Asset owners should conduct high-level assessments and engage with priority companies to better understand the impact of artificial intelligence (AI) on their portfolios, according to a report from UK pension manager Railpen. It introduces a four-pillar AI Governance Framework designed to help asset owners assess the materiality of AI risks and pursue actionable practices.
While AI is considered to offer a range of long-term efficiency benefits, the race to deliver these has raised many concerns, including over resource consumption, data privacy and output accuracy. A recent survey by Deloitte identified that over 60% of S&P companies believe they face material risks related to AI, with its wider deployment expected to have major impacts for disrupters and disrupted alike.
Railpen, which manages £34 billion of assets on behalf of more than 350,000 members, has incorporated considerations of technology development into its investment approach, previously publishing guidance on cybersecurity risks in partnership with Royal London Asset Management.
“It is critical for us to continue engaging with our portfolio companies on AI risks and we are calling on other investors to do the same,” said Caroline Escott, Co-Head of Sustainable Ownership and Head of Investment Stewardship at Railpen. The new report – co-authored by specialist consultancy Chronos Sustainability – also asks asset owners to consider engaging in policy advocacy “to close the gap between regulation and the rapid evolution of AI”.
