How AI can boost sustainable investing

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In the European Union, large companies and many commercial companies will be required to publish updates on the environment and the risks they face, with those reports starting in 2025.

Across the pond, the Securities and Exchange Commission earlier this month announced new proposed rules businesses to disclose to investors their greenhouse gas emissions. “It will be a reality for many financial executives,” said John Mennel, executive director Deloitte.

With disclosure requirements emerging in countries from India to China, the need for tools that help businesses manage environmental, social, and governance issues is expected to rise. Many of these tools rely on artificial intelligence to help companies of all sizes stay compliant – and transform their businesses along the way.

“What you see is about 40% of the world’s GDP that requires not only climate disclosure, but full sustainability – E, S, and G based on the so-called double function of this type, which not only affects the company, but the impact of the company on the world,” says Tim Mohin, partner and director at Boston Consulting Group.

“I think it’s great for businesses,” says Meera Clark, venture capitalist at Redpoint Ventures. “Now that they have a structure, they have a signal that they plan to establish a reporting environment that they can rely on for the next 5, 10, or 20 years.”

AI is already helping companies pursue their ESG goals in a variety of ways, with some of the most popular tools being used ranging from machine learning to improve the accuracy of ESG metrics and address disclosure opportunities, to using AI-powered satellite technologies to monitor ecosystems . hazards, and a predictive model to calculate greenhouse gas emissions.

“There are many areas where AI will play a role,” said Matt Slovik, head of global sustainable finance. Morgan Stanley.

But, Slovik adds, companies should be careful. “Is this a problem that AI can help solve?” Slovik asks. “And if so, what does that answer look like and what does it mean for your team, your cost, and your other goals so you can make the right decision.”

At Redpoint Ventures, Clark says the company spends most of its time in the software and data industry, looking for market opportunities and the main reason why startups haven’t existed in the past but should today.

“The regulatory environment continues to evolve,” says Clark, which he believes agrees with Redpoint Ventures’. led money in a $13 million Series A for sustainable AI platform Greenplaces. “There is a clear need for businesses to be able to explain this clearly.”

One question that comes up in the rise of demand for AI and AI tools is the use of force necessary for such calculations. “Data centers continue to use a large portion of energy and unless that energy can be renewable or there is some way to reduce its use, we will have a large and negative side to this,” warns Mohin.

Susannah Shattuck, chief product officer at AI governance software provider Credo AI, says that if an organization sets a goal to achieve zero carbon by 2050, it must make informed decisions and know that “these big languages ​​can have a lot of carbon emissions and so I make decisions to put them into practice.” which will have a big impact on my business.”

Bigger language that can be offensive, biased, or open to an organization’s attacks can lead a brand to steer them in the wrong direction, creating new governance risks when companies rely on these tools.

“An organization that wants to use this technology safely, needs to ensure that it is in the right place to protect against potential risks and negative consequences,” says Shattuck.

At Deloitte, Mennel says AI tools for ESG don’t just help companies comply with new standards, they can transform them. An agricultural company can use AI to analyze the ecosystem, for example, a particular food source of carbon, and sell that claim to consumers. “With what I can create, is there an opportunity to create new products or new businesses that bring value,” asks Mennel.

Canada-based Geotab has used AI for more than a decade to help Fortune 500 companies and government agencies manage their fleets, providing data intelligence to make informed decisions about the mobility, safety, and sustainability of the vehicles they use. “Sometimes there is a big overlap between sustainable and effective decisions,” said Neil Cawse, CEO of Geotab.

The most sustainable solution is simple: reduce driving. From there, Mr. Cawse says public and private agencies can determine the volume of their transportation, and ensure that the type of vehicle meets the requirements of the road. But one common mistake is that some companies aggressively switch to electric vehicles, a costly mistake if some vehicles in the fleet are stranded because they cannot complete the journey.

“Good decisions are driven by good data,” adds Cawse. “Let the AI ​​know what to look for first.”

In February, Geotab uncovered An AI analytics provider called Geotab Ace, which accesses billions of data every day including predictive security analysis, predictive maintenance, travel statistics, EV statistics, and GPS tracking to answer questions from customers.

C3 AI, meanwhile, sells AI-powered software to institutional investors to help them collect, manage, and analyze data, identify risks, and plan for their ESG goals. “The demand for these ESGs is about to go through the roof,” said Tom Siebel, chairman and CEO of C3 AI.

Siebel questions whether ESG disclosure requirements will make much of a difference, arguing that such standards would be too expensive for companies to report. Companies only need to publish information to comply with regulations from Europe, the US, and other markets—there is no need for us to take action.

C3 AI’s hope is that the tools it provides will help, ensure the company’s bottom line will reduce costs and ultimately be good for customers, owners, and the planet.

“We will allow them to plan and reduce their emissions and reduce their energy consumption to meet the goals they have set,” says Siebel.

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