Impact insights #5

Welcome back to the ESGI Horizon Newsletter! Today, we’ll examine the WEF report on AI for impact, look at some News and trends, including the alarming Emissions Gap report, and, as usual, conclude with some of the latest impact deals.

Focus Article: WEF report - AI for Impact- Strengthening AI Ecosystems for Social Innovation

The WEF AI for Impact report highlights the transformative potential of AI in addressing global social and environmental challenges. As AI continues to evolve, its deployment for social good is crucial for achieving a scalable and sustainable impact.

Global interest and investment in AI, especially generative AI, have surged, with venture capital investments totalling over $290 billion between 2019 and 2024.

Over 70% of social innovators have deployed a form of machine learning in social impact domains such as healthcare and the environment. Yet the social impact ecosystem for AI faces underinvestment, receiving less than 0.5% of all budgets allocated to AI implementation.  The report's analysis shows that out of almost 100 AI initiatives reviewed, only 31% focus on positive impact. Of these impact-focused initiatives, less than half provide direct financial resources.

The report urges increased collaboration and funding for AI for impact initiatives. Key strategies for success include developing cross-sectoral partnerships, enhancing data access, providing financial and non-financial support to social innovators, and prioritizing ethical AI practices.  The private sector can play a vital role in bridging the gap between technology organizations and social innovators, facilitating access to AI tools, and ensuring that AI development is aligned with social enterprises' needs.  Public-private partnerships are essential for creating comprehensive support systems for social entrepreneurs deploying AI for good.

As ESGI Horizon, we are excited to discuss more possibilities to bridge the gap between AI and impact through our participation in the Alpha Programm at the Websummit. See you there!

News & Trends

• 🔥 Ahead of the COP29 in Baku, from November 11-22, the UN Environment Program’s Emissions Gap report finds that current national pledges fall far short of the drastic emissions cuts needed to limit warming to 1.5°C. To stay on track, nations must deliver much stronger ambition and action, reducing emissions by 42% by 2030 and 57% by 2035 to prevent warming beyond 1.5C, which is now a target that is likely out of reach. Failure to significantly strengthen commitments in the next round of Nationally Determined Contributions (NDCs) could lock the world into a devastating 2.6-3.1°C temperature rise by 2100, with catastrophic consequences for humanity and the planet.

  

• 🌍 In the State of the Climate in Africa 2023 report, the World Meteorological Organization notes that on average, climate-related hazards cause African countries to lose 2-5% of their GDP annually, with many diverting up to 9% of their budgets to respond to climate extremes. Despite Africa contributing less than 10% of global greenhouse gas emissions, it is disproportionately impacted by climate change. The continent observed a warming trend that has become more rapid than the global average, making it the most vulnerable region to extreme weather events including droughts, floods and heatwaves. By 2030, it is estimated that up to 118 million people in poverty will be exposed to drought, floods and extreme heat in Africa, if adequate response measures are not implemented.

  

  Flooding in Maiduguri, Nigeria, on Sept 10.

• 🗳️ Brazil's recent municipal elections saw a record-breaking number of Indigenous representation, with 256 elected officials (an 8% increase since 2020). This is a key move to ensure greater protection of Indigenous rights and could pave the way for greater Indigenous representation in the 2026 state and federal elections. However, a significant gender gap persists, with women comprising only 16% of elected Indigenous officials.

  

  Ingrid Sateré Mawé first Indigenous city councilor of Florianópolis

Latest Impact Deals

• Nuveen, an American asset manager, raised €157 Million for its Impact Credit Strategy which focuses on reducing social inequality and tackling the negative effects of climate change. “The strategy will seek to not only consistently outperform the global corporate bond market on an excess and risk-adjusted basis, but also aim to lower the cost of capital for environmental and social projects by funding initiatives through the easily accessible, liquid public fixed income markets”.

• Members of the UN-backed Net-Zero Asset Owner Alliance invested $175B in climate solutions in 2023. It is an initiative of institutional investors committed to transitioning their investment portfolios to net zero GHG emissions by 2050. The group’s 88 members collectively represent $9.5 trillion in AUM, 6% or $555 billion are allocated toward climate-focused investments so far.

• British International Investment announces $150m trade finance facility with Absa Group to support African SMEs in agriculture, healthcare, and other sectors. This partnership aims to address Africa’s estimated $100-$120 billion trade financing gap.

• Finova Capital raised $135 million in Series E round. Finova is a non-banking financial institution that offers personal and business loans to India’s urban and rural poor.