Green software, AI and trusted data: the impact of technology in ESG

Mariana Estradé

Hughes & Hughes, Montevideo

mestrade@hughes.com.uy

Conference report

Biennial IBA Latin American Regional Forum Conference: Technology, social media and artificial intelligence: challenges for the legal industry in the digital age

23 March 2023

Breakout session 4

Co-Chairs

Pablo Artagaveytia Marval O’Farrell Mairal, Buenos Aires; Vice-Chair, Latin American Regional Forum

Sandra Reed Serrano Perez Bustamante & Ponce, Quito; Membership Officer, Latin American Regional Forum

Speakers

David Flechner Allen & Overy, New York, NY; Vice-Chair, Mergers and Acquisitions Subcommittee, IBA Securities Law Committee

Catalina Hoyos Jimenez GOH GodoyHoyos, Bogota

Andres Nieto Norton Rose Fulbright, Mexico City

Paula Vargas META, Buenos Aires

The aim of this session was to examine how environmental, social, and governance (ESG) is being affected by AI and other new technology.

Andres Nieto began by stating that the discussion on how to treat ESG issues effectively is shaping up to be one of the more significant questions of the decade for businesses and investors. ESG is becoming a major strategic imperative, especially for large corporations. He explained that: ‘E’ mainly relates to climate change; ‘S’ to diversity policies, equity and inclusion, safety at work and human rights; and ‘G’ to corporate internal management, transparency and accountability.

Nieto also pointed out that the ESG mandate presents various challenges: the topic is very broad and complex, there are many competing frameworks and standards around the world, and regulators discuss whether disclosures are mandatory or not, plus there is a lack of standardisation. These challenges present an opportunity for the technology sector. For example, in Nieto’s view, technology can help companies improve working conditions, provide tools for transparency, accountability and stakeholder engagement. Technology also has the potential to create ESG opportunities, and companies with the latest technology are in a better position to deal with ESG issues.

David Flechner expanded on the analysis of the relationship between ESG and AI. He stated that there is a very important data component to be taken into account in decision making and investments, and AI’s application in this area brings efficiencies relating to, for example how to make sure that when there is a new framework in place it can be applied quickly and that ESG objectives are achieved. AI helps to ensure compliance and give predictive outcomes. The application of technology facilitates ESG compliance. Another interesting example according to Flechner, is the application of AI to human resources issues. In this respect, for compliance with diversity and inclusion standards, AI could counteract some of the bias in promotion or recruiting procedures.

Paula Vargas gave insights into how their firm META is dealing with sustainability. She explained that, for META, sustainability is more than an operating responsibility, but rather an opportunity to have a positive impact on the community. She mentioned that META has clear ESG targets, including: the reduction of operational emissions by 90 per cent in three years; their operations are completely net zero of greenhouse gases emissions; and that they only use renewable energy. She also spoke about an unprecedented collaboration between a technology company, governments and the academia (Yale University) to fill information gaps critical in this respect. This project, related to a large survey, was being performed to address questions such as knowledge of climate change and what should be done. The results showed a deep concern for governments and companies to take meaningful action on climate change.

Catalina Hoyos Jimenez addressed the ‘E’ in ESG, agreeing in principle about the positive impact of AI on the environment. However, she also highlighted some aspects which in her opinion, are not so positive. These included the big energy consumption of blockchain, production processes of technologies and final disposal of certain technologies. She also explained the concept of ‘green software’, which is being designed, developed and used in ways which minimise its effects on the environment.

The panel also referred to the impact of renewable energy in Latin America, and how attitudes are changing in favour of renewables. In this sense panellists agreed that renewable technologies will be an important in attaining ESG targets relating to environmental protection. Flechner considered that renewable energy will be an essential component of a company’s ESG compliance strategy.

Nieto addressed the role of technology in the ‘S’ component, mentioning practical examples such as facilitation of access to justice by carrying out judicial proceedings electronically and the use of digitalisation tools. Nevertheless, the panel also mentioned certain challenges in this respect, including cybersecurity risks and ethical considerations.

Finally, in relation to governance, Vargas considered that responsible governance of data is essential in maintaining their clients’ confidence, as it is relevant for the sustainability and survival of their businesses. She also gave a practical example on a key tool they use relating to privacy review processes. The tool allows them to identify their products’ privacy risks and mitigate accordingly.