Monday, 31 July 2023: Global systematic investment specialist, Acadian Asset Management, has developed a tool that utilises the same Artificial Intelligence (AI) technology that underpins ChatGPT to analyse company reports and predict the likelihood of them achieving their sustainability targets.
The Acadian Net Zero Alignment Model is the first net zero tool to integrate Large Language Models (LLM), a type of AI algorithm that uses deep learning techniques and underpins ChatGPT. It has been designed in consultation with a select number of the group’s European institutional investors and will also be made available to Australian clients from this month.
According to Andy Moniz, Acadian’s Director of Responsible Investing, a key strength of the group’s approach is the ability to process a company’s qualitative disclosure and assess the credibility of their decarbonisation plans.
“For the growing number of investors who are setting a net zero target for their equity portfolios, it is important that portfolios are positioned to ensure they achieve their objectives yet many existing net zero alignment models are misleading in the sense that they lead investors to believe there is certainty in achieving a given alignment outcome,” he said.
“Existing solutions rely on stale data and are backwards looking so we developed a robust forward-looking approach to provide greater certainty for our clients.”
Moniz said the group’s net zero alignment model formed part of a broader suite of climate analysis tools and filled a hole in the market for reliable, nuanced data on the probability of companies achieving their net zero target not just a binary perspective.
“This tool incorporates uncertainty so it doesn’t just say; yes, this company is on track or no, this company is off track but it assesses the quality and achievability of a company’s goals, identifies key risks and gives each company a proprietary score,” he said.
“We are using it to help us position portfolios but it can also be used to help companies that are at risk of missing their target identify issues, understand why they may not achieve their target and rethink their strategy.”
Gillian Savage, Chief Executive Officer of Acadian Asset Management Australia said that, despite being a global pioneer in the use of AI and ML technology to enhance investment management processes, the group continuously looked for ways to add value for clients.
“We believe investment processes must be dynamic and adapt to change, which is why we are constantly innovating and investing in people, technology and data,” she said.
Established in 1986, Acadian manages approximately A$144 billion in assets, primarily in equities and fixed income, on behalf of wholesale and institutional investors including superannuation and pension funds, platforms and multi-managers.
In the Australia, the firm manages over A$10 billion across 17 strategies including long-only equities, long/short equities and Socially Responsible Investment (SRI).