ESG fund managers who turned to big tech as a low-carbon, high-return bet are growing increasingly anxious over the sector’s experimentation with artificial intelligence.
Exposure to AI now represents a “short-term risk to investors”, said Marcel Stotzel, a London-based portfolio manager at Fidelity International.
Mr Stotzel said he is “worried we’ll get an AI blowback”, which he describes as a situation in which something unexpected triggers a meaningful market decline.
“It takes just one incident for something to go wrong and the material impact could be significant,” he said.
Examples that Mr Stotzel says warrant concern are fighter jets with self-learning AI systems. Fidelity is now among fund managers talking to the companies developing such technologies to discuss safety features such as a “kill switch” that can be activated if the world one day wakes up to “AI systems going rogue in a dramatic way”, he said.
The ESG investing industry may be more exposed to such risks than most, after taking to tech in a big way. Funds registered as having an outright environmental, social and good governance objective hold more tech assets than any other sector, according to Bloomberg Intelligence.
And the world’s biggest ESG exchange-traded fund is dominated by tech, led by Apple, Microsoft, Amazon and Nvidia.
Those companies are now at the forefront of developing AI. Tension over the direction the industry should take – and the speed at which it should move – recently erupted into full public view.
This month, OpenAI, the company that rocked the world a year ago with its launch of ChatGPT, fired and then rapidly rehired its chief executive, Sam Altman, setting off a frenzy of speculation.
Internal disagreements had ostensibly flared up over how ambitious OpenAI should be, in light of the potential societal risks. Mr Altman’s reinstatement puts the company on track to pursue his growth plans, including faster commercialisation of AI.
Apple has said it plans to tread cautiously in the field of AI, with chief executive Tim Cook saying in May that there are “a number of issues that need to be sorted” with the technology.
And companies, including Microsoft, Amazon, Alphabet and Meta Platforms, have agreed to enact voluntary safeguards to minimise abuse of and bias within AI.
Mr Stotzel said he is less worried about the risks stemming from small-scale AI start-ups than about those lurking in the world’s major tech companies.
“The biggest companies could do the most damage,” he said.
Other investors share those concerns. The New York City Employees’ Retirement System, one of the biggest US public pension plans, said it is “actively monitoring” how portfolio companies use AI, according to a spokeswoman for the $248 billion plan.
Generation Investment Management, the firm co-founded by former US vice president Al Gore, told clients that it Is stepping up research into generative AI and speaking daily with the companies it is invested in about the risks – as well as the opportunities – the technology represents.
And Norway’s $1.4 trillion sovereign wealth fund has told boards and companies to get serious about the “severe and uncharted” risks posed by AI.
When OpenAI’s ChatGPT was launched last November, it quickly became the fastest-growing internet application in history, reaching 13 million daily users by January, according to estimates provided by analysts at UBS Group.
Against that backdrop, tech companies developing or backing similar technology have seen their share prices soar this year.
But the absence of regulations or any meaningful historical data on how AI assets might perform over time is cause for concern, according to Crystal Geng, an ESG analyst at BNP Paribas Asset Management in Hong Kong.
“We don’t have tools or methodology to quantify the risk,” she said.
One way in which BNP tries to estimate the potential social fallout of AI is to ask portfolio companies how many job cuts may occur because of the emergence of technologies like ChatGPT.
“I haven’t seen one company that can give me a useful number,” Ms Geng said.
Jonas Kron, chief advocacy officer at Boston-based Trillium Asset Management, which helped push Apple and Meta’s Facebook to include privacy in their board charters, has been pressing tech companies to do a better job of explaining their AI work.
Earlier this year, Trillium filed a shareholder resolution with Google parent Alphabet asking it to provide more details about its AI algorithms.
Mr Kron said AI represents a governance risk for investors and noted that even insiders, including OpenAI’s Altman, have urged lawmakers to impose regulations.
