Like shareholders and portfolio managers, we all make decisions about smaller or bigger investments. Every decision of spending matters somewhere. Today, robo-advisers help decision-making. The development of artificial intelligence (AI) accelerates exponentially, and AI penetrates to almost every industry. At the same time, we are getting more and more conscious about the sustainability and responsibility of our spending. This article aims to discuss the importance of responsibility in investment decisions made by algorithms.
According to Finsif (2018), responsible investment means involving ESG matters (Environment, Social and Governance) in investment activities to improve the portfolio’s return and risk profile. There is no one or only way of responsible investment. Each investor chooses tools appropriate to his own investment strategy. An investor can use ESG matters from different approaches. Responsible investment concerns all asset types.
According to Virtanen (2016), in Buddhism, consciousness is the key for an individual to become perfect in morality and in wisdom. From the point of view of cognitive neuroscience, consciousness is understood as a brain-induced phenomenon. So far, it has not been possible to explain how this is happening. AI can possess morality and may be capable to ethical reasoning. The ability of AI to engage in moral activity depends on the definition of a moral actor. Making ethical decisions is still a challenge. Human free will and free will [generally] are two different concepts. Implementation of free will to AI is difficult. (Virtanen 2016.) Artificial intelligence does not think like people, it does not have morality – it is unable to take care of others, which is essential in ethics and humankind (Himma 2009).
According to Heinäsmäki (2015), digitalization means the integration of digital technology into all life and activities. When algorithms are programmed to learn independently, it takes them further away from human control, towards singularity as computers develop their own intelligence – “Whereas the short-term impact of AI depends on who controls it, the long-term impact depends on whether it can be controlled at all” (Hawking et al. 2014). Independent algorithms will dominate digitalization in the future. Because algorithms are inhuman, they cause risks we cannot even imagine – therefore we should start to develop responsible digitality and responsible algorithms. ESG, i.e. environmental, social and governmental issues in financing, are the starting point of responsible thinking. But, ESG is just an abbreviation of a concept that could be a key for a better investment future.
Algorithms have a very effective performance. Decisions of investments are to be integrated to AI, which is the only way to survive with future demands of Big Data processing. Despite all the benefits, that algorithms can offer, AI is a dog that should not be unleashed. It will obey, if its creator knows the length of the leash that can be given for it. The creators and developers of AI are in a key position in determining how we people – who think can master everything – will succeed and survive with the future decisions made by AI. Through these key groups, we achieve the concept and the ideas of ESG. It is important to realize, what kind of possibilities AI can offer in reaching responsible thinking, and how AI can make a positive impact on decision-making in the future investing activities.
We need to preserve and maintain the viability of the Earth. There would not be any problems with unpredictable AI, if humans would think about preserving the mankind and the whole diversity of the nature, instead of gaining individual profit.
The climate viability length is a riddle we cannot ignore. By the right choices, we can affect to it, at least we can reduce the destructive and too risky development of singularity that sooner leads to worse disaster. We may not have the next 50-100 years this kind of living conditions on Earth, as we have now. The destroying of the planet causes huge challenges for those who decide about the allocation of the resources – the targets of investments. We can count the life expectancy of Earth, but can we live with the results that offer just desolation? We have only one Earth to live.
The idea of learning machines is not new, but still it is very much alive. We cannot control AI, if we do not know the route of its development. AI’s developers know the risks of singularity. Nowadays, the AI is at a stage where it begins to turn more human-independent than ever before. Neural networks and machine learning makes AI more and more human-independent, and algorithms are already the tools of today’s economic actions. How do we make safe decisions of future investments? At some level, it is going to be the AI, who decides future investment targets, because we have given it a role in the investment world – only during a few last years, because the amount of data has exponentially increased.
Today’s media offers a lot of responsibility issues and ESG-information as well as AI knowledge. Also, they offer estimations how algorithms are going to develop in the future. The literal sources along with the media, are not offering much information or prognosis about responsible investments or investment’s development approximately until 10-30 years. The responsibility aspect of investment decisions made by algorithms was examined in a recently published master’s thesis written by Marjut Karelberg (2018). The study included a survey among investment and AI experts. The main results of the survey were that AI will have more and more influence in the future in making investment decisions. However, many AI-developers are not aware of ESG, which is an alarming signal. The future AI-developers have a lot of power for the future of mankind – they develop the decision-making devices. They create the future digital brains. More resources for educating AI developers to understand ESG matters are needed. They need better competence about responsible thinking – sustainability and ethics. In this situation, Karelberg (2018) recommends – if we want responsibility to be the major competitive factor in the future investment decision-making – that, the developing of AI is transparent and controlled, and, that it’s resourced generously enough.