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Artificial Intelligence (AI) supervision infrastructure unveiled by Railpen

AI systems classification collaboration: UK pensions manager Railpen teams up with sustainability consultancy Chronos Sustainability for a report exploring the classification of artificial intelligence systems.

AI oversight structure unveiled by Railpen to address AI risks
AI oversight structure unveiled by Railpen to address AI risks

Artificial Intelligence (AI) supervision infrastructure unveiled by Railpen

Investors Urged to Adopt AI Governance Framework for Responsible AI Investments

In a bid to ensure a responsible and ethical approach to artificial intelligence (AI) investments, the pension fund manager Railpen, in partnership with Dr Rory Sullivan, CEO at Chronos Sustainability, has released a report advocating for the adoption of the AI Governance Framework (AIGF). The report aims to empower investors to manage AI risks effectively while harnessing the long-term opportunities presented by AI.

The AIGF is a comprehensive system designed to ensure trustworthy, ethical, and operationally excellent AI deployment. It encompasses key aspects such as purpose and scope, risk management, oversight and documentation, policy enforcement, and governance roles and accountability.

By adopting the AIGF, investors can enhance their due diligence on AI technologies embedded in businesses. This improved understanding allows for a better assessment of how portfolio companies manage AI-related risks, including regulatory compliance, ethical usage, and operational resilience.

The report also highlights that mature AI governance correlates with a higher chance of AI delivering sustainable business impact. This suggests that companies with strong governance may be better investment targets.

Investors can also use the AIGF criteria to engage with companies on enhancing AI governance practices, thus reducing risks tied to reputational damage, bias, or AI failures that affect value. Furthermore, incorporating AI governance metrics into ESG or risk frameworks allows for continual monitoring of how companies adapt to evolving AI regulations and ethical standards.

The report encourages investors to participate in policy advocacy on responsible AI, emphasizing the importance of investor perspectives in shaping regulation on AI. It also suggests investors engage with priority companies using the AIGF and associated disclosure guidance.

Caroline Escott, co-head of sustainable ownership and head of investment stewardship at Railpen, comments on the report, "As a long-term investor, we have a duty to our members to understand and act upon evolving risks and opportunities related to AI. We believe the AI Governance Framework provides a comprehensive lens to assess how AI is governed within companies, ensuring risks are managed and growth opportunities from AI are responsibly harnessed across our investment portfolios."

The publication follows earlier joint guidance from Railpen and Royal London Asset Management on cybersecurity risk and resilience, underscoring Railpen's commitment to responsible and sustainable investing. As AI-related incidents and controversies increase with the mainstream adoption of AI in business practices, the AIGF offers a practical solution for investors to navigate this complex landscape.

  1. Adopting the AI Governance Framework (AIGF) by investors can enable them to effectively manage AI risks and harness the long-term opportunities that AI presents in their business, reinforcing their commitment to responsible and sustainable investing.
  2. By using the AIGF criteria, investors can engage with companies to enhance their AI governance practices, helping to reduce risks tied to reputational damage, bias, or AI failures that may affect value, and permitting continual monitoring of how companies adapt to evolving AI regulations and ethical standards.
  3. Incorporating AI governance metrics into Environmental, Social, and Governance (ESG) or risk frameworks can empower investors to recognize companies with strong AI governance, which may increase their chances of being better investment targets due to their higher potential for sustainable business impact.

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