Kuala Lumpur (Malaysia): Over 50% of the world's asset management companies are adopting Artificial Intelligence (AI) to measure a stock's performance and company's sustainability.
Omar Selim, CEO Arabesque Asset Management Ltd UK said the trend was likely to grow, as the latest AI adoption by the Swedish National Pension Fund, Första AP-fonden (AP1), marked a significant achievement.
He was talking about Arabesque's diagnostic tool, S-Ray, which uses AI to score companies. Selim was speaking on the topic, “Technological Disruption Impacting Sustainable Finance” at the Global Islamic Finance Forum 2018 in Kuala Lumpur.
“S-Ray is a new standard to sustainability. Our mission is to make it as accessible as possible,” he told some 1,000 delegates.
In early October, the Swedish pension fund announced its integration of AI in its assessment frameworks. The fund is the latest amongst other international players such as UBS who are turning to technology as a way to study the profitability of socially responsible investments.
Arabesque Asset Management developed S-Ray as an integrated sustainability scoring system, which analyses the sustainability performance of some 7,000 of the world’s largest listed firms using self-learning quantitative models and data scores.
Omar said big data was the future as information becomes more complex with an increasing number of companies looking for data to support religious, ethical and social value-based investments. He added that the S-Ray was suitable for players in the Islamic finance sector.
As an example, he said BIMB Investment Management Bhd has been working with Arabesque in the last few years to analyse data for better understanding of companies and their performances.
Last year, the Malaysian bank and Arabesque launched two funds using S-Ray, namely the BIMB Arabesque i Global Dividend Fund 1 and the BIMB Arabesque Malaysia Shariah-ESG Equity Fund.
He added that Malaysia was one of five countries in the Southeast Asia region, who took the lead in adopting the AI tool for the market.
“Most of the data out there could be manipulated or is human biased,” he said.
Omar said the S-Ray was a diagnostic tool that offered an alternative solution and was developed out of meticulous algorithms. It studies data points and subjects them to plausibility tests and fact checks. His team checks the data point for reliability and credibility, and is inclined to analyse negative news as it believed positive news could be manipulated.
Omar acknowledged that governance may be questioned, but the algorithms and S-Ray's AI architecture were audited by external auditors and governed by a board backed by the UN Global Compact.
He said AI was still new in many markets and the company was open to discussions on how to improve it.
“The stronger AI becomes, the stronger you have to be in governance and cautious systems", he said.
Omar said AI used in the finance sector was exposed to external and internal shocks compared to AI used in other fields such as gaming. But, within the financial sector, AI offered practical and accurate analysis for investors compared to existing annual or quarterly tools available in the market, he added.
Arabesque's S-Ray tool analyses over 50,000 data sources in 15 languages, looking for data points based on the core principles of the United Nations Global Compact (UNGC) and the Environmental, Social and Governance (ESG) score on financial materials of listed companies.
S-Ray also allows a search function for investors keen to find out the types of products of companies before building their portfolios. The tool allows searches in the alcohol, tobacco and even stem cell sector.
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