26 May 2021
Artificial intelligence (AI) and natural language processing (NLP) could enable investors to access new data sources in emerging markets, according to a joint paper from the International Finance Corporation (IFC) and Amundi.
A key challenge limiting the ability of asset managers and institutional investors to invest in sustainable emerging market fixed income issuances is the lack of ESG data, according to the report entitled 'Artificial Intelligence Solutions to Support Environmental, Social, and Governance Integration in Emerging Markets'.
However, the report argues AI technologies have the potential to help investors overcome such ESG data challenges and could play a transformative role in unlocking emerging markets investments in the short and medium term.
The research shows that unstructured ESG data, such as news articles; multilateral development bank (MDB) project disclosures; annual, integrated, and sustainability reports; and bond prospectuses are generally underused in analyses of issuers' ESG performance. However, with the use of AI technologies and NLP techniques, analysis of unstructured data can be undertaken on a massive scale.
NLP could therefore be particularly useful in the emerging market space where such unstructured data is not commonly analysed, the report found.
The paper ends by recommending support for open-access ESG and impact data and analytical tools for emerging markets, reinforcing the need to extend analytics to the development of additional AI and NLP solutions in the short term, and proposing cross-industry collaborations between big finance and big tech to address ESG integration.
Jean-Jacques Barberis, head of institutional and corporate clients at Amundi, and Atiyah Curmally, principal environmental specialist at the IFC, will give a presentation on the report's findings today as part of Environmental Finance's free webinar on ESG investing and AI: is artificial intelligence the answer to data challenges?
Their presentation will be followed by a panel discussion featuring Tegwen Le Berthe, head of ESG scoring and methodology at Amundi, Libby Bernick, CEO of Impact Cubed, Luba Protopopova, EVP products and strategy at RepRisk, and Eric Van Nostrand, head of research for multi-asset strategies & sustainable investments at BlackRock. The webinar will be moderated by Peter Cripps, editor of Environmental Finance.