How is ESG Effort Affected by Artificial Intelligence?
The term «fintech for good» has evolved, now emphasizing societal impact and environmental benefits. The fintech industry reveals how it is driving positive change through environmental, social, and governance (ESG) initiatives, significantly supported by artificial intelligence (AI), as highlighted in The Fintech Times.
Chris Bourne, a fintech expert at NorthRow, highlights the transformative role of AI in ESG strategies. Bourne states, «We’re witnessing a shift towards sustainable growth models, emphasizing real-world benefits over short-term gains. Investors and consumers increasingly favor purpose-driven innovation. Emerging technologies, such as AI and machine learning, are pivotal in driving these opportunities within financial services. AI provides advanced tools for better data analysis, risk management, and decision-making.»
AI helps businesses monitor and report ESG metrics accurately, identify potential risks early, and ensure compliance with evolving regulations. Bourne adds, «AI facilitates the automation of ESG reporting, making it more efficient and reliable. Integrating AI into these processes ensures businesses can continue meeting ESG goals while adapting to regulatory demands.»
Simon Axon, financial services industry director at Teradata, explains AI’s potential in data integration for ESG. Axon notes, «In financial services, the impact of AI on ESG is still early days because the focus is on data quality and reporting. AI drives value in enhancing data integration and anomaly detection, improving data quality. Using AI, banks can reduce the time to create regulatory reports and enhance analytics to predict environmental impacts.»
Majda Dabaghi, chief sustainability officer at ekko, emphasizes AI’s positive global impact. Dabaghi says, «AI can be a force for good, from increasing food security to preventing human rights abuses. AI helps predict severe weather events and air quality, supporting governments and communities. It tracks and reduces emissions across industries, improving energy use efficiency and agricultural practices.»
Thomas Brock, expert contributor for Annuity.org, points out AI’s role in ESG investing. Brock states, «AI fosters transparency and accountability, enhancing data analysis and decision-making. In the environmental domain, AI helps companies reduce carbon footprints by monitoring energy utilization. In social and governance spheres, AI identifies unethical behavior patterns, promoting sustainability and compliance.»
Eric Croak, CFP, president at Croak Capital, discusses AI’s impact on ESG in fintech. Croak notes, «AI sifts through data on environmental impacts, social responsibilities, and corporate governance, providing valuable insights. It automates ESG reporting and compliance, showcasing companies’ commitment to sustainable practices.»
Not everyone agrees on AI’s current impact. Nicolas Mottis, a professor at Ecole Polytechnique Paris, explains, «Saying that AI is impacting ESG initiatives is a bit premature. Organizations are still in an exploratory phase. AI-based solutions can crunch vast data from diverse sources, but experts need to learn how to validate and use them effectively.»
AI is poised to significantly impact ESG initiatives by enhancing data analysis, decision-making, and reporting. While its full potential is still being explored, the integration of AI into ESG strategies promises a more sustainable and responsible future for the fintech industry.