Below is an overview of ISS ESG’s recently released report on Artificial Intelligence. To access the full report, you can download it directly from the ISS ESG online library.
Advances in Artificial Intelligence (AI) may have far-reaching effects on privacy, physical safety, discrimination, and the labor economy. The biggest negative impact may be related to the loss of privacy, while physical safety threats are probably most relevant in mass-consumer markets (e.g., automobiles). The use of AI systems may create an opportunity to combat discrimination (e.g., in hiring). Finally, although some might fear that machines will replace human labor too quickly, those companies that train their workforces to collaborate with new technology may ultimately lift the productivity (and salaries) of their employees.
For investors, there may be a spectrum of risks and opportunities related to AI use among portfolio companies along dimensions such as industry and geography. The approach to AI governance taken by the EU’s Artificial Intelligence Act (AIA) underscores the need for differentiated analyses. ISS ESG has identified 21 ESG rating industries in which the use of AI in products and services may potentially carry higher risks.
The AIA also highlights the potential value of a quality management system, which can help to ensure that robust quality control and assurance processes are in place, thereby maintaining and improving AI model accuracy, resilience, and security. Demonstrating a rigorous commitment to product quality and safety may also speed AI adoption. Trust appears to remain a considerable hurdle to the uptake of AI tools, even if their efficacy is apparent.
These issues are explored in the following report chapters:
- The Intersection of AI and ESG: Discrimination
- AI and Privacy: Toward a Social Cost of Data?
- AI and Safety: Mind the Accumulation of Mass-Market Risks
- AI and the Labor Economy: It Still Takes Two (Labor & Capital) to Tango
- AI Governance: Quality Management Is Paramount
Explore ISS ESG solutions mentioned in this report:
- Identify ESG risks and seize investment opportunities with the ISS ESG Corporate Rating.
By:
Joe Arns, Executive Director, Corporate Ratings Research, Technology, Media, & Telecommunications, ISS ESG
Harish Srivatsava, Vice President, Corporate Ratings Research, Technology, Media, & Telecommunications, ISS ESG
Harriet Fünning, Senior Associate, Corporate Ratings Research, Technology, Media, & Telecommunications, ISS ESG
Gayathri Hari, Associate, Corporate Ratings Research, Technology, Media, & Telecommunications, ISS ESG
Rachelle Piczon, Associate, Corporate Ratings Research, Technology, Media, & Telecommunications, ISS ESG
Roman Sokolov, Associate, Corporate Ratings Research, Technology, Media, & Telecommunications, ISS ESG
Iona Sugihara, Associate, Corporate Ratings Research, Technology, Media, & Telecommunications, ISS ESG
Rafael Alfonso Bastillo, Analyst, Corporate Ratings Research, Technology, Media, & Telecommunications, ISS ESG
Ishani Deshpande, Analyst, Corporate Ratings Research, Technology, Media, & Telecommunications, ISS ESG
Nat Latoza, Analyst, Corporate Ratings Research, Technology, Media, & Telecommunications, ISS ESG
Peter Mofokeng, Analyst, Corporate Ratings Research, Technology, Media, & Telecommunications, ISS ESG
Hittarth Raval, Analyst, Corporate Ratings Research, Technology, Media, & Telecommunications, ISS ESG
Archana Shanbhag, Analyst, Corporate Ratings Research, Technology, Media, & Telecommunications, ISS ESG
Vikram Shree Vyas, Analyst, Corporate Ratings Research, Technology, Media, & Telecommunications, ISS ESG
John Whitehead, Senior Associate, Integrated Solutions, Thematic Research, ISS ESG
