Along with the much-expected benefits from generative artificial intelligence are worries about the harm it could bring.
This fear falls far short of deadly dystopian scenarios such as the “Terminator” movies. The worry is more about privacy violations, patent infringement, false information, job disruptions and security weaknesses, among other things. All could devastate investments.
As such, warned a report by the World Economic Forum and the CPP Investments Insight Institute (the research unit of the Canadian Pension Plan), institutional investors should insist on “responsible AI principles” designed to mitigate the downside of this daunting technological advance.
“Large investors can and should exercise the influence afforded by their capital to promote the use of RAI in their portfolios, in their work with investment partners, and in the ecosystem at large,” wrote Cathy Li, head, AI, data and metaverse, member of the executive committee, World Economic Forum, and Judy Wade, managing director and head, strategy execution and relationship management, CPP Investments, in the report’s foreword.
Few doubt that AI will have a huge impact on investing. A 2023 McKinsey & Co. report concluded that AI will add from $2.6 trillion to $4.4 trillion annually to the world economy at some unspecified point in the future.
A Boston Consulting Group survey of asset managers, conducted with the Investment Company Institute and the CFA Institute, found that 72% believe GenAI will have a significant impact on their organizations within three to five years. But just 16% have a strategy for capitalizing on the changes and are adopting it.
The principles the WEF and CPP study urged were not “a technological upgrade, but a strategic imperative.” In other words: Better and smarter AI will not thwart any problems; only humans can, using an agreed-upon strategy to enhance the good of AI and cast out the bad.
The result will be improved revenue and profits, according to the report. An AI that performs well and everyone has confidence in “can increase customer trust and, therefore, engagement and retention,” per the study. So then, it went on, AI will be able to protect brand safety, boost sales, aid in competitive bidding and enhance pricing power.
How should asset owners go about propagating good AI principles? By “engaging with boards of portfolio companies” and ensuring that the directors and managements follow through, the WEF-CPP paper advocated. Plus, it declared, the allocators should enlist other owners as allies in this quest.
Asset owners “can encourage investment partners to adopt AI governance in their own operations and extend it into their holdings,” according to the report. Thus, “over a longer period, investors’ efforts can help create an ecosystem where the benefits” of AI principles are “well understood and adoption is ubiquitous.”
The report called for a collaboration among the private sector, academia and government to “help speed up the development of these tools.” Along the way, investors and companies need to continually keep abreast of AI advancement to ensure that the principles remain in force, the study contended.
“For investors looking toward the horizon of long-term value creation, advancing RAI is a strategic business decision,” the authors concluded.
But, the report cautioned, investors must avoid “the temptation to develop and deploy AI rapidly in pursuit of short-term gains,” treating principles “as an afterthought rather than a forethought.”
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Tags: AI, Artificial Intelligence, Boston Consulting Group, CPP Investments Insight Institute, false information, job disruptions, McKinsey & Co., patent infringement, privacy violations, security weaknesses, World Economic Forum