Shizen, Inc.

Financial capital (alongside policy) is the most critical lever for a timely climate mitigation and adaptation. Investment flows towards climate transition have been way too short than required.

Transitioning the global economy to low-carbon is both an opportunity and a risk. Nearly 18% of the global economic GDP is at a risk of being wiped out because of climate change. It will affect stability of the financial system, socio-economic security, and global development. It will result into loss of jobs, reduced household incomes, dwindling value of financial assets, availability of credit, among others. Eventually, adversely affecting the quality of life for people around the world. 

According to Swiss Re and McKinsey the cost of transitioning to net-zero by 2050 is upwards of US$275 trillion. The cost of inaction is up to 5X. At the same time, according to the UN, for each US$1 invested in the transition will lead to 4X the accrued benefits.

According to UNEP, the current funding for climate adaptation to developing countries is five to 10 times below the required levels of $350 B annually. 

We conducted an extensive primary research covering stakeholders in capital markets, regulatory bodies, academia, corporates, and civil society. We found that the fundamental reason for the large scale deficit in capital financing is integration of environmental factors to investment decisions. It holds for private and public investment firms in capital markets, public finance via multilateral development financial institutions and governments, and corporations. The analytical and organizational tools required to embed environmental factors to investing processes are inadequate. Also, the infrastructure to create new financial products for the green economy is missing. As if fragmented climate data was not enough, ESG, climate, and investment teams at asset management firms, institutional investors, banks, and other financial institutions have to deal with fragmented pieces of tools and infrastructure. Moreover, these tools are not inadequate when including environmental/climate factors to investment decisions.

We found four clusters of problems that these teams grapple with:

1. Bad data quality,
2. Inadequate analytics,
3. Not designed for team collaboration,
4. Missing infrastructure for new financial products

It deprives communities from investments for climate risk mitigation and adaptation. At the same time, investment firms, corporations, and financial institutions lose out on growing their competitive advantage in the evolving low-carbon economy.

Shizen platform provides tools for climate/ESG and investment teams at financial institutions and investment firms to embed environmental factors into investment decision-making lifecycle. The platform also serves as infrastructure to create new financial products and instruments for the low-carbon economy. We are starting with a focus on greenhouse gas emissions.
The platform includes analytical and organizational tools for different stakeholders involved in the investment decision-making process. These include analysts, ESG/climate research heads, portfolio managers, chief investment officers, quant teams, and Chief sustainability Officers. Subsequently, they can design climate integration strategies, conduct fundamental research analyses on investments, and make it transferable to build quantitative models for portfolio optimization. Ultimately, allowing investment teams at individual firms to grow their unique competitive advantage in the low-carbon economy.

Shizen platform combines machine intelligence and human decision making to:
1. Mitigate climate transition risks to investments,
2. Find new investable opportunities, and
3. Create new financial products in (and for) the low-carbon economy

Using Shizen, the time period to map existing investment universe reduces by 90%. With the heavy lifting of computations performed by the Shizen system, teams can focus on innovating on financial and economic models to apply to their climate transition strategies.

We started Shizen with a vision to decarbonize the global economy for the benefit of humanity. Our founding principle is that decarbonization will lead to more equity, poverty alleviation, and improvement in quality of life.

The Shizen platform caters to climate and investment teams at financial institutions such as asset management firms across asset classes, banks, and other financial institutions. The end users include stakeholders along the investment decision-making lifecycle. These include research analysts, ESG/climate research heads, portfolio managers, chief investment officers, quant teams, and chief sustainability officers. With the Shizen platform, the time it takes to map investments to climate and embed those factors in decisions is reduced by at least 90%. Some of the use cases are as follows:

1. Design firm-level environmental factors integration,
2. Map existing investment universe,
3. Monitor and forecast performance,
4. Scenario analysis,
5. Price emissions risks,
6. UN SDG Alignment

These decisions result in capital flows to multiple industries, including hard-to-abate sectors such as steel, transport, and coal power. It also leads to the financing projects for climate adaptation in industrialized and low-medium-income countries. Teams at multilateral financial institutions co-invest with other private firms and governments. These investments could lead to a faster transition to renewable energy systems, add to the accessibility and availability of credit flows for housing finance, and improve forest and water management systems, among others. Each $1 invested towards climate mitigation and adaptation will lead to at least 4x in accrued benefits. At the same time, financial capital enabling corporations and businesses to accomplish their net-zero goals will lead to more sustainable products for consumption in the market. It will also lead to the creation of millions of green economy jobs. Ultimate beneficiaries are the local communities in different regions across the world, adding to sustainable economic growth and quality of life.

