Like everyone else, sustainable investment managers are pondering the artificial intelligence (AI) question.
And while the answers might still be emergent, Pablo Berrutti, Stewart Investors portfolio specialist, said to date AI appears neutral from a sustainability perspective.
“There are some positives and some negatives,” Berrutti said.
For instance, AI might help improve batteries for electric vehicles but at the same time oil companies could use the technology to ferret out previously inaccessible fossil fuel reserves.
He said other sectors such as healthcare and IT are already seeing promising gains in productivity through the large language models and machine-learning tools that have flowered over the last couple of years.
Somewhat surprisingly, Berrutti name-checked cyber-security, social media ‘deep-fake’ assaults on democracy and warfare as the most significant risks above the energy required to feed the boundless AI data-crunching appetite.
According to the International Energy Agency, AI “uses more energy than other forms of computing – a crucial consideration as the world seeks to build a more efficient energy system”.
“Training a single model uses more electricity than 100 US homes consume in an entire year,” a November 2023 IEA article notes. “In 2022, Google reported that machine learning accounted for about 15% of its total energy use over the prior three years.”
Berrutti said while the hyperbolic growth of AI could “blow the emissions targets” of the historically low-carbon tech sector, the problem might also be the solution.
“The optimistic view is that the technology could also help develop clean energy systems,” he said.
But the growing use of AI to create compelling mis-information distributed via social media channels or in war through the use of automated drones, for example, might prove even more difficult to manage than soaring electricity usage.
“Everyone should be concerned about how AI is being used in warfare,” Berrutti said.
Disaster scenarios aside, Stewart takes a more considered position on the potential impact of AI on the companies it invests in.
As a bottom-up global equities manager with a sustainability bent, the Edinburgh-founded firm is focusing beyond the hot picks of the day (such as chip-king Nvidia) through to how the technology might impact “real economy” businesses over the long term.
“We are looking at the risks and opportunities from AI of the companies we invest in over a 10-year timeframe,” he said. “What other applications might there be that are not on the front-pages of the media now?”
Based in the Stewart Sydney office, Berrutti was in NZ earlier this month for the Responsible Investment Association of Australasia conference.
AI, of course, is just one analytical factor in the Stewart research process that leans to high-quality companies with good sustainability credentials.
The $31.5 billion manager – part of the First Sentier Investors group – runs about $213 million for NZ clients, roughly half in the Worldwide Sustainability Leaders portfolio investment entity (PIE) vehicle launched late in 2022.
Just last week, however, David Gait, the Sydney-based head of the Stewart investment team, announced the manager would be dropping the ‘sustainability’ label from its products this year.
In a letter to investors, Gait cited several reasons for the name-change including the fact “financial regulators globally are spending more time trying to define what ‘sustainability’ means and how it should be regulated”.
“Regulatory approaches are changing quickly and unpredictably and will likely continue to do so,” he told investors. “We would rather focus on improving our own approach to sustainable investment than lose focus trying to second-guess regulatory changes. Removing the word ‘sustainability’ helps us in this regard too.”