The use of AI in sustainability is controversial. While some argue that it can transform the sustainability landscape, others point to its resource-intensive nature and lack of practical use cases. Regardless of where you stand on the AI debate, companies are increasingly finding ways to integrate generative AI into their workflows. This includes major financial institutions and their sustainability practices. Recently, Norges Bank made news when publishing its Strategy 25: Close-out report. In the report, Norges discusses how they use AI to screen sustainable investments:
“We deployed AI tools to collect and analyse information about corporate and sustainability practices to better inform our ownership and risk management work. We improved the measurement and reporting of our engagement outcomes and strengthened our sustainability due diligence framework to better identify and assess portfolio companies’ exposure to conflict-affected and high-risk areas. We divested from 193 companies to reduce financial risk and generate excess return over time. We reversed 33 risk-based divestments.”
Companies and investors considering similar AI applications should be careful. While AI can serve as a tool for researchers, it shouldn’t be relied upon exclusively. AI does not know truth from fiction. In reality, it doesn’t really “know” anything. It can only calculate the most statistically likely words for answers based on the user’s prompts and its training data. This means that the results of AI searches can authoritatively state false information due to relying on inaccurate sources. While programmers can make AI prioritize trusted sources in its results, there is no foolproof system to eliminate these errors. This means that AI outputs must be thoroughly vetted by humans and cross-referenced with their original sources. Common solutions to these problems include “human in the loop” review, where humans review and are ultimately responsible for AI work product.
For those curious about AI and AI risk management, I recommend checking out TheAICounsel.net and subscribing to its free blog. I contribute to TheAICounsel.net blog bi-weekly, along with TheCorporateCounsel.net Managing Editor John Jenkins.
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