The AI Book

CHAPTER 35The Impact of AI on Environmental, Social and Governance (ESG) Investing: Implications for the Investment Value Chain

By Kalyani Inampudi, ACSI, MBA¹ and Martina Macpherson, FICRS²

¹Independent Consultant (ESG and Sustainability)

²President, Network for Sustainable Financial Markets; Visiting Fellow, Henley Business School and Guest Lecturer, University of Zurich

Introduction

There is a great potential for Artificial Intelligence (AI) to contribute towards global economic activity, especially towards Environmental, Social and Governance (ESG) investing. The combination of AI, and other similar Machine Learning (ML) technologies, with industry leading benchmark impact investing metrics can ensure data consistency, reliability and transparency by providing insights into key risks and trends allowing investors and corporations to mitigate their risk while simultaneously optimizing the performance at portfolio and entity level. Building a stronger evidence base will be particularly important for those who are developing practical frameworks and guidelines for AI governance and ethics, including government bodies, legislators, standard-setting bodies and asset owners.

So, what are the challenges and opportunities lying ahead for ESG in this context?

The Impact of AI on ESG

The impact of AI, including unstructured data and ML, on the financial services industry, is an undeniable phenomenon. Currently, several organizations are transitioning towards incorporating a broad ...