CSIRO releases industry standard for responsible AI investment

While investment opportunities abound in the current ‘first wave’ of the artificial intelligence (AI) revolution, investors can expect a surfeit of new prospects from the coming second and third waves, according to a new industry report. However, unchecked investments in this burgeoning technology and its adjacent industries could expose ethical quagmires for stockholders.

Australia’s chief science research agency, the CSIRO, and boutique investment firm, Alphinity, have sought to address these ethical concerns, releasing a new responsible AI (RAI) report that aims to “bridge the gap between emerging RAI considerations and traditional ESG [environmental, social and governance] principles, such as such as climate, modern slavery, and governance”.

The co-authored report, split into three parts, promises a practical, open-source and customisable toolkit for investors to assess the impact of AI across their investment portfolio.

Step one of the framework determines materiality risk incorporating 27 AI use cases across nine key sectors. Step two provides governance insight across 10 RAI key indicators, which assess the overall commitment, accountability, and measurement of RAI. Step three, a self-analysis section, provides 40 filterable questions to facilitate detailed analysis and engagement with company management on AI implementation and RAI practices.

Alphinity confirmed it will implement the RAI framework, tools, and templates into its ESG analysis processes, adding that it hopes the framework and toolkit “will become an industry-wide standard”.

Riding the wave, responsibly

The rapid advancement of AI technologies over recent years has “[paved] the way for significant risks and ethical concerns”, said Jessica Cairns, Alphinity’s head of ESG and sustainability.

She said the RAI toolkit was designed to address these concerns, providing a framework for investors to analyse the risks and opportunities as well as identify red flags in their risk and governance analysis.

While the AI revolution is “well underway”, Cairns said, dominated by companies with direct revenue exposure to AI, alongside those ‘picks and shovel’ stocks supporting both AI-producing and AI-backed industries, it is the second and third wave of AI that will exponentially increase opportunities for investors.

Here, traditional sectors, including banking and mining, will benefit from improved efficiencies, expanded revenue streams, and boosted productivity.

Citing figures from Deloitte, the RAI report predicts that by 2030, AI will see a seven-fold increase in the amount currently invested annually.

CSIRO research director, Professor Liming Zhu added that 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”.

“Our research showed RAI governance is best embedded within existing systems and processes and a strong track record of ESG performance is an indicator of confidence for investors.”

Cairns concluded with the “hope… that all investors, from super funds to boutique fund managers, will adopt responsible AI frameworks into ESG considerations and responsible investment criteria.”