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January 23, 2024

Exploring the synergy of AI and sustainability in technology trends

David Rainville
Portfolio manager

In an era driven by technological advancements, the fusion of Artificial Intelligence (AI) and sustainability is poised to shape the future. Our PM David Rainville delves into the transformative impact of AI, the electrification of vehicles, and Europe's innovation landscape, while highlighting sustainable tech players and evaluating their societal and environmental contributions.

Future potential of technology applications and trends to watch

Technology helps us to utilize resources efficiently, innovate and explore opportunities. Enormous amounts of data are being created in a time when both humans and machines are connected to the net. Making efficient use of that data will require tremendous capabilities in compute. The semiconductor and software market geared to the processing of data will see strong growth opportunities.

The electrification of vehicles is another strong trend, and we are seeing the electric auto market becoming a mass market. This creates opportunities for innovative vehicle makers and semiconductor producers that enable the electric powertrain. Assisted driving is a parallel development which exemplifies that in almost everything we do, we can use technology to extend our human ability. Artificial Intelligence (AI) or machine learning is currently driving innovation in software which ties back to compute and processing of data. Machine learning is a necessary technology to be able to develop autonomous, self-driving vehicles for instance.

AI and sustainability can collaborate

AI and sustainability can go along together if the algorithms are used for a sustainable purpose and if the AI is developed in an ethical way.

First, AI can contribute to sustainable products and services with a positive impact on society or the environment. For instance, Duolingo, an app to learn languages uses AI to optimize learner paths and language tests. On the environmental side, AI can be used in the building industry for eco-design, for instance by creating digital twins for sustainable design and building energy efficiency.

Second, to contribute to sustainability, AI must be developed in a sustainable way. In line with our Responsible Tech Charter, we are especially vigilant on 4 topics regarding the ethical development of algorithms:

· Is the algorithm explainable? This raises considerations of transparency, for example: is the GenAI algorithm able to explain the sources of an output text?

· What is the data on which the algorithm has been trained: is that dataset diversified and representative? This also raises questions of copyright (the sources of the generated text), even more so for images such as DALL-E, which can generate images.

· Ensure reliability of the algorithm, e.g., publish performance and accuracy metrics and demonstrate that it is constantly monitored for algorithmic bias, for instance ensure that the algorithm does not lead to racist, misogynistic, or hateful Internet or user interactions.

· Ensure that the company identifies the potential risks of the technology before making it available to its customers, and that it develops effective alert and remediation mechanisms if these risks materialize.

Is Europe a less innovative market ?

There is no lack of innovation in Europe but the infrastructure to commercialize it is not as extensive as in the United States. Funding is part of that infrastructure, and we hope to do our part by participating in European IPOs when they meet our requirements for a good investment. It is also important that European start-ups can develop with enough funding to achieve sufficient growth on a relatively short time span or their competitive edge can be eroded.

Tech companies selection through the sustainability lens

Every investment we make must meet our requirements in terms of sustainability or we will not invest. We consider the effects of business activities on society at large, including environmental impact, how well the company conducts its business internally, control over supply chain and impact on customers and employees. We evaluate how credible the company is in its efforts to improve and become a force for good.

Evaluating and measuring the impact of tech companies on society and the environment

The impact of the business model on society and the environment is respectively assessed by the Societal Contribution of products and services and the Net Environmental Contribution, two metrics developed in-house. Products and services with a positive social contribution include payments, edtech, medtech, green data centers, cybersecurity… Energy efficiency, contribution to electric vehicles or use of renewable energy will positively impact the Net Environmental Contribution.

A few examples of sustainable tech players

We underlined the vehicle electrification megatrend. STMicroelectronics, specifically, contributes to low-carbon mobility: the company designs microchips, as well as an offering enabling the digitalization and electrification of the mobility sector.

We also mentioned the positive impact that AI could have on the environment depending on its final use. To illustrate, Procore, a leading provider of cloud-based construction management software, enables its clients to build more sustainably, reduce carbon emissions & waste and avoid reworks.

Equinix also contributes positively to the environment thanks to its sustainable data center and colocation offerings. The company presents 250 data centers in 32 countries which are on average 96% powered by renewable energy. Equinix invested more than $130 million since 2011 in energy efficiency, leading to 430,000 tons of CO2 equivalent avoided.

Tech can also contribute to healthcare, as Oracle which, through Cerner, designs database management systems including a product offering dedicated to hospitals and healthcare systems.

The opinions and estimates herein are based on our judgement and may change without prior warning as may assertions on financial market trends which are based on current market conditions. To the best of our knowledge, the information herein is reliable but must not be considered as exhaustive. This document is not an offer or a solicitation to buy or sell any financial instrument whatsoever. References to specific securities or their issuing companies are merely for illustrative purposes and should not be construed as recommendations to buy or sell these securities. Past performance is not a reliable indicator of future returns. Opinions and strategies described may not be suitable for all investors. Returns and valuations for investments in any funds that might be mentioned may rise or fall and investors may receive more or less at redemption than the sum initially invested. Investors are warned that they could suffer capital losses.

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Exploring the synergy of AI and sustainability in technology trends

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