Different sustainability priorities and scattered data pose a challenge for responsible investing. Artificial intelligence could play a significant role in company analyses and addressing investors’ key focus areas, say Evli’s experts.
As responsible investing themes expand and sustainability reporting increases, conducting company analyses and making responsible investment decisions become ever more complex. Topics such as natural capital and biodiversity have quickly risen to the top of investors’ agendas.
According to Portfolio Manager Antti Sivonen, one of the biggest differentiating factors between investors now is the emphasis on their preferred sustainability themes.
“It’s natural that investors prioritize different areas. Some investors demand hyper-customized portfolios, while on the other end of the spectrum, we have investors who want to pick ready-made portfolios.”
Taking different investor priorities into consideration requires a lot of data and analysis. One of the biggest current challenges in responsible investing is the availability and fragmentation of data, explains Portfolio Manager Mattias Lagerspetz.
“We have witnessed this not only with natural capital issues but in responsible investing more broadly. While investors may feel there is not enough data, companies often feel they have too much to report. There is no standard yet available to unify these needs.”
The solution to addressing different key areas and collecting data from various sources may lie in artificial intelligence. With the help of AI tools, portfolio managers can sift through large data sets and analyze companies from multiple perspectives more efficiently than before.
AI will not replace the person making the investment decisions but can help analyze more companies using selected and trusted sustainability criteria, Sivonen emphasizes.
“Before, conducting this kind of analysis required a small army of analysts to assess if a company aligns with a selected theme. That’s the power of AI tools.”
AI goes through massive data sets in Evli’s Atlas service
Atlas is a digital service developed by Evli that allows investors to build tailored equity portfolios based on their investment philosophy or select solutions from ready-made options. Investment choices can be based on indices, factors, return strategies and many other areas the investor wishes to prioritize.
“In Atlas, you can build portfolios around a specific theme. This could mean, for example, cybersecurity or, within the realm of responsible investing, circular economy, clean water or biodiversity,” Sivonen explains.
Atlas uses AI in conducting company analyses. Generative AI can process large amounts of annual and sustainability reports or third-party data in an instant. In addition, AI can be trained to analyze data within a specific framework.
“These already existing frameworks are often created by the top experts in their fields and have well-thought-out processes,” Lagerspetz explains.
Traditionally, these frameworks are applied to a limited number of companies. With the help of AI, the same framework can be used to analyze a much broader range of businesses. In Atlas, AI has been leveraged to analyze companies from the perspective of children’s rights using a framework developed by UNICEF.
“AI isn’t necessarily better at analyzing data than an analyst, but it allows us to efficiently replicate the same analysis to thousands of companies,” Lagerspetz says.
Evli’s Head of Sustainability Petra Hakamo also emphasizes the efficiency benefits of AI. She believes that AI will play an important role in many areas of investing in the future.
“In responsible investing, we have already witnessed a substantial growth in the number of data points that must be reported now or in the future. Using AI will undoubtedly bring even more benefits as the technology will be more widespread.”
“It has been wonderful to witness how committed Evli is to developing AI also in the field of sustainability through the Atlas service and more,” Hakamo adds.
