Dilan Ashton
The launch of ChatGPT has led to heightened investor attention on generative AI over the past year and pushed AI regulation into the spotlight for governments around the world, notes Dilan Ashton General Manager of Responsible Investing at Equity Trustees Asset Management
“In Australia we do not currently have any specific regulation,” she says. “However, it is on the cards as per the recent announcement of the creation of an AI expert group to advise Government and help ensure the development and deployment of AI is done safely and responsibly.”
Ms Ashton says while it is still unclear when AI regulation will be finalised and come into force, “we are already seeing a number of ASX companies report their use of AI in their operations, highlighting benefits such as enhanced productivity, improved efficiency and reduced costs.
“The use of AI can also have a negative impact on ESG performance in areas such as social licence, trust, and data privacy and security if not adopted responsibly,” she notes. “It will be increasingly important for users to design responsible AI frameworks and governance practices to guard against some of these impacts and future regulatory changes.”
Ms Ashton adds that the CSIRO has partnered with Alphinity Investment Management (one of the investment manger’s in the EQT Responsible Investment Global Share Fund) to design a framework to help investors assess responsible AI through an ESG lens and Equity Trustees looked forward to the release of this tool later in the year.
Introduction of an Australian Climate Border Adjustment Mechanisim (CBAM)
Ms Ashton also notes that the Australian Government has announced a review into the feasability of an Australian CBAM policy with the findings expected to be released this September 2024. The mechanism is effectively a carbon tax on imports, aimed at protecting domestic industries by preventing ‘carbon leakage’ which occurs when carbon-intensive production is moved to low cost countries with weaker carbon reduction policies.
The review follows Europe’s lead where a transitional phase of the EU CBAM started in 2023 and is expected to be fully phased in by 2026. The US have also introduced a CBAM policy, and if passed will start in 2025 and will be a potential catalyst for other countries to follow.
Ms Ashton suggests the introduction of a CBAM in Australia will have implications on the most emissions-intensive industries. “Although it is designed to shield these industries, it also has the potential to expose them to higher input costs (if importing emissions intensive products) and increased competitive pressures which could result in an acceleration of green capex investment.
“It is still very early days and the development and implemetation of a CBAM in Australia will take time, however the outcome of the feasbility review and developments in this space will be interesting to watch over the coming months and years,” Ms Ashton notes.
Equity Trustees Asset Management have a strong belief that ESG factors have the potential to impact the performance of a business over the longer term, and companies managing it well prove to have more sustainable and robust busines franchises. Our objective is to better understand how the issues above evolve, and how they will impact on the companies we invest in and are key topics which will shape our engagements and discussions with companies this year.
