Jessica Cairns

Boutique active equities fund manager, Alphinity Investment Management (Alphinity), and CSIRO, Australia’s national science agency, have released a responsible AI (RAI) framework and actionable toolkit to help investors navigate the accelerating AI opportunity.

The Intersection of Responsible AI and ESG: A Framework for Investors Report is a three-part, practical, open-source toolkit that can be tailored and adapted by investors to assess the impact of AI across their investment portfolio. It bridges the gap between emerging RAI considerations and traditional ESG principles, such as climate, modern slavery, and governance.

Step one of the framework determines materiality risk incorporating 27 AI use cases across 9 key sectors. Step two provides governance insight across 10 RAI key indicators, which assess the overall commitment, accountability, and measurement of RAI. Finally, Step three is a deep dive with more than 40 filterable questions to facilitate detailed analysis and engagement with company management on AI implementation and RAI practices.

Alphinity’s Head of ESG and Sustainability, Jessica Cairns, said it was important to proactively investigate and understand risks and opportunities given the rapid uptake of AI.

“The first wave of AI is well underway, dominated by companies with direct revenue exposure alongside ‘picks and shovel’ stocks that provide the tools, platforms, and infrastructure required to drive success in an AI-enabled world,” Ms Cairns said.

“What we are most excited by is the second and third wave, where we see AI creating opportunities for a breadth of traditional sectors, like banking and mining, through improved efficiencies, expanded revenue streams, and boosted productivity.

“Like any tech revolution, however, there will be winners and losers. Rapid advancement also paves the way for significant risks and ethical concerns, which investors must understand, measure, and manage. Our RAI toolkit is designed to address this, providing a framework for investors to analyse the risks and opportunities and the option to deep dive should they spot red flags in their risk and governance analysis.”

The three-part RAI framework follows 12 months of extensive research and engagement with more than 28 global and domestic listed companies across a range of sectors, including Accenture, Commonwealth Bank of Australia, Shell, and Mirvac.

CSIRO Research Director, Professor Liming Zhu, said until it becomes commonplace for both RAI policies and the actual numbers for RAI indicators and metrics to be shared publicly, investors need to know where to look for signs of responsible AI use.

“Combining our RAI research and Alphinity’s investment expertise, the framework is purposefully designed so a range of investors can practically implement it into existing ESG analysis and reporting, picking and choosing the tools that work for them.

“With global AI adoption expected to accelerate significantly between now and 2030, it is imperative we take a considered investment approach to the responsible and safe use of AI.”

While the research found many global companies have extensive AI resourcing, the current wave of AI is levelling the playing field due to its general capabilities and ease of access.

“This provides strong opportunities for Australian companies and investors to embed best practice and robust risk mitigation from the early stages,” Professor Zhu said.

“Our research showed RAI governance is best embedded within existing systems and processes and a strong track record of ESG performance is an indicator of confidence for investors.”

Alphinity will implement the RAI framework, tools, and templates into its ESG analysis processes and hopes this framework and toolkit will become an industry-wide standard.

“We are already leveraging the framework in our investment strategy,” Ms Cairns said. “We will continue to engage with our investee companies and advocate for the uptake of publicly

disclosed RAI practices, an important governance measure as AI adoption booms.

“Our hope is that all investors, from super funds to boutique fund managers, will adopt responsible AI frameworks into ESG considerations and responsible investment criteria.”

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Jessica Cairns

Boutique active equities fund manager, Alphinity Investment Management (Alphinity), has unveiled a partnership with Australia’s national science agency, CSIRO, to develop a framework to help the investment community assess responsible artificial intelligence (AI) practices and integrate into ESG considerations.

Informed by interviews with businesses using or planning to use AI, the year-long research program will result in a report identifying current best practice and provide a framework to assess, manage and report on responsible AI risks.

Responsible AI is the practice of developing and using AI systems in a way that provides benefits to individuals, groups, and wider society, while minimising the risk of negative consequences.

Alphinity’s Head of ESG and Sustainability, Jessica Cairns, said AI technology was presenting investors with a new set of ever evolving challenges and greater insight was needed to guide investment decisions.

“AI will present significant opportunities to improve company performance, but we foresee potential risks in areas of governance, social licence, and operations, and investors will increasingly need to identify these.

“We’re inviting companies that are more advanced in their adoption of AI, or are actively exploring AI application, to participate and share information with us on their experience and thinking on the impact and responsible application of artificial intelligence across every facet of their business,” Ms Cairns said.

“Our work with CSIRO will contribute to increased awareness and knowledge of responsible AI considerations within the investment community. We hope the case studies and other data will also assist companies at the start of their AI journey to implement best-practice considerations,” Ms Cairns said.

“From our perspective, it will create a foundation for the longer-term development of frameworks for analysis and robust modelling of responsible AI within our broader set of ESG performance and risk analysis.”

CSIRO Research Director Liming Zhu, who leads the Responsible AI Initiative, said: “This unique partnership will combine the investment community’s deep expertise with CSIRO’s cutting-edge scientific understanding of AI risks and opportunities. This collaboration aims to empower Australian businesses to attract global investments.”

“Australia can lead the world in the responsible development and use of artificial intelligence, but to practically achieve that we must bring diverse skill sets together and develop measurements and tools to support implementation.

“This project will give us insights into the AI risks and opportunities companies are grappling with and provide guidance around best practices that will help both investors and companies.”

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