AI is rapidly transforming the landscape of equity investing. For positive impact investors, AI presents a powerful enabling technology, one that, like electricity or the internet, can be used for both good and bad depending on how it is applied. Our focus is on how AI can serve as a catalyst for positive social and environmental outcomes while generating sustainable financial returns.
Since the launch of ChatGPT in 2022, most of the equity market’s excitement around AI has centered on the infrastructure layer – the hardware and software that powers AI capabilities. As positive impact investors, we have mainly focused on the implications of this on energy demand and related emissions. As companies like Microsoft rolled back their climate commitments due to the heavy computing needs of AI, it became clear to us that energy efficiency and heat management would be critical solutions to mitigate this challenge. Many of our portfolio companies are driving improvements in data centre sustainability and chip manufacturing resource efficiency.
However, as AI matures, we see the application layer becoming an increasingly exciting frontier – especially for positive impact investors.
While infrastructure remains essential and will likely continue growing with the global proliferation of AI tools, the next wave of value creation and impact will come from identifying application winners.
These are companies that embed AI to solve real-world problems in areas like healthcare, education, financial inclusion, and environmental sustainability.
In healthcare, the potential of AI is already being realised. Major pharmaceutical firms like GSK and AstraZeneca have publicly embraced AI in drug discovery and clinical trial design, often partnering with specialised AI start-ups. These collaborations accelerate the development of life-saving treatments while improving efficiency and reducing costs. In the renewable energy sector, companies like NextEra Energy, Enphase, and Iberdrola are leveraging AI for predictive maintenance, grid optimisation, and demand forecasting. These applications enhance grid stability, improve energy storage, and facilitate a more efficient transition to renewables.
AI can potentially play an increasingly important role in the internal processes of positive impact investing – enhancing how we generate ideas, conduct research, and construct portfolios:
- Improved Screening and Thematic Mapping: LLMs can help to identify companies that align with specific impact themes. These tools can also flag potential controversies or misalignments with impact goals, helping investors avoid reputational or ethical risks. AI-enhanced screening tools can support proactive engagement strategies and help bring under-the-radar investment opportunities to the fore.
- Enhanced ESG Data Analysis: AI excels at processing large volumes of structured and unstructured ESG data, including regulatory filings, news, and social media. Natural language processing can already extract sentiment insights from various sources at a speed and scale that is beyond human capability. We may not be too far away from data providers enabling dynamic, real-time ESG scoring and risk monitoring. This could provide a more timely view of a company’s behaviour compared with traditional backward-looking metrics.
- Challenges and Considerations: Despite its benefits, AI is not without its risks. Models may inherit bias from skewed training data or reflect underlying inequities in society. This makes human oversight essential. Moreover, the rise of AI-driven decision-making highlights the need for transparency, explainability, and adherence to evolving regulatory standards.
In summary, AI is already reshaping how positive impact investing is practiced, and this evolution is likely to continue both in terms of investments and portfolio management. As we move beyond the infrastructure phase and towards high-impact applications, there will be increasing opportunities to back companies that not only harness AI for financial gain but also drive measurable societal and environmental outcomes. Our role as investors is to remain vigilant stewards of this transition, ensuring that the AI tools we support are aligned with our values and the outcomes we aim to achieve.
This article is an excerpt from our Impact Report 2024.
The views and opinions expressed by fund managers (internal or external) may differ from the house view. They are shared for informational purposes and do not constitute investment advice or a recommendation.
