‘AI Blowback’ Angst Grips ESG Investors Who Bet Big on Tech

ESG fund managers who turned to big tech as a low-carbon, high-return bet are growing increasingly anxious over the sector’s experimentation with artificial intelligence.

Exposure to AI now represents a “short-term risk to investors,” said Marcel Stotzel, a London-based portfolio manager at Fidelity International.

Stotzel said he’s “worried we’ll get an AI blowback,” which he describes as a situation in which something unexpected triggers a meaningful market decline. “It takes just one incident for something to go wrong and the material impact could be significant,” he said.

Examples that Stotzel says warrant concern are fighter jets with self-learning AI systems. Fidelity is now among fund managers talking to the companies developing such technologies to discuss safety features such as a “kill switch” that can be activated if the world one day wakes up to “AI systems going rogue in a dramatic way,” he said.

The ESG investing industry may be more exposed to such risks than most, after taking to tech in a big way. Funds registered as having an outright environmental, social and good governance objective hold more tech assets than any other sector, according to Bloomberg Intelligence. And the world’s biggest ESG exchange-traded fund is dominated by tech, led by Apple Inc., Microsoft Corp., Amazon.com Inc. and Nvidia Corp.

Those companies are now at the forefront of developing AI. Tensions over the direction the industry should take — and the speed at which it should move — recently erupted into full public view. This month, OpenAI, the company that rocked the world a year ago with its launch of ChatGPT, fired and then rapidly rehired its chief executive, Sam Altman, setting off a frenzy of speculation.

Sam Altman was reinstated as OpenAI CEO less than five days after his ouster.