RIBES project: Return of Investments for Building Energy efficiency Solutions

modefinance 16 July 2021

The RIBES project has come to an end

Almost two years of research, cooperation and development of tech solutions aimed at creating a solution that integrates the analysis of the energy performance of a building with the assessment of the real-time operational risk, based on the building’s energy production, the incentives provided for the system, saving and resale of the same energy, and other economic and financial parameters.

It has been financed with the POR FESR 2014-2020 by Veneto region, AXIS 1 "Research, Technological development and Innovation" Action 1.1.4 with the aim of "Supporting collaborative R&D activities for the development of new sustainable technologies, new products and services”, and a total contribution of 236,219.68 euro.

The project

Research and development activities were aimed at implementing an innovative monitoring system for building’s energy management, capable of integrating real-time IoT energy data, together with financial data, for a complete building’s management. Through RIBES, Energy Managers may be able to carry out comprehensive analyses, beyond just monitoring and optimizing energy use: they have also the ability to monitor the return on investment in real-time, reducing the risk. RIBES, thanks to its cloud platform, and to the aforementioned enabling technologies, allows different professionals to work on the same platform, where credit assessment algorithms and methodologies are connected with IoT energy data. A significant focus has been put on predictive maintenance: using data and information produced by the plant itself, the system aims at predicting any interventions and developing targeted solutions to significantly reduce maintenance costs, which affect the entire financial ecosystem.

Four partners – ArcSystem, M. Technologies, Minozzi Energy Products, and modefinance – based in northern Italy, having strong relations with a connected-technology environment and strong advanced skills, participated to the project.

Being modefinance both a FinTech and a Credit Rating Agency, we were able to carry out a creditworthiness analysis, in terms of modefinance's MORE evaluation. This assessment, based on the company’s fundamentals and the comparative analysis of the same against the reference sector in the country in which it operates, gives a comprehensive balanced evaluation, and the financial resilience level. The MORE methodology is not led to under- or over-estimate risk events for companies that demonstrate strong resilience, i.e. in terms of solvency or poor return in terms of profitability. Not to deepen the analyses carried out, it should be noted that the first case study is a cooperative for mutual purposes, therefore profitability is not decisive; the second one, we decided to focus on a statistical analysis, to define the companies’ creditworthiness based on local sector’s performance.

The prospective analysis and ESG ratings

Furthermore, we invested our research on hypotheses on the evolution of the economic and financial situation, related to the possibility of energy efficiency project’s investments. Specifically, we adopted our own ForST model, a Forecasting and Stress-Testing instrument, which allowed us to simulate the company’s financial statements up to 5 years, based on the hypothesis of its balance sheet values.

In line with EU evolution scenario on company’s creditworthiness assessments, we introduced a wider evaluation based on ESG (Environmental, Social and Governance) key factors, which therefore made it possible to complete the definition of a process and a series of scenarios within which the different types of investment fall. Surely, the lack of financial data has reduced the predictive capacity of modefinance algorithms. Nonetheless, it is believed that the use of the statistical method may already have provided initial evaluation elements of greater importance.

However, in order to further improve the evaluation performance, also meeting the demands of the financial market for greater investment responsibility, it is considered appropriate to enrich the assessments with ESG evaluations. This purpose is also motivated by the nature of the RIBES project itself, aimed at improving the environmental sustainability (with a consequent reduction of costs) of companies through targeted measures.

The results

On July 2021, RIBES project has come to its natural end. The final objective and opportunities it offered have been summed up as follows:

  • The collaboration and contamination of academic, business, sustainability-centered and energy backgrounds and expertise have been tested and showed their practical application, as energy managers, owners and financial analysts are now able to work together through a common platform.
  • Communication and decision-making times have been reduced.
  • Real-time consumption monitoring, and plants’ predictive aspects -with implications on bankability and return on investment- have been carried out with success.
  • A more precise investor rating has been evaluated, thanks to the adoption and analysis of alternative data (i.e. financials, IoT and ESG qualitative questionnaires).
  • There’s now the possibility to access a more accurate investment valuation, widening the company’s economic and financial risk reduction, and monitoring each situation with a clearer view.