Investors expect to use artificial intelligence (AI) to address data challenges – but also view it as an ESG risk, according to research that reveals ESG adoption is at an “all time high”.
The rapid rise of AI is perceived to pose “new material ESG risks” to investment decisions, found Capital Group, based on responses from 1,130 global investors spanning 24 countries.
The sample includes 565 global institutional investors and 565 global intermediaries.
On the practical side, although only 10% of the survey cohort currently use AI to analyse ESG data, 53% said they planned to use AI in future. The same percentage (53%) said ESG data consistency and reliability are still significant challenges to adoption.
From an ESG investing perspective, six out of 10 investors view the impact of AI as the most material social issue over the next 12 months while 54% are concerned about the environmental impact from AI’s power-intensive operations.
In the wider survey, Capital Group found that nearly six in 10 (58%) think investors will maintain a long-term commitment to ESG despite current geopolitical and macroeconomic headwinds.
A majority of respondents said the pace of sustainable policy implementation and speed of ESG regulatory change act as tailwinds that will support faster progress on ESG.
Jessica Ground, global head of ESG at Capital Group, said: “This year’s ESG Global Study has underscored global investors’ long-term commitment to ESG in a volatile world. ESG adoption has remained high, with nine in 10 investors in the study identifying as ESG users. And over half of respondents (57%) indicate plans to increase allocations to ESG funds in the next 12 months.”
She said AI was a new area of interest emerging in the latest study. Investors are taking “tentative steps” to use AI as a tool to tackle ESG’s data challenges.
“AI as an investment opportunity, however, has prompted greater deliberation of related ESG risks. With an ability to take a more granular view on opportunities and risks, most respondents view active managers as well-equipped to navigate ESG headwinds and overcome challenges.”
