Artificial Intelligence (AI) is not only a tool for technological advancement but also a means to enhance human well-being and freedom. As the world pushes for sustainable development in line with the UN Agenda 2030, AI emerges as a key enabler. The growing global trend of divesting from companies that do not align with Environmental, Social, and Governance (ESG) criteria is a strong indicator that ESG is becoming an essential focus for businesses worldwide.
The ESG Divestment Movement
In recent years, there has been a rapid shift in the way institutions view investments, particularly when it comes to fossil fuels. The Rockefeller Foundation, a 107-year-old philanthropy built by oil tycoon John D. Rockefeller, recently pledged to divest from fossil fuels in favor of environmental sustainability. According to environmental group 350.org, over 1,300 institutions controlling $14.5 trillion have divested from fossil fuels, creating a significant momentum for the ESG movement.
This growing shift signals that businesses must now take ESG criteria seriously to remain relevant. Being associated with companies that are not aligning with ESG standards could negatively impact a company’s long-term sustainability.
The Role of AI in ESG Monitoring
Mark Germishuys, CEO of NGA, a data science company specializing in ESG real-time monitoring, highlights how AI can be a game-changer in this space. “As the ESG trend grows, businesses aligning their sustainable development goals (SDG) with their growth strategies are increasingly using AI as a social impact tool,” says Germishuys. With AI, businesses can monitor real-time ESG scores of their suppliers and partners, giving them a competitive advantage by enabling proactive management of their reputation and market risk.
Challenges in South Africa
In South Africa, however, the adoption of ESG principles has been slow. The country’s high unemployment rates and economic challenges have often overshadowed the importance of ESG. As Germishuys points out, business owners should be concerned about being left behind as consumers, particularly millennials, become more aware of ESG issues. A report by Morgan Stanley showed that 95% of millennials expressed interest in sustainable investing as of 2019, highlighting a growing demand for businesses to align with ESG principles.
AI-Driven ESG Scoring
The key to integrating AI into ESG monitoring lies in the quality and quantity of the data used. AI engines analyze vast amounts of data from various sources—such as social media, customer feedback, and supplier reports—to generate real-time ESG scores. This data-driven approach helps business owners understand what customers are saying about their products or how their suppliers might negatively affect their ESG rating. A lack of transparency can lead to a low ESG score, which could trigger divestment by major shareholders.
Proactively managing ESG communications allows companies to improve their scores, showcasing their commitment to sustainability.
Responsible AI Metrics and Success Tracking
To ensure that businesses are truly making a positive impact on the planet, it is crucial to integrate responsible AI metrics into ESG databases. By effectively tracking and measuring success, businesses can ensure that their efforts align with global sustainability goals, making responsible practices an integral part of their growth strategy.
The Future of Business Sustainability
AI is revolutionizing ESG monitoring, providing businesses with the tools to navigate the complexities of sustainability in real-time. As the global movement towards responsible investing grows, businesses that embrace ESG principles and leverage AI to monitor their sustainability efforts will be best positioned to thrive in the future.