Since the emergence of “Modern Portfolio Theory” and the “Capital Asset Pricing Model” in the late 1960s, institutional investors have taken a quantitatively driven approach to portfolio construction, looking to create portfolio diversification and obtain better risk-adjusted returns by balancing their asset-class exposures. This journey has seen several important advancements in thinking about how to optimally achieve desired results.
Funds that want to take the total portfolio approach first need to get the total portfolio view. To do that they not only need data – and lots of it – but a rock-solid understanding of exactly how they’re going to use it.
Equity Trustees deputises AI for greenwashing fight
Greenwashing is a scourge on the financial services industry, but it’s not always intentional. It can sometimes result from a misunderstanding between the investment and marketing teams, a mismatch of member expectations or a failure to closely read the fine print before it’s plastered all over social media.
Equity Trustees (EQT) thinks that it might have found a solution to at least some of those problems with an AI-powered compliance tool from Haast, estimating that it’s also improved productivity by around 80 per cent by reducing the time needed to review vast volumes of documents and online content and allowed it to “focus its attention where it can offer real value”.
“As a trustee we have responsibilities for oversight of fund marketing, among other things, and most of that happens in a digital format these days,” Alicia Kokocinski, general manager for marketing and communications at EQT, tells ISN. “We were looking for a way to efficiently monitor what was going out in the world so we could be alerted in real time when something was going up that wasn’t matching the various rules and guidance we needed them to comply with.”
The tech can track thousands of mentions in a matter of minutes and has the potential to “transform” EQT’s oversight of fund marketing by industrialising more routine checks and allowing its compliance and governance teams to home in on the higher order issues.
“With respect to the various regulators, the requirements to monitor for a whole lot of things – like greenwashing or ESG claims – are becoming much more important, and those things have to be done while everybody is still learning what kind of language is permissible and which part of it is skating too close to the wind. We were looking for something that can capture that really quickly, and a lot of the popular terminology gets used in a social media marketing context.”
The tech isn’t a silver bullet – it still needs a human looking over its shoulder – but it adds a safety net when there are now heavy consequences for saying the wrong thing to the wrong people.
“Greenwashing is a great example of being able to apply that higher level human judgement with an AI assistant,” Haast founder Jason Watling tells ISN. “There are several terms that are now ‘over the line’ and which we know we shouldn’t be saying. You can use the live monitoring to make sure that claim has been withdrawn from market and to make sure it doesn’t pop up again if somebody’s copy-pasting from an old brief.
“It can also identify terms that might imply greenwashing and so require human review… Rather than relying on humans to have to review everything and try and home in on the risk areas, you can automate a lot of that and draw human attention to the parts that are risky.”
