Artificial intelligence (AI), one of the most analyzed and debated topics lately, continues to improve its technology and capabilities, so its impact on numerous facets of companies and society is also increasing. All signs point to AI breaking into almost every sector, with the added potential to transform society, although it remains to be seen whether the balance will be positive or negative.
Although AI raises well-documented fears, its many potentially positive uses often attract less attention. As is the case with much of technology, whether it ultimately turns out to be beneficial or destructive will depend on how we manage its breakthrough and how we integrate it into our lives. The other ‘top’ values of AI funds beyond the Magnificent Seven.
More transparency and fewer biases
If introduced cautiously – that is, understanding its possible drawbacks – AI can promote much greater transparency and a decrease in biases in decision-making. Since AI systems can unintentionally reproduce current human biases and lead to harmful outcomes known as “algorithmic bias,” it is important that developers, owners, and users prioritize both awareness and mitigation of this risk. Possible measures include establishing responsible processes, using technical tools, and adopting operational practices such as internal “red teams” or third-party audits. Fortunately, as awareness of inherent bias and its risks increases, the threat of AI inadvertently reversing progress made in areas as important as diversity in the workplace decreases.
AI can enable investment professionals to have more time for analysis and make higher-level strategic decisions
In order for AI to improve transparency and reduce biases, it must be reliable. There is an increasing demand for explanations and clarity about the use of data by regulators and the general public. For it to be transparent, the data it receives must be understandable and clean, which will make it easier for humans to understand and trust AI decisions and will form the basis for testing and explaining those decisions to stakeholders. At the political level, both President Biden’s October 2023 executive order and the European Parliament’s December 2023 Artificial Intelligence Act focus on transparent and reliable use of this new technology.
The contribution of AI to the ESG field
There is a great opportunity for AI to play a transformative role in the ESG world. Once again, success will depend on how we guide the technology; that is: we must steer it to make a positive difference. An example would be AI-driven development of technologies aimed at removing greenhouse gases from the atmosphere and helping mitigate climate risk. Integrating AI resources into predictions related to climate change can enhance accuracy, help measure and control emissions, and provide essential data for climate action. In addition, smart manufacturing can enable a significant reduction in energy consumption, waste, and carbon emissions, while AI-based forecasts can improve the efficiency of electrical systems through accurate predictions of supply and demand.
Boston Consulting Group and Google predict that, with expert guidance, AI could help mitigate between five and ten percent of global greenhouse gas emissions by 2030, around ten to twenty percent of the Intergovernmental Panel on Climate Change’s interim target of achieving net-zero emissions by 2050. If applied correctly, we believe that AI’s influence on our path to greater sustainability would lead to faster technological experimentation and, therefore, faster progress than expected.
The transformative influence of AI in the investment field
Despite concerns about potential job reductions linked to AI in the banking and investment sector, many argue that this technology is not here to replace people in their work, but to complement them. Daren Acemoglu, professor of Economics at MIT, states that when AI and humans work together, they achieve better results than each would achieve separately.
We are moving towards a world where humans and technology will mutually complement each other
The smarter computers become, the greater their potential to automate complex and repetitive tasks, such as executing operations, preparing performance reports, and monitoring compliance. Therefore, AI can help identify and implement cost-saving opportunities and operational improvements. This can result in investment professionals having more time to perform analysis and make higher-level strategic decisions, which is the core of sound portfolio management. AI’s potential to process and analyze large amounts of data at speeds unattainable for humans allows for more sophisticated market analysis, resulting in better-informed investment decisions. Regarding customer management, AI can analyze each client’s data to provide highly personalized investment advice and recommendations, increasing client satisfaction and retention.
Instead of focusing the debate on the possibility of minimizing the workforce, we should also consider how these technological advances will reshape our sector and other industries. As AI integrates into the investment management sector, there is likely to be an increased demand for professionals skilled in data science, machine learning, and AI implementation. However, as in the field of medicine, when it comes to sensitive matters such as financial planning and investment, it is difficult to imagine a world where interacting with a chatbot completely replaces human interaction.
Therefore, although AI will improve efficiency and systematization, it is unlikely to eliminate the human factor in our sector and others. It seems, therefore, that the future ahead is one in which humans and technology will mutually complement each other. We believe that the careful application of AI, understanding the scope of its risks, should yield a net positive outcome in both the investment world and beyond.