Shizen’s mission-driven founding team shares a common passion to combine innovation in technology, design, and business to build solutions to problems to improve quality of life for people across the world.

Aadish: Before starting Shizen, Aadish worked in equity research for a Boston based financial technology company covering a portfolio of mid-large cap financial services and insurance companies with a combined market cap of nearly $1 trillion. Also, he founded Insanirator, an MIT spin-off building decentralized sewage treatment infrastructure for low-medium income countries. It was named one of the best innovations at MIT Solve and likely to change sanitation in developing countries. Prior to that, he was a founding team member at a B2B SaaS start-up in social media management for small and medium businesses in the US and Japan. As Product Manager, I led the first B2B product from idea to nearly $1 mil in ARR. Aadish’s first start-up was Infinite Bounce, specializing in developing education services. After studying electrical engineering at Panjab University, Chandigarh, Aadish started Infinite Bounce. It was an education technology start-up. Most recently, he was a fellow in entrepreneurship and technology at MIT. He also studied data, economics, and development policy at MIT Economics.

Manmohit: He is the software engineer at Shizen. He has extensive experience building enterprise software for large corporations for more than 7 years. He studied computer sciences at Purdue University.

Previously we have had interns in economics and experience in international development finance. They were both sponsored by MIT.

At the moment, we are building the pilot. By the end of 2023, we will serve 2-5 climate and investment teams at financial institutions. We estimate we will directly or indirectly impact about 50,000-100,000 people through the end of 2023.

Financing the low-carbon transition of the global economy is a complex systems problem. Naturally, Shizen needs a solid support system to add to our resource kit to continue our relentless pursuit of the massive opportunity at the intersection of impact and business. Both once in the lifetime of human existence!

We strongly believe MIT Solve will be a vital catalyst in aiding us to move forward in that direction. We have been fortunate to have the support of experts and leaders in academia and industry. We want to broaden that support base. Solve will help us engage with a wider global community and help us make the vision of healthier and prosperous economy a reality. Solve will provide us access to extensive network of organizations, advisors, mentors, experts who are as driven as we are to solve the climate finance challenge for low-carbon transition. That is the most valuable resource we will gain at Solve.

Additionally, the prize money will help us in the initial stages of implementing the pilots with investment firms and financial institutions.
Lastly, it is our belief that we can gain only as much as we give to the Solve community. Climate offers so many interesting hard problems to solve. Our team cannot build a company solving each one of those (unfortunately!). That is why we would love to use our backgrounds, experiences, and existing support network to help other entrepreneurs in the Solve community to succeed in building scalable solutions for impact.

We are using a systems design approach to build for both functionality and emotional experience for our users. Climate is a both critically important and requires paradigm shift to the traditional investment decisions-making. The evolving economy demands balancing financial returns, risks, and environmental factors in the same investing equation. We believe that as the economy evolves to low-carbon regulations will become stricter and mature. It will lead to capital markets to price carbon and other environmental factors. Ultimately, environment factors will become a default in every single investment decision and not viewed in silo.

We have interviewed over 150 stakeholders in the capital markets. These have included ESG research heads and investment analysts, CIOs, heads of climate, sustainability managers, Climate and Environmental engineers. Also, decision makers at regulatory bodies. We covered multiple asset classes: equities, fixed income, credit, and project finance. We designed the tools on Shizen platform to be modular. They can be used individually or best together.

The design of our tools equips different stakeholders across the entire spectrum of investment decision-making. The tools solve top priorities in their respective roles while seamlessly integrating into their workflows.
Teams can also apply and build their own models in addition to the data and models Shizen’s system uses. These include (not limited to) economic, climate, financial data. We input data from primary sources, academia, and third-party providers to ensure highest quality and reliability.
We are building Shizen to make environmental factors inherent to every investment decision. Our mission is to provide tools to enable investment decisions for climate transition at institutional investment firms, financial institutions in capital markets, public finance, corporate finance, and central banks at economy-wide level.

