Artificial intelligence represents both a sustainability challenge and opportunity for investors, according to a new report from BNP Paribas Asset Management.
The report, AI: A sustainability risk and opportunity for long-term investors, which was published as part of the asset manager’s Portfolio Perspectives series, suggests that AI should be viewed not only in terms of its growth potential, but also with regard to its impact on environmental footprints and social cohesion.
As the authors suggest, while AI presents a myriad of environmental challenges, it also boasts ‘potentially transformative’ benefits when it comes to efficiency, innovation and the development of sustainable solutions.
Optimists and sceptics
“The debate encompassing AI’s sustainability credentials has optimists pointing to productivity gains, scientific breakthroughs, and improved resource allocation,” commented Alex Bernhardt, global head of sustainability research, and Ulrik Fuggman, co-head of the environmental strategies group at BNP Paribas Asset Management. “In contrast, sceptics highlight the environmental risks from increased energy use, the erosion of social cohesion, labour impacts, and the concentration of power.
“For sustainable investors, this debate makes clear that AI is a systemic force, a transversal phenomenon that can create new sustainability risks, unlock new opportunities, and reprice assets across the economy. For investors with long horizons, the question is not whether AI will matter, but how its sustainability implications will interact with portfolio risk, return, and real-world impact.”
‘Layers of risk’
The report examines several sustainability risks associated with AI; chief among which is the growing energy demand required to power data centres.
As BNP Paribas Asset Management notes, this, in turn, creates ‘several layers of risk’ for investors, including a transition risk for utilities that are struggling to decarbonise, potential regulatory scrutiny, and a systemic risk in which a rise in energy demand offsets any efficiency gains delivered by AI.
Other sustainability risks identified in the report include water stress and local environmental externalities, and issues related to social cohesion and labour disruption, with AI’s ability to automate cognitive and creative tasks ‘threatening white-collar jobs in ways that differ from prior industrial transitions’, it noted.
At the same time, the report also points to the ‘transformative potential’ of AI to accelerate sustainability outcomes, including efficiency gains across energy, water and material systems; accelerated innovation in areas such as battery storage, advanced materials, carbon capture and healthcare; and the ability to scale sustainability solutions faster.
“For sustainable investors, AI is best understood as a force multiplier,” the authors note. “It can amplify existing trends towards decarbonisation or resource strain, inclusion or inequality – depending on how it is deployed and governed.
“The technology itself is neither inherently sustainable nor unsustainable; its net effect emerges from the interaction between markets, policy, and capital allocation.” Read more here.
