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Business deals

Moody's takes stake in Hong Kong fintech startup MioTech

Tighter regulations and coronavirus pandemic spur ESG awareness in greater China

MioTech's algorithm-driven services tap into databases to help evaluate companies -- and their suppliers and shareholders -- on ESG. (Screenshot from MioTech's website)

HONG KONG -- Financial services firm Moody's on Thursday said it acquired a minority stake in MioTech, a Hong Kong-based fintech startup that uses artificial intelligence to generate data for asset managers and investors in the greater China region.

The parent of credit rating agency Moody's Investors Service did not disclose the amount of the investment -- which it made through a new funding round for MioTech -- but said it was financed with cash on hand and that the deal was not expected to have a material effect on its 2020 financial results.

The investment comes after an earlier funding round led by Horizons Ventures, Hong Kong billionaire Li Ka-shing's private investment arm, in January this year. Horizons Ventures also led a $7 million early funding round in 2017.

MioTech's algorithm-driven services tap into databases, including Chinese provincial records on chemical spills, labor strikes and enforcement penalties as well as social-network posts and news articles to help evaluate companies -- and their suppliers and shareholders -- on ESG.

Regulators in the region have strengthened ESG -- environmental, social and governance -- requirements for financial institutions, which, compounded by the coronavirus pandemic, has led to a higher awareness of responsible spending among investors and boosted demand for MioTech's services.

In July, the Hong Kong Stock Exchange updated its reporting guide to step up ESG scrutiny for listed companies in the city. The China Securities Regulatory Commission also is expected to adopt mandatory ESG rules later this year.

"We have seen explosive growth in 2020 with COVID-19 driving investor and business awareness to ESG and responsible investing," Jason Tu, co-founder and chief executive of MioTech, told Nikkei Asia in an interview.

"The investment from Moody's gives us credibility and deepens our industry know-how. It is strategic, as it gives us funding and the opportunity to tap into the company's decades of global experience and footprint in ESG," he said.

Tu said there will be "more funding coming in" over the next two months from both existing and new strategic investors like Moody's, as the company closes its series B funding round. The new funds will go toward expansion, sales, and research and development for new technology, products and data coverage, he said.

While MioTech will continue to operate as an independent entity, Moody's said it will seek to incorporate the startup's alternative data and product offerings to streamline analytical processes, monitor portfolios, inform risk assessments, accelerate product developments and deepen coverage of China.

"MioTech's leading technology platform collates and analyzes an impressive range of... data from a variety of public sources to provide relevant information to customers," Min Ye, managing director and head of international for Moody's, said in a statement. "Our partnership will provide valuable data, analytics and insights to China's domestic risk and investment markets."

Launched in 2016, MioTech was established with seed funding from Chinese venture capital group ZhenFund. Other investors include Li Zhiguo, chief executive of Hangzhou-based mobile app developer Wacai, and Simon Loong Pui-chi, co-founder and chief executive of Hong Kong internet finance company WeLab.

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