Illustration of how Responsible AI can help banks fulfill ESG initiatives

What do a growing share of today’s consumers value? That’s just it: values. Consumers want to see their values reflected and shared with the brands they use - and the financial services sector is no exception. Many consumers put a premium on financial institutions that prioritize delivering services equally for all different groups. To enhance these social and sustainability objectives, banks should look for ways to connect their environmental, social, and governance (ESG) initiatives with their responsible AI priorities.

ESG and responsible AI initiatives are not regulated at this time. But just because the regulations aren’t in place yet, doesn’t mean they won’t be eventually. Financial institutions that invest and implement responsible AI initiatives will demonstrate their commitment to social progress to regulators. 

Here’s why banks should align their ESG and responsible AI priorities.

3 Ways ESG and Responsible AI Work Together

Here are three key ways that responsible AI supports a bank’s ESG priorities by promoting social responsibility and environmentally-friendly goals. 

  • Responsible AI Promotes Fairness. Social responsibility is one of ESG’s key pillars. Algorithmic bias can creep into a bank’s decisioning models, resulting in harmful consequences for customers. Affected customers are denied access to important financial services (e.g., better interest rates, loans, or greater credit lines) if these barriers go unaddressed. Implementing responsible AI and model fairness enables banks to better serve underserved customers. This promotes financial inclusion and addresses core ESG pillars.
  • Responsible AI Promotes Explainability. Explainability is critical to enhancing the customer experience and ensuring all customers are treated fairly. At the same time, having a more transparent understanding of AI’s rationale also enables banks to be more transparent with customers on why decisions were made. Greater explainability also empowers FIs to better serve minority customers by determining whether certain groups are being treated unfairly. With this knowledge, FIs can fulfill the social tenet of their ESG framework. Being able to demonstrate explainability and how AI reached its decision will also go a long way with regulators.
  • Responsible AI Promotes Privacy. Implementing responsible privacy controls and practices support all three pillars of a bank’s ESG framework. First, the environmental pillar: as the amount of data produced increases, banks must demonstrate that they handle it responsibly. This includes how they use, secure, and dispose of it. Responsible data collection, storage, and disposal also tie directly to supporting sustainable environmental goals by reducing the FI’s carbon footprint. On the social pillar, banks should also find ways to collect data securely and put customer privacy and safety at the forefront. Finally, banks can demonstrate the governance pillar of ESG by putting responsible AI at the heart of company policies. This demonstrates that the financial institution is living up to its ESG commitments at all levels.

How FIs Can Align Their ESG and Responsible AI Goals

Big data is already a massive industry. As more customers adopt digital banking practices, it’s only going to get bigger. FIs need to ensure they have reliable and robust banking systems in place to address their customers’ needs.  

These systems must be able to protect consumers from all types of threats, including frauds and new scams that emerge. They should also tie to the FI’s ESG and responsible AI priorities by identifying opportunities to minimize inequalities among customers and operate sustainably. Connecting ESG and responsible AI systems enable banks to both respond rapidly to change and to better serve customers.

Here are three steps to combine ESG and responsible AI goals. 

1. Implement AI in a Responsible Way

Ultimately, AI solutions must enable banks to better serve their customers from all backgrounds – a key provision of ESG’s social pillar. A responsible AI framework removes many barriers that many minority customers encounter. As customers experience fewer obstacles in their financial journeys, FIs can identify new AI use cases that will elevate their services and deliver a better experience for all customers. For example, banks can implement more automation tools that reduce manual and repetitive tasks, enabling employees to focus on building stronger customer relations. 

2. Demand ESG and RAI Frameworks From Vendors

ESG and responsible AI requires a team effort to be successful; FIs can’t do it alone. Banks should have conversations with their vendors to understand how these businesses approach ESG and RAI initiatives and to encourage vendors to participate in their ESG and RAI efforts. Requiring partners to consider their own responsibility initiatives means financial institutions develop ESG partnerships.

3. Get Ahead of ESG and RAI Initiatives Before Regulators

While ESG and responsible AI frameworks are not currently mandated, there are strong signs that they will be in the future. But even if it’s not mandated, there are still good reasons to implement ESG and ethical AI initiatives. First, many modern consumers respect and identify with socially responsible brands. Banks and financial institutions that promote socially responsible principles are likely to be rewarded by socially-aware consumers. Second, these values are an invaluable way to attract new, innovative talent to your organization. By offering these initiatives, financial institutions can position themselves as cool, mission-driven organizations where top talent wants to work.

Consumers See Banks’ ESG Efforts Lagging

ESG frameworks are gaining momentum in the financial sector as consumers demand greater social responsibility from their brands. They also come at a time when most consumers doubt their banks’ sincerity in their ESG priorities; a recent survey found 53% of respondents believe banks are not genuine in their social and environmental commitments. 

This finding is somewhat surprising given that banks have several widely available ESG frameworks to follow. These include the Global Reporting Initiative (GRI), Sustainability Accounting Standards Board (SASB), and the United Nations’ Sustainable Development Goals (UNSDG), to name a few. 

The good news is the same survey also found 61% of respondents believe banks are sincere in their efforts to improve equity. Banks can build on this perception by linking their responsible AI initiatives with their ESG commitments. 

Download our eBook, Understanding Responsible AI: A Primer for Financial Institutions, to learn how banks can prevent and detect fraud and financial crime while simultaneously mitigating AI bias.