Along with the great benefits to be gained from generative artificial intelligence, there are also concerns about the harm it may cause.
The fears are nowhere close to deadly dystopian scenarios like those in the “Terminator” movies, but rather concerns about privacy violations, patent infringement, false information, job disruptions and security weaknesses, all of which could devastate investments.
That’s why a report from the World Economic Forum and the CPP Investment Insights Institute (the research arm of the Canada Pension Fund) warns that institutional investors should insist on “responsible AI principles” designed to mitigate the downside of this challenging technological advancement.
“Large investors can and should use the influence their capital brings to drive the use of RAI in their portfolios, their collaborations with investment partners, and across the ecosystem,” Kathie Lee, head of AI, Data and Metaverse at the World Economic Forum and a member of its executive committee, and Judy Wade, managing director and head of strategy execution and relationship management at CPP Investments, wrote in the report’s foreword.
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Few doubt that AI will have a major impact on investing: A 2023 McKinsey & Company report concluded that AI could benefit the global economy by $2.6 trillion to $4.4 trillion per year at some point in the future.
A survey of asset managers conducted by Boston Consulting Group in partnership with the Investment Company Association and CFA Institute found that 72% believe GenAI will have a significant impact on their organization within three to five years, but only 16% have a strategy in place to capitalize on the change.
The principle asserted by the WEF and CPP studies was “a strategic imperative, not a technological upgrade.” In other words, better, smarter AI cannot thwart the problem. Only humans can use agreed-upon strategies to enhance AI’s strengths and eliminate its weaknesses.
The result, according to the report, is increased revenue and profits. High-performing, trusted AI “can increase customer trust, which in turn can increase engagement and retention,” the report states. Additionally, AI can protect brand safety, boost sales, assist with competitive bidding, and increase pricing power.
How should asset owners promote good AI principles? The WEF-CPP paper recommends “engaging with portfolio company boards” to ensure directors and management adherence. It goes on to declare that asset allocators need to get other owners on board in this effort.
According to the report, asset owners “can encourage their investment partners to implement AI governance in their own operations and extend it to their assets,” and thus, “in the longer term, investors’ efforts may help build an ecosystem in which the benefits of AI principles are well understood and adoption is widespread.”
The report calls for collaboration between the private sector, academia and governments to “accelerate the development of these tools.” Along the way, it argues, investors and companies need to stay on top of advances in AI to ensure the principles remain valid.
“For investors with a long-term view to value creation, pursuing RAI is a strategic business decision,” the authors conclude.
But the report warns that investors need to avoid the “temptation to rapidly develop and deploy AI in pursuit of short-term gains” and treat the principles “as an ex post rather than ex ante consideration.”
Related article:
How investors are using artificial intelligence
How to invest in the future of artificial intelligence
Goldman: Artificial Intelligence Could Boost Global GDP by 7%
Tags: AI, artificial intelligence, Boston Consulting Group, CPP Investments Insight Institute, disinformation, employment disruption, McKinsey, patent infringement, privacy violations, security weaknesses, World Economic Forum