The worry is that, left unfettered, AI can reinforce discrimination in areas such as health care. And aside from AI’s potential to amplify racial and gender biases, there are concerns about its propensity to enable the misuse of personal data.
Meanwhile, the number of AI incidents and controversies has increased by a factor of 26 since 2012, according to a database that tracks misuse of the technology.
Investors in Microsoft, Apple and Alphabet’s Google have filed resolutions demanding greater transparency over AI algorithms.
The AFL-CIO Equity Index Fund, which oversees $12 billion in union pensions, has asked companies including Netflix and Walt Disney to report on whether they have adopted guidelines to protect workers, customers and the public from AI harms.
Points of concern include discrimination or bias against employees, disinformation during political elections and mass layoffs resulting from automation, said Carin Zelenko, director of capital strategies at AFL-CIO in Washington.
She added that worries about AI by actors and writers in Hollywood played a role in their high-profile strikes this year.
“It just heightened the awareness of just how significant this issue is in probably every business,” she said.
Red flags
- Promises of high, fixed or 'guaranteed' returns.
- Unregulated structured products or complex investments often used to bypass traditional safeguards.
- Lack of clear information, vague language, no access to audited financials.
- Overseas companies targeting investors in other jurisdictions - this can make legal recovery difficult.
- Hard-selling tactics - creating urgency, offering 'exclusive' deals.
Courtesy: Carol Glynn, founder of Conscious Finance Coaching
David Haye record
Total fights: 32
Wins: 28
Wins by KO: 26
Losses: 4
Company%20Profile
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The specs
Engine: 2.0-litre 4cyl turbo
Power: 261hp at 5,500rpm
Torque: 405Nm at 1,750-3,500rpm
Transmission: 9-speed auto
Fuel consumption: 6.9L/100km
On sale: Now
Price: From Dh117,059
About RuPay
A homegrown card payment scheme launched by the National Payments Corporation of India and backed by the Reserve Bank of India, the country’s central bank
RuPay process payments between banks and merchants for purchases made with credit or debit cards
It has grown rapidly in India and competes with global payment network firms like MasterCard and Visa.
In India, it can be used at ATMs, for online payments and variations of the card can be used to pay for bus, metro charges, road toll payments
The name blends two words rupee and payment
Some advantages of the network include lower processing fees and transaction costs
England ODI squad
Eoin Morgan (captain), Moeen Ali, Jonny Bairstow, Jake Ball, Sam Billings, Jos Buttler, Tom Curran, Alex Hales, Liam Plunkett, Adil Rashid, Joe Root, Jason Roy, Ben Stokes, David Willey, Chris Woakes, Mark Wood.
INDIA V SOUTH AFRICA
First Test: October 2-6, at Visakhapatnam
Second Test: October 10-14, at Maharashtra
Third Test: October 19-23, at Ranchi
The%20specs
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Killing of Qassem Suleimani
Most sought after workplace benefits in the UAE
- Flexible work arrangements
- Pension support
- Mental well-being assistance
- Insurance coverage for optical, dental, alternative medicine, cancer screening
- Financial well-being incentives
Pharaoh's curse
British aristocrat Lord Carnarvon, who funded the expedition to find the Tutankhamun tomb, died in a Cairo hotel four months after the crypt was opened.
He had been in poor health for many years after a car crash, and a mosquito bite made worse by a shaving cut led to blood poisoning and pneumonia.
Reports at the time said Lord Carnarvon suffered from “pain as the inflammation affected the nasal passages and eyes”.
Decades later, scientists contended he had died of aspergillosis after inhaling spores of the fungus aspergillus in the tomb, which can lie dormant for months. The fact several others who entered were also found dead withiin a short time led to the myth of the curse.
How The Debt Panel's advice helped readers in 2019
December 11: 'My husband died, so what happens to the Dh240,000 he owes in the UAE?'
