This article series spotlights key business trends identified by the expert members of Forbes Councils. Find out if you qualify for Forbes Technology Council here.
ESG investing, which accounts for a company’s environmental, social and governance ratings alongside traditional financial metrics, and the concept of “stakeholder capitalism” over shareholder profitability had been growing trends even before the pandemic. Now, after nearly 40 million Americans lost their jobs and over 170,000 lost their lives due to Covid-19, companies that have effectively responded by protecting their customers and employees have become much more attractive to investors.
Companies that have proven themselves invaluable during the pandemic are attracting record-high levels of sustainable ESG funds, despite a dramatic downturn in the overall economy. According to Morningstar’s Global Sustainable Fund Flows Report, global sustainable funds reached almost $45.7 billion in net flows during the first quarter of 2020.
Many experts say ESG investing is a growing phenomenon as consumers demand brands with a social conscience and brand reputation becomes a bigger factor in determining corporate value. Forbes Technology Council member Dr. Steven Gustafson is the CTO of Noonum, a Seattle-based fintech startup leveraging advanced data science and machine learning technology to improve financial analysis and investment decisions. He said that Covid-19 has accelerated the need to leverage AI in order to better create and understand new sustainable ESG investment alternatives.
“The financial services industry has a massive impact on funding the projects and companies that drive our economy and society. Businesses that are bad actors for the economy or social issues are no longer as easily tolerated, even when they are growth engines or have outsized returns,” Gustafson said. He sees sustainable investing in strong business models with the potential to keep pace with social, environmental and cultural shifts, as well as ESG investing’s even deeper commitment to customers and employees, as modern essentials.
With a PhD in computer science, Gustafson has devoted his career to working with industry experts to take innovative technology at the research stage and develop practical, impactful applications that benefit customers. At Noonum, his work helped develop a powerful decision support tool to help asset managers and others in the financial services and organization strategy industries understand the themes associated with investment products.
“We started with U.S. public equities and, through a state-of-the-art, cloud-based AI platform, process thousands of daily pieces of information to grow a real-time and dynamic graph of relationships and knowledge,” Gustafson said. This technology allows users to answer questions like “What companies are delivering on vaccines for Covid-19 that are in clinical trials?” or “What companies are increasing their commitment to renewable energy?” in a matter of seconds.
In Gustafson’s experience, understanding the customer’s problem and delivering value is key to building technology solutions. “Avoid building technology or a platform and then searching for a problem to solve,” he said. And because the decision complexity is so high in industries like financial services, he said AI is still a long way from automating many important components. Because expert decision-makers are still vital, Gustafson said technology is most valuable when it augments and assists human intelligence.
“Many competitors in our space are technology-first, trying to find a way to fit their algorithm or their database into financial services. You can see this clearly when the product becomes multi-vertical, serving disparate industries, which means the users in any one of those verticals probably have to work harder to benefit,” he said.
Ultimately, even the most innovative and advanced technology is only as valuable as the impact it makes on human lives. Gustafson believes AI technology that supports sustainable business investments has the capacity to create a more equitable society that is exponentially more resistant to global crises like Covid-19.
“The hard part is finding a way to deliver value consistently. We believe that to really help customers you should understand the trends, understand the customers and commit to being a solution and not an experimentation or learning experience for the customer. To really make a difference, startups need to be good at applied technology that delivers value and not experimentation and research projects.”
For more information, check out Dr. Steven Gustafson’s executive profile here. To learn more about Forbes Technology Council and see if you qualify for membership, click here.