AI and Accountability: The Emerging ESG Risk Institutional Investors Can’t Ignore
The growing intersection of artificial intelligence (AI) and environmental, social, and governance (ESG) factors is becoming a critical area of concern for institutional investors. As AI technologies proliferate, their implications for human rights, privacy, and ethical governance are increasingly under scrutiny.
Introduction to AI Governance Frameworks
Recent developments highlight the urgent need for robust AI governance frameworks. A notable example is a shareholder proposal filed by a Canadian trade union, calling on a major corporation to enhance its AI governance practices. This proposal emphasizes aligning governance frameworks with the UN Guiding Principles (UNGPs) on Business and Human Rights, underscoring the necessity of addressing increasing and emerging AI-related risks.
Concerns Over AI Misuse
While AI offers numerous advantages, the potential for misuse raises significant concerns among investors. Issues related to data privacy, algorithmic biases, and broader human rights implications are alarming stakeholders. The proposal from the trade union points out that firms involved in AI development face escalating legal, regulatory, and reputational risks.
Thomson Reuters Case Study
An illustrative case is the upcoming annual general meeting (AGM) of Thomson Reuters, scheduled for June 4. The British Columbia General Employees’ Union (BCGEU) has highlighted potential risks associated with the company’s AI products, particularly those related to human rights violations.
Thomson Reuters has invested heavily in AI, especially in generative AI (genAI) technologies, which have been linked to controversial practices, including facilitating immigrant raids in the United States. The company’s genAI Consolidated Lead Evaluation and Reporting (CLEAR) software has raised red flags for its role in law enforcement, capturing extensive data points that intensify privacy concerns.
Legal and Ethical Implications
The BCGEU’s proposal urges shareholders to consider the implications of the company’s AI practices, noting that Thomson Reuters settled a US$27.5 million lawsuit over unauthorized data sales linked to the CLEAR tool. This case exemplifies the pressing need for clear, rights-based AI governance to ensure ethical compliance.
Investor Sentiment and Trends
Investor priorities are shifting, as evidenced by the rise in shareholder resolutions focused on AI governance. In the 2025 proxy season, 17 proposals related to AI have been filed, a significant increase from just six the previous year. This trend reflects a broader concern among institutional investors regarding the governance of AI technologies.
Conclusion
The call for enhanced AI governance frameworks is not just a regulatory necessity but a strategic imperative for companies. As AI technologies continue to evolve, the need for transparency and ethical commitment will become increasingly vital to mitigate reputational, financial, and operational risks. Institutional investors must remain vigilant and proactive in advocating for responsible AI practices, ensuring that companies align their operations with both ethical standards and stakeholder expectations.
