Enough is enough?
By Shaznee Seraj
Enough is never enough when it comes to AI and ESG – a basic understanding of how technology can be used to improve ESG.
Technology is synonymous with law and has been for the last decade or so. This is especially true in commercial and corporate law. We have seen headlines after headlines in the news such as “how technology can be used to improve M&A” or “leveraging new technology to M&A deal” it promises jam-packed features that can supercharge to maximise efficiency for instance.
Advances in cognitive technology such as artificial intelligence (AI) software make it possible to quickly identify and extract critical terms from thousands of contracts and other documents in a couple of days or weeks. Having a deal strategy expert on your transaction team who can also harness cutting-edge technology can help organisations significantly speed up the M&A process and free up resources. Furthermore, cognitive technology is getting smarter and smarter each day which substantially reduces the human propensity to make mistakes or be negligent. Win-win, am I right?
This too can be said for ESG – and sure is worth the investment.
The benefits of incorporating AI into the world of ESG aren’t limited to businesses; investors may also benefit from the rising synergies. S&P Global, a financial analytics firm, identified AI as being at the intersection of technology, innovation, and sustainability in a 2020 report. Minkinnen et al argued that regulation is not capable of covering everything and argued that effective AI governance is not simply just about legal compliance but companies must be prepared to go beyond the necessary in the development of fa air, transparent and accountable AI system – we agree.
One thing we know and are certain about AI is the never-ending nature and essentially endless bounds which makes it dare we say, the perfect tool as a check against firms professing to be more environmentally conscious than they actually are and perhaps, assist in the resolution of grey areas caused by a lack of disclosure standards. Technology can also be used to consult external data sources to confirm, validate, or refute the self-reporting of businesses. Natural language processing which extracts essential trends and developments from text-based sources gives data-driven analysis an extra edge. Further, insights pulled from news stories and reports can highlight emerging trends that may qualitatively affect a company’s finances beyond what is featured on income statements, balance sheets, or cash flow statements. It paints a story. The possibility is endless with technology but data remains one of the key features.
We know that businesses and organisations as a whole are jumping on the ESG bandwagon. Law firms too, refuse to stand down by using their expertise and knowledge to be team players. Ashurst, one of the leading law firms in the UK understood the assignment by revealing its solution through innovation – ESG Ready, a one-stop digital solution for ESG compliance last year. Essentially, it is a cloud-based digital product to help banks, asset managers and other financial services firms ensure complete readiness and compliance under the new EU Sustainable Finance Disclosure Regulation. More here.
It truly is exciting to see what law firms and the law, in general, have in store for ESG moving forward. Despite it being the answer to allow its clients to be ESG compliant, ESG Ready is pretty much an innovative tool in to help shine the light on ESG, be it for its clients or simply by creating a new norm within the organisation. Hopefully more organisations irrespective of sectors will jump on the bandwagon to inject ESG into the culture across the management.