Stewardship calling for technological enhancement
In the world of finance, responsible investment is no longer a niche practice. It's a widely adopted approach that focuses on governance and sustainability issues, with investors taking a proactive role in shaping the future of the companies they invest in. However, as the challenges of climate change, inequality, and governance failures escalate, stewardship must become more structured and scalable to meet these challenges head-on.
Unfortunately, without better infrastructure, companies often tune out, investors duplicate efforts, and regulators respond with requirements for more standardised reporting that may miss the real issues. Reports get written but rarely read, and outcomes are claimed but seldom verified, leaving both companies and investors trying to connect the dots in the dark.
Enter Impactive Tech's Stewardship Intelligence tool. This innovative solution aims to centralize and structure public engagement activity across the investment ecosystem. Companies can receive hundreds of similar requests each year, while investors have no clear line of sight into what's already been asked, answered, or resolved.
Technology and AI are key to improving responsible investment engagement. They enable more precise data analysis, enhance transparency, and foster targeted dialogue with companies on environmental, social, and governance (ESG) risks and opportunities.
Improved Data Collection and Standardization: Investors demand more standardized and transparent data on AI risks and ESG factors such as cybersecurity, resource consumption, and corporate governance, enabling better assessment and comparison of company practices.
Risk Identification and Monitoring: AI algorithms help identify material AI-related risks including societal harms (bias, misinformation, privacy) and catastrophic risks (loss of human control, misuse) to guide engagement priorities.
Enhancing Sustainability Impact: AI optimizes resource use, for example by improving energy efficiency in data centers, smart buildings, and chip manufacturing, contributing to lower environmental footprints of investees.
Sector-Specific Engagement: Investors use AI tools to prioritize engagements on the most exposed sectors or companies, addressing issues from AI governance at the board level to workforce retraining.
Supporting Evidence-Based Dialogue: By analyzing large data sets—such as AI incident databases or environmental impact simulations—AI provides a fact-based foundation for engagement on governance and sustainability issues.
Upskilling and Human-AI Collaboration: Successful integration involves educating investment teams and company personnel to understand AI insights and foster meaningful governance and sustainability actions.
Responsible AI Frameworks: Adoption of frameworks focused on fairness, transparency, accountability, and safety in AI deployment helps ensure that responsible investment considerations are embedded in both risk management and opportunity identification.
These advancements not only enable more efficient processing of complex ESG data but also enhance the effectiveness of investor engagement by focusing dialogue on material issues, improving transparency, and fostering measurable sustainability improvements. This creates a positive feedback loop where technology-driven insights align financial performance with broader societal goals in governance and sustainability.
The pressure is mounting on investment firms, as over 5,000 PRI signatories representing more than $120 trillion in assets feel under-resourced for effective engagement. To address these challenges, there is a need to pool intelligence, leverage AI, clarify accountability, coordinate campaigns, and modernize the stewardship system.
For engagement to be truly effective, investors need to be able to answer five basic questions: Who else has engaged this company on this issue?, Has the company responded or made a public commitment?, What additional value can our engagement bring?, Is there a collaborative effort we can join?, What's the company's track record on responsiveness?
As we move forward, stewardship needs to evolve into a genuine two-way conversation built on trust, shared knowledge, and accountability. Engagement in stewardship often feels one-sided, with companies not receiving meaningful feedback or closure. Confidentiality in discussions must be balanced with enough transparency to help the system improve.
Investors regularly challenge companies on various issues such as climate risk, human rights, board composition, and pay structures. Many engagements can drive real progress, particularly when strong coordination is involved, but much engagement remains frustratingly opaque. With the help of technology and AI, we can strive for a brighter future where responsible investment drives tangible, measurable change.
In the context of enhancing responsible investment, technology is key to improving engagement by enabling more precise data analysis, fostering targeted dialogue with companies, and offering a fact-based foundation for governance and sustainability discussions. However, to ensure that engagement is effective, investors need answers to questions like who else has engaged a company on an issue, if the company has responded or made a commitment, what additional value an engagement can bring, if there's a collaborative effort to join, and a company's track record on responsiveness.
