The domain of socially conscious investors and asset managers continues to expand. In the last five years, assets under management (AuM) of environmental, social and governance (ESG)-related funds or ESG-principled investing experienced 25 percent growth. In 2019, these investments account for around US$31 trillion, or 30 percent of total AuM globally. Rise of responsible investment With socially responsible investments on the rise, investors must leverage artificial intelligence (AI)-based solutions to integrate their ESG criteria. If done strategically, AI can enable asset managers building green funds to screen companies easier and invest in organizations with higher ESG ratings. While keeping new ratings, market events, news and research in mind, investors now consider ESG in creating an investment strategy. The challenge comes in interpreting the data and making an ESG-sound investment. Enter: AI!

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Clear AI view for ESG investing AI technologies’ ability to process massive amounts of ESG-related data enables investors to identify information missed by traditional research. It can provide actionable insights and equip investors to choose organizations with higher ESG ratings—integrating profit and purpose. The AI-based analytical framework for ESG Investing offers:

  1. Qualitative analysis – Accounting for environmental, social, and governance factors starts with capturing ESG factors that affect the company alongside the asset manager’s ESG portfolio strategy.
  2. Quantitative analysis – The AI-based ESG model will then correlate this financial data with non-financial factors, while adjusting the financial forecast for ESG-themed portfolios accordingly.
  3. Investment decision – Through AI, asset managers can reduce their risks. They can make informed investment decisions based on this analysis and choose how to best grow their portfolio.
  4. Assessment – As more information is consumed, an AI-based ESG model will improve its algorithm over time, and provide more accurate, socially responsible investment recommendations.

Key insights

  • AI systems play a crucial role in the rise of responsible investing, particularly in identifying potential green investment funds.
  • The market share of AI-powered ESG, including ESG Quant Funds and multiple ESG indices, continues to grow.
  • The role of AI in integrating ESG in asset management covers qualitative analysis, quantitative analysis, investment decision and assessment.

What you can do:

Nicole Bodack

Managing Director - Capital Markets, Growth Markets

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