The Frankfurt start-up Arabesque has promised a lot since it was founded in 2013. First it was about Islam-compliant investments and funds, later the company developed a database for sustainability indicators, then software was added that is supposed to invest money with artificial intelligence. However, the commercial breakthrough seems to have failed to materialize so far. A new idea is set to change that: the latest promise is called “ESG Book”. It replaces the previous data offering called Arabesque S-Ray and, as a global platform for sustainability data, is intended to be a central point of contact where companies can store for investors how green or social they are.
For this project, Arabesque has now raised 35 million dollars from two financial investors and a subsidiary of the insurance group Allianz. It is about enabling the company “further growth” and expanding the outstanding technology, according to a statement by ESG Book. The partnership is driven by the “shared vision for radical transparency in sustainability data,” said venture capital firm Energy Impact Partners, which has teamed up with financial investor Meridiam, which also specializes in sustainability. We see a “tremendous momentum” and the company on the way to becoming the world’s leading platform for ESG data.
This is data that evaluates how far companies pay attention to the environment, social issues and responsible corporate management (governance). Daniel Klier, CEO of ESG Book and former head of strategy at major bank HSBC, said he was looking forward to the company’s “next growth chapter”.
Existing shareholders sell at a profit
However, some existing shareholders no longer seem to want to participate in this capital. In 2019, several Frankfurt financial groups invested in the up-and-coming company. The Deutsche Bank subsidiary DWS and the Landesbank Hessen-Thüringen (Helaba) were among them, Commerzbank and the IT consultancy Accenture took part, and the state of Hesse invested tax money. In the rather ailing banking location of Frankfurt, the promise of a start-up that is so ambitiously tackling a future-oriented topic is attracting considerable attention. Celebrities such as the former Deutsche Bank boss Jürgen Fitschen or ex-Vice Chancellor Philipp Rösler took over seats on the company’s advisory board.
However, the initial euphoria seems to have evaporated for some. In fact, Arabesque has not yet been able to benefit from the green financial investment business, based on the latest published figures from 2020. The Commerzbank subsidiary Commerzbank Real (with a 4.9 percent stake) and the state of Hesse (2.2 percent) have now sold their shares, as they announced on Thursday. Helaba, DWS and Accenture, on the other hand, have their shares diluted, i.e. remain invested without participating in the capital increase.
According to an insider, Commerz Real and the state of Hesse were dissatisfied with the commitment, which neither investor wanted to comment on. As a venture capital investment, getting involved with Arabesque S-Ray made “absolutely sensible,” said a spokesman for Commerz Real. However, because a specific project for the valuation of real estate is “no longer a priority”, they no longer see a need for support and have decided to sell it. The minority share was sold to the financial investors at a profit.
Controversial business partners
Arabesque Holding, which held 75 percent of S-Ray before the capital increase, and its founder Omar Selim were not mentioned in Thursday’s announcement. The German-British company was recently talked about, among other things, by the commitment of Daniel Wruck, he is a businessman from Wiesbaden with excellent contacts in the Middle East. As a partner of Arabesque, he was involved in bringing together the prominent round of investors in 2019. He benefited from his political connections, but also from the proximity to Frankfurt’s banking celebrities – including ex-DWS boss Asoka Wöhrmann, who had vigorously promoted the investment in Arabesque. After allegations of greenwashing and alleged compliance violations, Wöhrmann recently had to resign.
Did the new investors demand Arabesque S-Ray’s name change, pretending to distance themselves from the former mother? Does all the fresh money flow into the company or is it paid out to the existing shareholders? An Arabesque spokesman and the CEO of ESG Book left these and other questions unanswered. “Radical transparency” is not that easy in everyday life.