The US-headquartered quantitative investment shop, Acadian Asset Management, has combined climate change and artificial intelligence (AI) in a first-of-a-kind tool aimed at assessing portfolio and corporate net zero target achievement probabilities.
Andy Moniz, Acadian responsible investing director, said the new system – the first net zero system to use the technology underpinning AI superstar, ChatGPT – provides a detailed, forward-looking estimate of whether investment portfolios or companies could meet their stated decarbonisation goals.
Moniz said Acadian had used ChatGPT tech to examine the credibility of corporate net zero pledges via in-depth analysis of thousands of documents and other statements.
By comparing subtle language signals across multiple corporate documents and communications, he said the AI-enhanced tool offers unparalleled insight into net zero and other environmental, social and governance (ESG) claims.
As well as providing more solid ground for engaging with companies over climate change, Moniz said the new Acadian system also helps investment managers and asset owners to better understand the net zero exposure at the total portfolio level or build strategies around the goals.
Investors, and policy-makers, too, might find the deeper analysis useful in gauging broader market risks: the Acadian tool, for instance, estimates the S&P ASX300 universe has a 20 per cent probability of meeting net zero goals in contrast to another research report that found the Australian equities index is already aligned with the climate targets.
It is understood, the Acadian tool would soon be available for use by Australian clients.
But the net zero and other ESG revelations won’t be available simply by plugging into ChatGPT.
“We’re using the underlying ChatGPT technology to train our own large language models,” he said. “Our domain expertise means we can explore the nuance of sustainable investing and ESG in portfolio management.”
While Moniz, who joined Acadian in 2021, had already helped developed anti-greenwashing tools for the manager using natural-language processing (NLP) and machine-learning technology, he said AI kit such as ChatGPT has significantly improved efficiency.
For example, he said previously it would take three to four days to scan disclosure documents from a company into the system.
“With the ChatGPT technology we can do it in 15 seconds.”
Acadian data shows companies in the MSCI world index product about 2,500 sustainability reports alone last year, requiring about 80 minutes each for a human to read.
But in addition to zeroing in on corporate climate change risks and opportunities, Moniz said Acadian is also using the AI-powered analytical tools to more accurately map companies against the UN Sustainable Development Goals (SDGs)
“We found one leading data provider that mapped fizzy drinks and confectionary companies to SDG2 (alleviating hunger), raising questions on the quality of their data,” he said. “Using NLP techniques, we have built a SDG taxonomy that automatically maps companies’ product revenue and operational alignment to each of the SDGs.”
Acadian manages about A$144 billion globally including A$10 billion sourced from investors in Australia and NZ: the group has an Australian office headed by Gillian Savage.
Acadian is primarily open to institutional investors in NZ, although retail clients may have some exposure via the Mercer multi-manager global equities panel.