JL, a housewife from India, wrote to us about her husband, who died earlier this month. He left behind an outstanding loan of Dh240,000 and she was hoping to pay it off with an insurance policy he had taken out. She also wanted to recover some of her husband’s end-of-service liabilities to help support her and her son.
“I have no words to thank you for helping me out,” she wrote to The Debt Panel after receiving the panellists' comments. “The advice has given me an idea of the present status of the loan and how to take it up further. I will draft a letter and send it to the email ID on the bank’s website along with the death certificate. I hope and pray to find a way out of this.”
November 26: ‘I owe Dh100,000 because my employer has not paid me for a year’
SL, a financial services employee from India, left the UAE in June after quitting his job because his employer had not paid him since November 2018. He owes Dh103,800 on four debts and was told by the panellists he may be able to use the insolvency law to solve his issue.
SL thanked the panellists for their efforts. "Indeed, I have some clarity on the consequence of the case and the next steps to take regarding my situation," he says. "Hopefully, I will be able to provide a positive testimony soon."
October 15: 'I lost my job and left the UAE owing Dh71,000. Can I return?'
MS, an energy sector employee from South Africa, left the UAE in August after losing his Dh12,000 job. He was struggling to meet the repayments while securing a new position in the UAE and feared he would be detained if he returned. He has now secured a new job and will return to the Emirates this month.
“The insolvency law is indeed a relief to hear,” he says. "I will not apply for insolvency at this stage. I have been able to pay something towards my loan and credit card. As it stands, I only have a one-month deficit, which I will be able to recover by the end of December."
THE SPECS
Engine: 1.5-litre turbocharged four-cylinder
Transmission: Constant Variable (CVT)
Power: 141bhp
Torque: 250Nm
Price: Dh64,500
On sale: Now
Types of fraud
Phishing: Fraudsters send an unsolicited email that appears to be from a financial institution or online retailer. The hoax email requests that you provide sensitive information, often by clicking on to a link leading to a fake website.
Smishing: The SMS equivalent of phishing. Fraudsters falsify the telephone number through “text spoofing,” so that it appears to be a genuine text from the bank.
Vishing: The telephone equivalent of phishing and smishing. Fraudsters may pose as bank staff, police or government officials. They may persuade the consumer to transfer money or divulge personal information.
SIM swap: Fraudsters duplicate the SIM of your mobile number without your knowledge or authorisation, allowing them to conduct financial transactions with your bank.
Identity theft: Someone illegally obtains your confidential information, through various ways, such as theft of your wallet, bank and utility bill statements, computer intrusion and social networks.
Prize scams: Fraudsters claiming to be authorised representatives from well-known organisations (such as Etisalat, du, Dubai Shopping Festival, Expo2020, Lulu Hypermarket etc) contact victims to tell them they have won a cash prize and request them to share confidential banking details to transfer the prize money.
* Nada El Sawy
Walls
Louis Tomlinson
3 out of 5 stars
(Syco Music/Arista Records)
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GULF MEN'S LEAGUE
Pool A Dubai Hurricanes, Bahrain, Dubai Exiles, Dubai Tigers 2
Pool B Abu Dhabi Harlequins, Jebel Ali Dragons, Dubai Knights Eagles, Dubai Tigers
Opening fixtures
Thursday, December 5
6.40pm, Pitch 8, Abu Dhabi Harlequins v Dubai Knights Eagles
7pm, Pitch 2, Jebel Ali Dragons v Dubai Tigers
7pm, Pitch 4, Dubai Hurricanes v Dubai Exiles
7pm, Pitch 5, Bahrain v Dubai Eagles 2
Recent winners
2018 Dubai Hurricanes
2017 Dubai Exiles
2016 Abu Dhabi Harlequins
2015 Abu Dhabi Harlequins
2014 Abu Dhabi Harlequins
From Zero
Artist: Linkin Park
Label: Warner Records
Number of tracks: 11
Rating: 4/5
