Nanuk blending ESG with the new world of ‘deep learning’

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Move over machine learning. Here comes deep learning. Unlike machine learning, which is a computation of statistics that leads to changes which appear to be, but are not, of a behavioural nature, deep learning is an artificial neural network with many layers of data. So, there you have it.

Both are types of artificial intelligence (AI), the study of which is developing at a rapid pace – way ahead of its implementation and commercialisation. For many of us mere mortals, this seems a bit scary. Will a smart phone ever replace journalists? Perish the thought.

Luckily, though, there are ESG-focused fund managers on the side of humans. They are looking to take advantage of AI and exploit new returns from developments in that field, at the same time as watching out for the sustainability of those developments – that is, looking for the environmental, social and governance consequences. One such manager is Australia’s Nanuk Asset Management.

At an investor webinar last week, Tristan Patience, portfolio manager at Nanuk, said that the number of listed company annual reports which referenced AI or machine learning soared from about 1,500 to 3,650 in the past 12 months. Ten years ago, the number was just 250.

Patience, who received a “university medal” in mathematics at Sydney University, also got first class honours for his dissertation on neural networks, a key component of AI.

In the sustainability sector, he said, the “real world interpretation” of AI meant images, such as computer vision, sounds and natural language. In analytics, applications involved real-time data, predictive data, now being used by marketers and big super funds to gauge what members and customers are thinking of doing, and unstructured data (such as newspapers and other loose forms of information), which has been traditionally difficult to collate.

Examples of investment categories currently include:

  • autonomous machines, such cars, industrial robots and the Internet of Things (IoT), which is to do with sensors
  • smart infrastructure, such as in whole cities, renewable energy and storage
  • healthcare, such as in diagnosis, surgery and discovery
  • resource efficiency, such as in agriculture and waste collection and disposal, and
  • internet services, such as consumer interaction.

Nanuk’s flagship “New World” fund invests in a concentrated long-only global portfolio, but the firm also has a long/short version, both of which have comfortably outperformed their benchmarks since inception in 2009. It’s investment universe is about 1,000 of the 10,400 in the Factset global equities grouping.

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