CSIRO joins fund manager to put AI under microscope

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As excitement around artificial intelligence explodes, the national science agency CSIRO and fund manager Alphinity Investment Management have joined forces to build a framework to help investors identify “responsible” AI.

While environmental, social and governance (ESG) investing has become a core framework for many investors, CSIRO research director Liming Zhu says the rapid growth of AI has left gaps in the understanding of how the technology should be considered in line with ESG frameworks.

Whether AI would replace jobs or simply replace tasks remains to be seen.Credit: Marija Ercegovac

“We’ve observed that demand for understanding AI and its risks has been skyrocketing, especially in the last six months,” Zhu says.

“But a lot of the time, the technology division of the company experimenting with AI and understanding the risks, and they’re having trouble trying to communicate with their board and senior executives on how to manage it. We feel putting AI risks into an ESG lens will make boards and executives pay more attention.”

Responsible artificial intelligence 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 head of ESG and sustainability Jessica Cairns said algorithms in banking have the potential to both worsen and improve biases.Credit: Louie Douvis

Alphinity’s head of ESG and sustainability, Jessica Cairns, said discussions about AI and its ethical implications in the firm began two years ago as it had big technology names such as Google, Microsoft and Apple in its portfolio, but AI risks and opportunities have since become increasingly relevant to sectors beyond IT.

“I think it’s important that we get ahead of the potential issues and really understand how the application of AI should be considered in line with our ESG framework,” she said.

Alphinity portfolio manager Mary Manning said while there was an “AI gold rush” happening in markets, the technology could come to a standstill if they were not managed well. “If AI products are not designed and commercialised responsibly, they may be regulated out of existence at some point in the future,” she said.

While Cairns said there were “significant benefits” to integrating AI into businesses, including greater access to information and increased business efficiency, the technology posed substantial risks – both to businesses directly and to the systems within which they operate.

Most sectors are using AI in one form or another, but Cairns pinpointed the financial services industry as one of the most interesting users, with banks harnessing AI to power processes such as credit scoring, pre-application screening, transaction monitoring and fraud detection.

“These algorithms will be based on data that’s been built based on past decisions, and if bankers have historically made decisions that are biased against people of colour, or women, or other minority groups, then that will flow forward and potentially exacerbate issues that are already prevalent in society,” Cairns warned.

“However, there are some fintechs that are using non-traditional financial information to build a more complete picture of someone’s risk profile, which can provide incredible opportunities for people that may not have had access before.”

Dr Liming Zhu, who leads the software and computational systems research program at the CSIRO.

Alphinity and CSIRO’s one-year research program will produce a report identifying current best practice as well as a framework to assess, manage and report on responsible AI risk, engaging with leading Australian and global businesses across a range of sectors to develop a report that should help other investors better understand and analyse ESG-related risks and opportunities.

Zhu said the partnership will combine investment expertise with CSIRO’s understanding of AI, to not only mitigate risks but also help companies and investors avoid shying away from opportunities brought about by AI.

“Many of the opportunities are not being realised because people do not understand the risks or have the right risk mitigation strategies,” he said.

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