How impact investors are thinking about generative AI

Some fund managers are taking a 'watch-and-wait' approach, while others see potential for generative AI to deepen the need for impact investing to address energy demand and equity.

The development of generative artificial intelligence has the potential to transform industries and workflow processes – but how this transformation pans out remains to be seen. We asked impact fund managers how it could affect their business in our mid-year review series. Many are approaching the rollout of generative AI with caution, but some are also seeing new priorities and opportunities that may shape their future strategies.

Some have taken a ‘watch and wait’ approach: Climate Adaptive Infrastructure’s founder Bill Green, for example, said: “We have not introduced AI into our process at this time. However, we are following this nascent field as it relates to our energy, water and urban infrastructure transition investing.”

Most are urging caution and responsible use of the technology. BlueOrchard’s Michael Wehrle noted that there are risks of “data privacy concerns and the potential for biases in the algorithms”. Similarly, Pia Irell, a partner at Trill Impact, cited “the need to handle AI with care” because “it can reflect human biases and lean on historical data”.

Nevertheless, there is potential for firms to rely on generative AI to improve investment and asset management processes. It “may allow fund managers to analyse and use data more efficiently and effectively and contribute to a more comprehensive and transparent impact management and reporting”, said BlueOrchard’s Wehrle. For Trill’s Irell, it could “support decision-making, risk assessment and innovation”.

At the asset level, artificial intelligence more broadly is already playing a role in climate-tech portfolios. NextEnergy Capital, for example, “uses AI across a few elements in the solar value chain”, particularly to monitor assets, said Shane Swords, managing director and global head of investor relations. “We use drone technology to monitor solar assets remotely, which helps reduce travel costs and gives the team more accurate insight of the operations of each particular asset. It also decreases the likelihood of health and safety issues.”

The widespread implementation of generative AI in the economy could also create new investment opportunities for impact funds. It will “add a tremendous load to electric infrastructure”, which will deepen the need to invest in innovative low-carbon energy solutions, Energy Impact Partners’ founder and managing partner Hans Kobler said.

Lightrock partner Umur Hursever noted it could mean portfolio companies “develop novel products”. And given how it could transform industries and individuals’ lives, Lightrock is thinking about “what role we might play in making this technological leap forward more equitable”.