Nexus FrontierTech (Nexus) and APS Asset Management (APS) have released a technical white paper awarded the Monetary Authority of Singapore’s (MAS) Financial Sector Technology and Innovation (FSTI) proof-of-concept (POC) scheme grant. It demonstrates the technological success and commercial viability of an artificial intelligence (AI) platform for asset management.
The paper details a unique collaboration and commercial innovation among investment managers, ESG experts, and technology providers across Singapore and China. This partnership has resulted in the discovery of new insights into innovating AI-driven data analysis in investment processes, as well as the creation of the award-winning environmental, social, and governance (ESG) data platform, ANAFES (APS-Nexus AI-Fundamental ESG System).
ANAFES taps on new and advanced technologies to resolve the challenges of ESG investing in China. These include the lack of transparency, and inconsistent reporting standards. Additionally, available ESG data systems are scattered, manual, and not integrated into asset management operations. ANAFES also successfully demonstrated interoperability between an ESG framework such as GRI with an asset manager’s in-house framework.
Embedding AI models
Nexus and APS developed three sets of AI models embedded in ANAFES, with accuracy rates averaging 80 per cent, fundamentally changing the ease of use of ESG data for businesses:
- the ESG data parser allows users to customise accurately extracted ESG data into their own investment frameworks. This is instead of relying on ESG scores from potentially less relevant and opaque one-size-fits-all global service providers.
- the News Monitoring function allows users to automatically perform sentiment analysis based on news aggregated from both publicly available and subscription-based source.
- the Investigative AI function conducts deeper analysis into important data categories like footnotes and business terms in company annual reports as well as other written investor communications. This function also maps out senior corporate figures’ key related parties and factors these relationships into each target company’s ESG scoring.
Managing ESG frameworks
Functioning as a central portal that manages all ESG frameworks, data, and news efficiently and accurately on a single dashboard, ANAFES helps portfolio managers and analysts visualise, benchmark, and analyse company ESG performances across industries and geographies. Additionally, it standardises an asset manager’s integration of ESG into their investment process.
By automating various tedious, manual research workflows, it is expected that investment analysts will see a 50-70 per cent increase in productivity. More time would be freed up for them to concentrate on higher value tasks and functions, such as fundamental analysis.
ANAFES unlocks the potential for a large number of small and mid-sized asset managers with limited resources to accelerate the implementation of ESG investing via their own manager-defined approach. Although the initial focus is on China, ANAFES’ AI-native capabilities can easily scale into other markets. This would augment the capabilities of asset managers and researchers in the region.
By releasing this paper, Nexus and APS are optimistic that the experiences and end products of this project will add to the growing pool of intellectual capital and capabilities for sustainable finance. This is in addition to spurring greater dialogue and collaboration in ESG data interoperability.