Acadian Asset Management has unveiled a new AI-based tool that can be used to analyze company reports and predict the likelihood of a business meeting its sustainability goals.

According to the global fund manager, the Acadian Net Zero Alignment Model is the first net zero tool to integrate large language models (LLM), a type of AI algorithm that uses deep learning techniques, which are also the basis of ChatGPT.

Acadian’s Net Zero Alignment model was designed in consultation with Acadian’s select European institutional investors and will now be made available to clients in Australia.

Andy Moniz, director of responsible investing at Acadian, highlighted the ability to process quality company disclosure and assess the credibility of their decarbonisation plans as a key strength of the fund manager's approach.

“For the growing number of investors setting a net zero target for their equity portfolios, it is important that portfolios are positioned to ensure they achieve their targets, but many existing net zero matching models are misleading in that they drive investors to believe there is certainty in achieving a given alignment result,” he said.

"Existing solutions rely on outdated data and are backward-looking, so we've developed a robust, forward-looking approach to provide greater security for our customers."

Mr Moniz said the new model fills a gap in the market for reliable, nuanced data on the likelihood of companies achieving their net zero goal from a binary perspective.

"This tool incorporates uncertainty, so it doesn't just say 'yes, this company is on track or no, this company is off track,' but it assesses the quality and attainability of the company's goals, identifies key risks, and gives each company private score,” he explained.

"We use it to help us position portfolios, but it can also be used to help companies that are at risk of missing their target, identify the issues, understand why they might not hit their target and rethink your strategy.”

The new model joins a broader set of climate analysis tools. Last year, Acadian unveiled an automated system to help identify greenwashing in potential investment targets.

Gillian Savage, chief executive of Acadian Asset Management Australia, said the fund manager was constantly looking for ways to add value for clients.

"We believe that investment processes must be dynamic and adapt to change, which is why we are constantly innovating and investing in people, technology and data," she said.

Acadian currently manages approximately $144 billion in assets, primarily in equity and debt instruments, on behalf of wholesale and institutional investors, including super and pension funds, platforms and multi-managers.

In Australia, Acadian manages over $10 billion across 17 strategies, including long equity, long/short equity and socially responsible investments (SRI).

John Bragg

John Bragg is a journalist for Momentum Media's Investor Daily, nestegg and ifa. He enjoys writing about a wide variety of financial topics and issues and exploring the many implications they have on all aspects of life.