An AI and ESG workshop led today by Dr Jane Thomason, Emeritus chair of the World Metaverse Council, and AIBC ambassador, took a look at the transformative potential of AI in advancing ESG principles in sustainable investing. The workshop, which is being held at the AIBC Eurasia summit in Dubai examined the ethical considerations behind this, including climate concerns, privacy, and security.
The role of AI in ESG investing
Investors today are not just looking for profit; they are also seeking to leave a positive legacy. AI can be instrumental in achieving this by optimising sustainability efforts and enhancing decision-making in ESG investing. It enables investors to analyse massive amounts of data, track carbon footprints, optimise energy efficiency, and improve resource management. This makes it easier to invest in companies that are truly committed to ESG principles rather than those that merely claim to be.
“AI can be your best friend when thinking about how to improve the impact of your investments. Some people only leave behind money, but some want to leave behind a legacy. AI can help as a tech that’s going to improve sustainability and help you make better investments for social return.”
“What AI is going to be able to help you to do is make it a lot more analytic and data based. It enables you to know that the companies you’re investing in are in fact serious about ESG. Predictive modeling will allow you to look at a range of future scenarios and enable you to be a better, more informed precision investor.” Thomason explains.
According to Thomason, regulatory pressure is also increasing for companies to be involved in ethical and responsible AI practices in ESG.
She cautions however, that there are risks and algorithmic biases, and, of course, the incredible amount of energy that data centres require to feed the AI. There are also risks with data quality because “traditionally, ESG data simply hasn’t been collected,” she says.
Dr. Thomason emphasized the urgency of ESG investing, particularly in regions facing environmental challenges such as pollution, water shortages (there will be a 20% decrease in rainfall over the next 20 years), and food insecurity. This includes Dubai – an emirate which according to Thomason has a fragile landscape. With rapid urbanisation and increasing pressure on natural resources, investments must prioritize sustainable solutions. AI can help monitor these risks through predictive modeling and satellite-based emissions tracking, allowing for data-driven investment decisions. 70% of the world’s population now lives in cities, she highlighted.
AI-driven transparency and governance
AI enhances transparency in ESG by analyzing vast amounts of data to verify corporate sustainability claims. It aids in governance by improving risk management and regulatory compliance. AI-powered automation also streamlines processes, making ESG reporting more efficient. Moreover, digital twin technologies are being used to model climate scenarios and disaster preparedness, offering valuable insights for investors.
Balancing AI’s energy demands with ESG goals
Despite its advantages, AI comes with challenges, including significant energy consumption. Sustainable AI development is necessary to ensure that the benefits outweigh the environmental costs. Blockchain, often criticized for its high energy usage, can still play a crucial role in ESG by supporting smart grid management, tracking carbon credits, and enabling decentralized energy markets. “We must balance the energy cost of these technologies with the benefits they accrue”, she goes on to say.
The Future of AI and ESG
AI is revolutionising ESG investing by enabling predictive analytics, impact measurement, and improved accountability. Investors can now leverage AI to ensure their capital is directed towards initiatives that truly drive positive change. As regulatory pressures and consumer expectations continue to rise, ESG will become a fundamental consideration in investment strategies, with AI serving as a key enabler in this transformation.
“Sustainable investment will always involve human judgement, but AI can really serve us as a tool to improve the way we make decisions. We need to take responsibility for how to mitigate the risks.”
Sustainable investing is no longer just an ethical choice – it is a strategic imperative. By integrating AI with ESG principles, investors can contribute to a future that is both financially and socially rewarding.
