Count the Shareholder Association for Research and Education (SHARE) among those raising AI alarm bells. To its credit, the responsible investment organization is doing that and more — engaging with executive teams and advocating for retail shareholder activism.
“Governance is one of the key pillars related to responsible AI,” said Juana Lee, associate director, corporate engagement at SHARE in an interview.
Lee’s not just talking about AI firms here. SHARE’s work on this file comes at a critical moment, as companies across the broad economy are investing in the new technology. “There are no guardrails in place to ensure that the development and deployment of these AI systems are responsible and ethical,” she said.
SHARE released Investor Advocacy on Artificial Intelligence this week, a report arguing that “the responsible development and deployment of [AI] is a material investor issue. … There are environmental and social concerns with AI development and use that will affect both individual assets and investor portfolios as a whole.”
The report outlines financial, legal and reputational risks associated with weak oversight and what new regulations and standards mean for stakeholders. It encourages investors to engage executives on risks related to human rights, mis- and disinformation, disclosure and the environment.
The report presents a three-pronged framework for materiality assessments.
Under financial materiality, investors should consider productivity and innovation; governance and oversight; legal costs and settlements; and customer satisfaction, loyalty and reputation.
Impact materiality includes environmental and energy affordability issues; bias and discrimination resulting from bad AI training data; and people’s access to services.
Under systemic materiality, investors should review employment decisions related to AI; intellectual property protections; technology control; economic productivity; and climate change.
Early days
“Investors are increasingly expecting investing companies to have that effective governance control in place to ensure the responsible and ethical development and deployment of AI systems,” Lee said.
While it’s too early to tell how AI plays out, the stakes are too high to wait.
“This is a really crucial time where the long-term impacts of AI are as yet unknown,” Lee said. “But we still have clarity on some of the risks that are associated with AI. It is important for companies within our portfolios to be able to integrate those systems and controls and prevent those risks.”
SHARE is right to tackle AI in the context of responsible investing. It’s striking how closely the financial materiality framework aligns with the worries a lot of us have about how the broad implementation of AI technology will transform the world we live in.
The organization’s value is its ability to address progressive ideals in a real-world context. As institutional investors have demonstrated for years, capital flows drive executive action. Retail investors, and the advisors who serve them, have an opportunity to make a similarly positive impact.