Should charities invest in Artificial Intelligence (AI)?

The emergence of artificial intelligence (AI) as a business tool and as an investable theme presents a compelling opportunity for charities both by affecting their own business operations and enhancing their portfolios’ performance, potentially amplifying their impact on the causes they support.

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Philip Kelly
Published: 28 Feb 2024 Updated: 28 Feb 2024

Yet, alongside this potential for greater returns, concerns regarding accountability, ethical implications and the ability for AI to offer consistent returns loom large. Here, we look at the risks and benefits of investing in AI.

The rise of AI

Many think of ‘AI investments’ as companies developing AI tools, such as ChatGPT and Microsoft Co-pilot. But these tools need robust infrastructure for processing vast amounts of data, and that is provided by companies like Amazon Web Services. Equally, the core of AI advancement lies in hardware components, notably semiconductors produced by firms like Nvidia and TSMC and it is this hardware layer that has experienced the most significant financial gains recently.

Beyond technology firms, the future trajectory of AI investment is limitless. The real economic impact of AI will benefit sectors spanning industrials, consumer goods, utilities, agriculture and financials.

Navigating AI Investment

The obvious benefit of AI is improvement in productivity. In the charity sector, adoption of these tools can affect and enhance many areas of operation. Likewise, meaningful AI adoption in the for-profit workplace could boost corporate profitability, wage growth and returns from equity markets.

Moreover, AI's disruptive potential extends beyond individual projects, with entire business models facing upheaval. For instance, Google's dominant position in search, historically unassailable, now faces challenges from alternatives like Microsoft's GPT-4-powered Bing.

Investing in the AI sector can offer both opportunities and challenges. However, identifying winners from this theme could be difficult and there are many things for charities to consider before they invest in this sector. As with all investing, your capital is at risk and you may not get back the amount invested.

Guiding principles for Charity investment

Charity investors would be wise to approach AI investment with caution. Our approach is to adhere to these fundamental principles:

  1. Temper hype with reality: learn lessons from past technology booms and busts. While AI holds immense potential, investment decisions should be based on economic fundamentals rather than speculation.
  2. Diversification is key: maintain a properly diversified portfolio. There’s nothing wrong with investing in AI, but if an investment portfolio is too skewed in favour of AI it could result in investors losing out on other opportunities.
  3. Be patient, look beyond the trend: Charities that have long-term investment horizons can afford to be patient. Rather than simply looking at the immediate winners today, it’s important to consider the wider impact across the entire economy.

Impact of AI and trustees’ responsibilities

The impact of AI will not always be positive and it’s important for trustees to look at this sector through an environmental, social and governance (ESG) lens. This could involve, for instance, asking questions about AI’s ability to develop its own consciousness or looking at the environmental impact. As AI burns vast amounts of energy, it’s important to consider what companies are doing to improve energy efficiency and work towards a more sustainable future.

While AI presents promising investment opportunities, trustees must navigate the landscape with caution, grounded in sound investment principles and ethical considerations, to ensure long-term benefits for their organisations and beneficiaries.

Speak to Evelyn Partners

Our recent AI webinar for charities can be viewed here Our dedicated charities investment team can help can offer your charity guidance on investing in line with your charity’s objectives. For more information about how they can work with you and your charity, contact a member of our team.

Important information

By necessity, this briefing can only provide a short overview and it is essential to seek professional advice before applying the contents of this article. This briefing does not constitute advice nor a recommendation relating to the acquisition or disposal of investments. Details correct at time of writing.