“I think it’s a classic misdirection - almost like a magician misdirection trick,” Goodin explains. Where an organization owns its data centers, the carbon emissions will be captured and reported in its TCFD scope 1 and 2 emissions. If, however - as happens at an increasing number of financial firms - data centers are outsourced to a cloud provider, emissions drop down to scope 3 in terms of TCFD reporting, which tends to take place on a voluntary basis. Yet, accounting for this huge electricity use is often hidden. Separate calculations put the energy usage of one super-computer as the same as that of 10,000 households. Recent estimates from academics suggest that the carbon footprint from training a single AI is 284 tons, equivalent to five times the lifetime emissions of the average car. “AI are trained via deep learning, which involves processing vast amounts of data.” “Training artificial intelligence is a highly energy-intensive process,” Goodin says.
Training AI for firms’ use has a big environmental impact, according to Tanya Goodin, a tech ethicist expert and fellow of the Royal Society of Arts in London.
Running algorithms to process data also requires energy consumption. Environmental: Carbon footprint of energy useĪccording to the International Energy Agency, electricity consumption from cooling data centers could be as much as 15% to 30% of a country’s entire usage by 2030. The carbon footprint from storing and processing data is enormous and growing, algorithms have already been shown to discriminate against certain groups in the population, and a lack of technology skills in both senior management ranks and the general workforce leave firms vulnerable to mistakes. Potential problems for financial services firms using AI lurk beneath all three columns of E, S and G, however. Taken all together and it becomes clear that AI-enabled systems will be essential to firms’ efforts to make sense of - and profit from - all these requirements. Further, there is the data being collected under the Task Force on Climate-Related Financial Disclosures (TCFD) initiative and the International Sustainability Standards Board’s plans to create a baseline for ESG reporting. The European Union’s Sustainable Finance Disclosure Regulation has required asset management firms to begin collecting millions of data points from the companies in which they invest, and the forthcoming Corporate Sustainable Reporting Directive will only add to the volume of data points.
Yet ESG also poses an existential threat to the financial services industry's use of AI Artificial intelligence (AI) is often touted as the cure-all for financial services firms' ability to deal with the looming data onslaught stemming from environmental, social & governance (ESG) regulation.
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