Alphinity Investment Management and CSIRO have brought its responsible artificial intelligence (AI) framework to the market.
The three-part framework follows 12 months of extensive research and company engagements with over 28 global and domestic listed companies across a range of industries.
According to Alphinity and CSIRO, the responsible AI (RAI) framework and actionable toolkit assists investors in navigating the burgeoning opportunities presented by the AI sector.
The 32-page report titled The Intersection of Responsible AI and ESG: A Framework for Investors is intended to be used by equity investors who are looking to assess the ESG implications of AI across their investment portfolios.
Step one of the toolkit determines materiality risk by implementing 27 AI use cases across nine key sectors. Materiality is based upon regulatory risks, environmental and social impacts as well as impact scope.
The second step offers governance insights across 10 RAI key indicators to evaluate the overall strength of a company’s management approach.
Step three is a deep dive with over 40 filterable questions to provide detailed analysis with company management on AI implementation and responsible practices.
Last week, the Responsible Investment Association of Australasia (RIAA) also launched a toolkit to help advisers address the risks presented by AI.
Jessica Cairns, Alphinity head of ESG and sustainability, explained why proactively investigating the risks and opportunities of AI’s rapid uptake is vital.
“The first wave of AI is well underway, dominated by companies with direct revenue exposure alongside ‘picks and shovel’ stocks that provide the tools, platforms and infrastructure required to drive success in an AI-enabled world.
“What we are most excited by is the second and third wave, where we see AI creating opportunities for a breadth of traditional sectors, like banking and mining, through improved efficiencies, expanded revenue streams and boosted productivity,” she described.
With AI’s development also giving way to heightened risks and ethical concerns, Cairns emphasised why responsible frameworks are important to spot red flags in governance analysis.
Professor Liming Zhu, CSIRO research director, believes investors must know where to look for signs of responsible AI use until it becomes commonplace for RAI policies to be shared publicly.
He elaborated: “Combining our RAI research and Alphinity’s investment expertise, the framework is purposefully designed so a range of investors can practically implement it into existing ESG analysis and reporting, picking and choosing the tools that work for them.
“With global AI adoption expected to accelerate significantly between now and 2030, it is imperative we take a considered investment approach to the responsible and safe use of AI.”
Alphinity will also implement the framework into its own ESG analysis processes, and hopes the toolkit will become an industry-wide standard as AI adoption booms.
“Our hope is that all investors, from super funds to boutique fund managers, will adopt responsible AI frameworks into ESG considerations and responsible investment criteria,” Cairns added.
Early last year, the boutique funds manager identified that getting the growth of AI wrong can present a greater problem than climate change and should be considered as part of an ESG application.
