By Chea Srun | XQuant
According to a study by PwC in 2018, Artificial intelligence (AI) could lift global GDP by US$15-20 trillion by 2030. We believe that one big component of this global GDP growth will be captured by sustainable investing which is getting more and more the attention of Millennials and High Net Worth.
In order to be successful, Green Digital Finance has to rely on systems and data. Below is a framework showing different layers to reach the Sustainable Development Goals (SDGs) as defined by the United Nations:
Sources: Sustainable Finance Digital Finance Alliance (2018)
At the foundation, we need meaningful data such as standardized metrics, detailed reporting about the environmental impact of companies or projects. Using Natural Language Processing (NLP), we can create a system which quickly find those data for the decision makers. For example, if there are some positive or negative articles published somewhere relative to the sustainable activities of a company which can impact the decision process, it’s important that the decision makers are aware of them.
It’s also important to detect greenwashing and AI can find divergence between the company’s own claim regarding sustainability and information given by external observers.
Once those data are available and accessible to the public, they can be used as factors in quantitative portfolio models. For example, a Robo Advisor system can use those data to recommend the best assets to retail investors. A fund manager can use them to engage with the board of directors and exercise his voting right to push the companies to make the right decisions.
Using the channel of mobile applications or distributed ledger technologies (DeFi), sustainable projects can raise money more quickly and making it more accessible to retail and institutional investors.
We believe that Green Digital Finance will growth exponentially over the next 10 years as environmental concerns and regulations will reshape the investment landscape.
To know more what AI can do to help Green Sustainable Finance, please contact XQuant (info@xquant-ai.com)