It is necessary in building procurement systems to counter climate change. It is fundamental in assessing the performance of financial instruments in terms of sustainability impact. Assurances, however well-meant, are not enough. In a characteristic example of how technology can improve life under certain circumstances, an emerging scientific discipline known as spatial finance comes to close that gap.

Spatial finance combines Earth observation and remote sensing via aerial means – including satellite and drone imaging – with machine learning and financial analysis. Since spatial finance can improve the quality of predictions about the impact of climate change on land mass and habitats, coastal, rural and metropolitan areas as well as river and sea pollution levels, it allows the financial sector to conduct a more accurate assessment of environmental risks.

The Network of Central Banks and Supervisors for Greening the Financial System has fully recognised the positive implications of spatial observation and analysis for financial supervisors, incorporating climate risk into ongoing prudential supervision.

Similarly, the emerging science can boost detection and enforcement of breaches of environmental protection laws. It can also augment the wider role of the law in implementing sustainability, for example through the contracts that give effect to green financing arrangements and related insurance arrangements.

Most financing today includes environmental, social and governance obligations in the contractual documentation. There are various ways of enforcing these obligations, such as non-compliance resulting in a higher interest rate in some green loans.

More generally, a breach of an environmental promise or covenant can lead to legal claims by which the financier declares an event of default and calls in the lending, bringing the contract to an end. This is an acrimonious route that could lead to years of litigation.

The problem is essentially the same one that faces financial supervisors – metrics, quantification and monitoring. How do you know if the obligations are being complied with? In some contracts, there is self-reporting and in others some kind of external review, but this is difficult and could lead to disputes.

In contrast, spatial technology can be instrumental in measuring the footprint of new roads and railways, particularly in environmentally sensitive areas, making it practical for investors and creditors to detect breaches of biodiversity covenants in real time. The supply of evidence via spatial technology could enable funders to suspend funding until the contractors offer full compliance.

Is this system currently feasible? With the advent of so-called smart contracts, which are self-executing, the answer seems to be positive. There are risks of increased surveillance, which are coming under increasing attention, yet climate change risks are also pressing. It is therefore a matter of checks and balances coupled with a sense of urgency.

Sir William Blair is Professor of Banking Law and Ethics at the Centre for Commercial Law Studies at Queen Mary University of London and formerly presiding judge of the Commercial Court of the UK’s High Court. Emilios Avgouleas is chair in International Banking Law & Finance at the University of Edinburgh