By 2028, with the integration of climate factors into investment decisions, Shizen aims to:

1. Operationalize $25 T towards the net-zero transition of the global economy. It will lead to a potential reduction of 5 Giga-tons of CO2e greenhouse gas emissions. [UN SDG 13: Climate Action]
2. Subsequently, it will lead to at least 2 million new jobs in the green economy. [UN SDG 8: Decent work and economic growth]

In the next 12 months, we aim to expand our coverage to $500 B in AUM.

From day 1, success of our customers is our top driving force. It means what percentage of AUM is de-risked from climate transition risks for our institutional customers. Also, the impact in terms of reduction of GHG emissions created through operationalizing financial capital for net-zero.

The top indicator we are measuring at the moment is the asset under management covered through Shizen's platform.

Going forward, we will measure the impact in terms of GHG reduction as a result of embedding GHG emissions into investing via Shizen's platform.

We are building Shizen for investment and climate teams at financial institutions in both private and public capital markets, regulators and policymakers, and corporations. These institutions face the following challenges in climate transition:

1. De-risking investment portfolios from climate transition risks and leveraging investment opportunities in the low-carbon economy;
2. Devising fiscal and monetary policies for national economies to mitigate climate transition shocks to the economy and enable a smoother transition to net zero;
3. Transforming operations and business models to leverage low-carbon transition to build a competitive advantage

Shizen’s theory of change is that faster, more reliable, and precise decision-making for investing in climate transition will lead to a positive impact in the following areas:

1. Stability of the financial system: With Shizen, they can protect the value of financial assets, and credit flows and operationalize capital for transitioning to the low-carbon economy. Ultimately, it will save nearly 20% of the global GDP from being wiped out.
2. Socio-economic and national security: Capital market participants can act fast and at scale on integrating environmental factors into investment decisions to execute climate transition plans. It will lead to a resilient and climate-proof economy, safeguarding existing jobs and creating new ones.
3. Global development: Low-income countries and emerging economies are at the greatest risk of being adversely impacted by climate change. It will lead to wiping out decades of work lifting billions out of poverty, rising levels of quality of life, and the rest of the development work. Presently, less than $100 B per year is directed from developed economies to these resource-constrained countries. Shizen will facilitate operationalizing investments at speed towards decarbonization and climate adaptation, at a global scale.

1. Enterprise SaaS subscription
It is our first go-to-market business model that we have adopted. It is simple, fast, and easy to adopt owing to high demand in the market. We believe Shizen's end-to-end solution design will deliver far greater value that can be captured back. Going forward, we believe there will be a solid case to support higher pricing than the incumbents because of the following reasons:

 - climate risk cost will increase;
- regulations and cost of non-compliance will increase; and
- without climate factors integration, firms will miss out on competitive advantage and lose out more in the financial value of their assets

2. Infrastructure as a Service: 
Going forward, Shizen will become the infrastructure layer for firms to create and offer financial instruments and products, such as mutual funds, ETFs, green bonds, and new ones (?). Shizen's business model will evolve into charging firms as the infrastructure for offering financial products in the low-carbon economy.

Shizen stands to leverage a massive business opportunity. We are working on the following path to financial stability:

a.) Customers: In order to build a financially sustainable and thriving business, our primary focus is to have customers (right from pilot stage) to pay us.

In order to grow at the scale and speed required to solve the climate finance problem and prevent the imminent dangers from materializing we will need more resources. We are also working on:

1. Grants and competitions: We will seek grants and non-dilutive funding from organizations and individuals aligned with our vision. 
2. Investors: We believe our uniquely advantageous position at the intersection of impact and business opportunity will be attractive to both traditional VC firms and impact investors with patient capital. We have already piqued the interest of investors. We are selective in recruiting investors. We are looking for capital but more importantly alignment to our vision with the same passion. We need supporters for growth and network to push for rapid scaling to adoption of Shizen system in investment decision making across capital markets.