It is estimated that the energy demands of the artificial intelligence (AI) industry will increase tenfold by 2026, and this is a key sustainability and compliance risk that management and boards at financial sector organizations need to consider carefully as they position their organizations for success in the AI age.
A new report from the Global Risk Institute examines the energy demands of the fast-growing AI sector, and points to business and regulatory developments that suggest energy consumption from AI should be a key consideration for the financial sector. It explores the balance between harnessing AI’s transformative potential and mitigating its environmental impacts, with a special focus on the role of Scope 2 and Scope 3 emissions in crafting a sustainable future.
The report presents risks, opportunities and recommendations for organizations at different levels of AI adoption and investment in sustainability. As financial institutions integrate AI into their operations, the report also proposes questions that management and boards should ask about AI and energy consumption.
Effective challenge for financial institutions and their boards
As financial institutions integrate AI into their operations, the environmental impact of these technologies becomes a significant concern. Therefore, it is essential for board members and senior management to ask the right questions to ensure that sustainability considerations are thoroughly addressed.
The report poses some key questions to guide their approach:
Energy Consumption and Efficiency
• What steps are we taking to monitor and reduce the energy consumption of our AI operations?
• Are we investing in energy-efficient AI models and hardware?
Data Centre Partnerships
• Are our data centre partners committed to using renewable energy sources?
• How can we encourage or incentivize our partners to adopt greener practices?
Scope 2 and Scope 3 Emissions
• How are we addressing the indirect emissions from our AI-related energy consumption (Scope 2)?
• What measures are in place to mitigate the broader environmental impacts in our supply chain (Scope 3)?
Strategic Investments
• Are we prioritizing investments in companies and technologies that align with our sustainability goals?
• How can we leverage AI to enhance our environmental initiatives?
Regulatory Compliance and Risk Management
• Are we prepared to meet evolving regulatory standards related to AI and environmental sustainability?
• Are we looking at potential regulatory and policy changes based on international indicators and reports, such as the one released by the IMF in June?
• How are we managing the risks associated with increased energy demand from AI?
Innovation and Market Leadership
• How can we use AI to drive innovation in sustainability?
• What opportunities exist for us to lead the market in green AI practices and how are we set up to capitalize on them?
Long-term Sustainability Goals
• How does our AI strategy align with our long-term sustainability objectives?
• Are we setting and tracking specific targets for reducing the environmental impact of our AI operations?
To read the complete report from the Global Risk Institute, visit:
Featured image credit: Getty Images
