Australian investors now have a toolkit for assessing the environmental, social and governance (ESG) implications of artificial intelligence as they gear up for a second wave of the technology.
The new framework was developed by the CSIRO and fund manager Alphinity over the last year and has been positioned as a guide for listed companies grappling with responsible AI and risk management.
Based on Australia’s eight AI Ethics Principles, it provides a practical guide for what is hoped will become standard practice.
While the Australian AI ethics principles have existed since 2019 and a centre within the CSIRO is dedicated to the responsible uptake of AI by businesses, information doesn’t flow freely between businesses and there is little guidance specifically for investors.
“Metrics for responsible AI are not often shared publicly, making it challenging for investors to assess performance and understand what best practice looks like,” the framework says.
ESG frameworks already offer a useful way for investors to assess risk but none have provided measures related to responsible AI.
Early last year Alphinity and the CSIRO began a project to create the Intersection of Responsible AI and ESG: A Framework for Investors Report for investors to bridge the gap, with a dedicated framework and three step process.
Step one of the Responsible AI Framework determines materiality risk, incorporating 27 AI use cases across 9 key sectors. The second step provides governance insight to assess the overall commitment, accountability, and measurement of responsible AI.
A final step used for when red flags are spotted provides a deep dive guide that includes more than 40 filterable questions to facilitate detailed analysis and engagement with company management on AI implementation and RAI practices.
Based on research and consultation with 28 listed companies, the practical guide comes amid the “first wave” of AI dominated by the technology, media and telecom companies that have direct revenue exposure to AI-related products and services or are providing the tech tools and infrastructure too them.
“What we are most excited by is the second and third wave,” says Alphinity’s head of ESG and sustainability, Jessica Cairns.
“Where we see AI creating opportunities for a breadth of traditional sectors, like banking and mining, through improved efficiencies, expanded revenue streams, and boosted productivity.
“Like any tech revolution, however, there will be winners and losers. Rapid advancement also paves the way for significant risks and ethical concerns, which investors must understand, measure, and manage.”
CSIRO research director, Professor Liming Zhu said the framework is designed so investors can pick and choose elements to incorporate with existing ESG analysis.
“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,” he said.
Do you know more? Contact James Riley via Email.