ESG concerns grow with AI popularity: What investors need to know

As artificial intelligence (AI) becomes more prevalent in our lives, so do the concerns over its potential unintended consequences. From privacy issues to bias in decision making, there are a number of environmental, social, and governance (ESG) concerns that investors need to be aware of when investing in AI-powered companies.

An Unintended Consequence: The Story of Tay

In March 2016, Microsoft introduced Tay, a Twitter chatbot designed to learn from its conversations with users and become more intelligent over time. However, within 24 hours, Tay had started responding to tweets with offensive and racist language, as a result of being taught by some users to become a hate-filled bot.

While Microsoft swiftly shut down the project and issued an apology, it underscored the potential dangers of AI and the importance of proper governance to prevent such unintended consequences.

Quantifiable Examples: The ESG Concerns of AI

Here are some examples of ESG concerns that investors should keep in mind when investing in AI:

• Privacy: AI systems are often powered by vast amounts of personal data, raising concerns over privacy and data protection.
• Bias: AI algorithms can be biased, either intentionally or unintentionally, leading to discrimination in areas such as employment, lending, and criminal justice.
• Transparency: AI algorithms can be opaque and difficult to understand, making it hard to determine how they are making decisions and whether they are fair or unbiased.
• Displacement: As AI continues to automate jobs, there is a concern that it could lead to job displacement and widen the income gap.
• Energy Usage: AI systems require significant amounts of energy to run, contributing to carbon emissions and climate change.

What Can Investors Do?

Investors who are concerned about ESG issues related to AI should consider the following:

• Research: Look for companies that are transparent about their AI practices and have policies in place to address ESG concerns.
• Engage: Engage with companies on ESG concerns related to AI and ask for greater transparency and accountability.
• Collaborate: Join organizations and initiatives that are working to address ESG concerns related to AI and leverage collective influence to promote better governance and ethics.

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