Using AI to Enhance Stewardship Evaluation and Addressing Misalignment: A Case Study with Brunel Pension Partnership
In the world of responsible investing, Brunel Pension Partnership is leading the way by harnessing the power of artificial intelligence to enhance their stewardship evaluation practices. This innovative approach is not only improving their own voting guidelines but also addressing the misalignment of interests between asset owners and managers when it comes to climate stewardship.
Using a cutting-edge AI tool called a generative pre-trained transformer (GPT), Brunel is able to analyze and compare the voting guidelines of various asset managers and owners. This allows them to stay ahead of the curve and ensure that their own guidelines reflect the latest industry standards and expectations. By leveraging AI in this way, Brunel is able to streamline operational tasks and devote more resources to engaging with investee companies and other core stewardship activities.
Oliver Wright, responsible investment officer at Brunel, emphasizes the importance of understanding shifts in stewardship standards and using AI to enhance their practices. He believes that as AI technology continues to evolve, new tools will emerge to facilitate more effective engagement with companies, monitor sustainability factors, and even predict potential governance risks.
However, Wright also acknowledges the risks associated with AI, such as the potential for social bias in algorithms. To mitigate these risks, Brunel regularly audits their AI tools for bias, maintains transparency in operations, and strikes a balance between the efficiency of AI and the expertise of human judgement.
In addition to their AI-driven initiatives, Brunel has been actively working to address the misalignment of interests between asset owners and managers in relation to climate stewardship. By engaging in dialogue with managers and collaborating with other asset owners, Brunel is striving to ensure that climate-related risks are effectively addressed through stewardship activities, ultimately safeguarding long-term beneficiary interests.
Through research conducted by independent academic Professor Andreas Hoepner, Brunel has gained valuable insights into the misalignment between asset owners and managers. This research has highlighted various reasons for the gap, including cultural differences, resource allocation misunderstandings, and differing perceptions of fiduciary duty.
Moving forward, Brunel plans to continue their efforts to bridge the gap between asset owners and managers through one-to-one conversations and a focus on articulating views on climate stewardship. By leveraging AI technology and engaging in collaborative initiatives, Brunel is setting a new standard for responsible investing and stewardship practices in the industry.
