuers and investors in 2018.

− We built a hypothetical rating scenario for a green CLO to compare and contrast the underlying portfolio and structure with a typical European CLO 2.0 transaction.

− Our hypothetical green CLO analysis showed that green loans may have different fundamental characteristics to corporate loans, such as lower asset yields, higher credit quality, and higher recovery rates assumptions.

The global collateralized loan obligation (CLO) market has experienced a rebirth (2010 in the U.S. and 2013 in Europe). New issuance continues to increase due to investor familiarity with the product, as well as low historical default rates. While a market for green assets, such as green loans and bonds has been established for a while, although still of a relative size, a sustainable securitization market is still in its infancy. Considering the challenge in financing the amounts, S&P Global Ratings expects green CLOs to play a role in increasing the private sector presence in the sustainable finance market.

Following the Paris Agreement that came into force in November 2016, 184 parties have ratified the action plan to limit global warming. For this purpose, developed nations have pledged to provide $100 billion (about €87 billion) annually until 2025. As part of this deal the EU has committed to decrease carbon emissions by 40% by 2030. In March 2018 the European Commission (EC) proposed the creation of environmental, social, and corporate governance 'taxonomy', regulating sustainable finance product disclosures, as well as introducing the 'green supporting factor' in the EU prudential rules for banks and insurance companies.

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S&P Global Ratings' Global Outlook 2019

 A deep dive into S&P Global Ratings’ insights on the credit outlook for 2019 and what are the risks and vulnerabilities to look out for.

Access all the Global Outlook
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Considering the Risk from Future Carbon Prices

Along with the advent of the 2015 Paris Climate Agreement has come a growing understanding of the structural changes required across the global economy to shift to low- (or zero-) carbon, sustainable business practices.

The increasing regulation of carbon emissions through taxes, emissions trading schemes, and fossil fuel extraction fees is expected to feature prominently in global efforts to address climate change. Carbon prices are already implemented in 40 countries and 20 cities and regions. Average carbon prices could increase more than sevenfold to USD 120 per metric ton by 2030, as regulations aim to limit the average global temperature increase to 2 degrees Celsius, in accordance with the Paris Agreement.

S&P Dow Jones Indices launched the S&P Carbon Price Risk Adjusted Indices to embed future carbon price risk into today’s index constituents.

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Download