Now, with a focus on social and environmental impact, the term “fintech for good” has evolved from its initial meaning of charity. But it doesn’t stop there. This July, we’re on the hunt to discover how the fintech sector is doing “good” for local communities and the world, revealing current and future plans to make changes.

Over the past two years, the buzzword “artificial intelligence” (AI) has been inescapable. Transcending industries and rapidly insinuating itself into people’s daily lives, AI seems to offer nearly limitless potential no matter how you look at it.

As we continue to focus on the theme of “fintech for good”, we are focusing on the environmental, social and governance theme (ESG) and wondering how artificial intelligence is impacting this space.

Artificial Intelligence Supports ESG Initiatives

Chris Bournefintech expert at North Rowexplores various ways in which AI can help ESG initiatives achieve their goals: “We are seeing a shift toward sustainable growth models, which emphasize real-world benefits over short-term gains. Investors and consumers are increasingly discerning and favoring purpose-driven innovation. This trend is expected to continue, with a strong focus on ESG strategies, responsible operations, and improving diversity and inclusion.

Chris Bourne, Financial Technology Expert at NorthRow

“Emerging technologies, such as artificial intelligence and machine learning, are critical to driving these opportunities in financial services. AI has a significant impact on ESG initiatives by providing advanced tools for better data analysis, risk management and decision making.

“These technologies enable companies to monitor and report ESG metrics more accurately, identify potential risks earlier, and ensure compliance with evolving regulations. Additionally, AI facilitates the automation of ESG reporting, making it more efficient and reliable. As we address regulatory challenges, partnerships and compliance will be crucial to long-term success.

“While ESG initiatives and the introduction of recording technology may seem lower on the priority list for compliance officers, it’s likely because these initiatives are already being effectively managed within broader compliance strategies. Integrating AI into these processes ensures companies can continue to meet ESG goals while adapting to regulatory demands. Overall, despite the uncertainties, the future of fintech looks promising. By embracing innovative collaboration and focusing on market needs, we are positioning ourselves for an exciting and prosperous 2024 and beyond.”

Significant potential of artificial intelligence

Simone AxonDirector of Financial Services, International at Cloud Analytics and Data Platform Teradataexplains how AI could prove transformative when it comes to data integration: “In financial services, AI’s impact on ESG is still in its infancy as the focus is on data quality and reporting.

Simon Axon, Director of Financial Services at Teradata

“However, I have already seen AI generate value when it comes to improving data integration. Banks need to source more granular data externally to integrate structured bank data, for example, energy performance certificates (EPCs) to understand environmental impacts. The role of AI here is to speed up the matching process.

‌”We are also seeing a focus on AI to drive the anomaly detection process to improve data quality. In one bank, we reduced the time to create a regulatory report by five days through more efficient monitoring of data quality. Using AI, I am also starting to see more advanced analytics to predict environmental impact, fueling open finance, for example with Money CenterOver time, carbon emissions will be part of each customer’s personalized dashboard in their app.

‌”This is still a proof of concept, but satellite imagery is a powerful data source for tracking emissions by business unit. However, as financial services moves from reporting to analytics, there will be huge growth in this area over the next 12 months.”

“Artificial Intelligence Can Be a Force for Good”

While many still associate negative connotations with AI, such as robots taking over the world or putting people out of work, it can still have a hugely positive impact on the world, he says. Majda DabaghiHead of Sustainability at ekkoa sustainability platform for banks and payments.

Majda Dabaghi, Head of Sustainability at ekko

“AI can be a force for good and a catalyst for sustainable development, from increasing food security to preventing human rights violations and providing essential services like health and education.

“Given that nearly four billion people already live in areas highly vulnerable to climate change and the associated risk is multiplying, according to the World Health OrganizationIt has never been more urgent to increase the speed and scale of solutions available to us to address these risks. Artificial intelligence is proving to be one such tool to help with both climate change mitigation and adaptation. For example, through AI, we can now predict extreme weather events and air quality to better support governments and local communities in their response. AI also allows us to track, trace and reduce emissions across sectors and improve the efficiency of energy use, agricultural practices and supply chains, to name a few.

“At the same time, we will need to balance the many ways in which AI enables us to accelerate climate action with addressing the environmental, social and political risks associated with this technology.”

“Ready to have a particularly powerful effect”

“AI is significantly impacting ESG initiatives by promoting transparency and accountability, improving data analytics and improving decision making,” he says. Thomas Brockexpert collaborator for Annuity.org“For example, in the environmental sector, AI is helping some companies reduce their carbon footprint by constantly monitoring energy usage, analyzing data in real time, and formulating action plans to promote more efficient resource management.

Thomas Brock, Senior Contributor for Annuity.org

“In the social and governance space, AI tools are sifting through massive amounts of data to identify patterns of unethical behavior, such as fraud, corruption, and discrimination, thereby improving corporate reputation, promoting sustainability, and strengthening compliance with regulatory standards.

“ESG investing is an area where AI is poised to have a particularly powerful effect. Currently, companies’ ESG scores are largely dependent on self-reporting, with minimal accountability and a lack of consistency in the quality and granularity of the information provided. AI-based ESG ratings could revolutionize the process, introducing a way to objectively and rigorously measure ESG effectiveness in more verifiable ways.”

Leveraging Automation

Eric GracchiaCFP, president at Capital of croakingsaid: “AI has had a significant impact on ESG initiatives in the fintech sector, particularly evident when considering developments in 2024. There is growing recognition of the need for sustainability and responsible investing, and AI technologies are increasingly crucial in this area.

Eric Croak, CFP, president of Croak Capital

“AI algorithms have the ability to sift through vast amounts of data related to environmental impacts, social responsibilities and corporate governance practices, providing valuable insights to investors and financial institutions.

“In addition, AI is key to automating ESG reporting and compliance processes, helping companies more effectively demonstrate their commitment to sustainable practices. As the integration of ESG considerations into investment strategies and compliance with regulatory requirements becomes more widespread, AI-based ESG solutions are expected to significantly impact the future of finance, starting this year and beyond.”

Praise for AI is ‘premature’

Nicholas Mottisfull professor at the Ecole Polytechnique in Paris

While the consensus seems to be that AI is already significantly impacting ESG initiatives, not everyone agrees. In fact, “stating that [AI] is having an impact on ESG initiatives is a bit premature,” he explains Nicholas Mottisfull professor at the department of innovation management and entrepreneurship at Polytechnic School Paris. “In most cases, organizations are still in an exploratory phase. The early applications of AI that I have seen are quite impressive for data collection and analysis.

“By definition, ESG data is very heterogeneous and, so far, very unstructured for most of it. AI-based solutions can process an incredible amount of data from extremely diverse sources and produce a high-quality summary in a very short amount of time. These analyses appear to be quite comprehensive and reliable, but experts still need to learn how to validate and use them.

“Combining that with some solid human peer judgment, bringing some nuance and a long-term perspective that mobilizes creativity and imagination, is a practice that in most cases has yet to be conceived.”

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