Climate Change And AI To Transform The Future of Investment

I Know First Research Team LogoThis article was written by the I Know First Research Team.

According to a recent article published in the Financial Times, the two main factors shaping the investment world of tomorrow will be the rise of the AI and climate change. These two are quite far from one another, and yet, one of them could be a solution – or part of the solution, at least, – to the other. How exactly these trends will affect the future of investment, and how can AI help solve climate change? Let us look into this.

Climate Change: The Scourge Of Tomorrow

Climate change is a contentious issue, which is seen by some as nothing short of a problem of a truly apocalyptic scale that threatens the very existence and survival of the human race as a species. Others, however, tend to view it as a sort of a conspiracy theory and a big hoax. Investors would disagree with the latter, it seems from the aforementioned article. Let us try to asses why.

Smoke from factories over power lines. In the future of investment, the industries that are seen as the main polluters might suffer in the court of public opinion.

First, there is the whole issue of sea levels rising and thus cutting into the amount of soil available for farm works, extreme weather conditions and events re-shaping the face of our planet, all mentioned in an EU overview of the matter, Arctic becoming ice-free and hurricanes becoming more frequent, as per NASA forecasts. What does this mean for an investor? On the most pragmatic level, a change of priorities. A world where there is less available soil, more crops getting battered by rains and getting flooded and more people (the global population is going up, let us not forget) is a world that may end up facing a lack of food, which is likely to push the revenues of the corresponding industries up. This makes them a lucrative investment target. For the more venture-minded investors, it may also be a sign that it is just the time to look into startups working on things like vertical farming, as those may end up becoming more than relevant with time.

Also, with climate activism driving thousands out to hit the streets on rallies across the globe, it is reasonable to expect that a company’s ability to communicate its adherence to environmentalist values could end up being a major factor in defining its profits. This, by extension, also drives its value up and makes it a more lucrative target for investment, so environmental friendliness becomes a more important variable in the analysis for picking out the stocks to hold. Similarly, a counteraction can be expected against the companies that comprise the industries known as the key polluters, be it the auto-makers or the energy sector. This could hit the profits of the respective enterprises unless they find ways to re-imagine themselves as fellow champions for responsible and environmentally-friendly business. By the same account, oil’s status as a sage-heaven commodity could end up being jeopardized.    

AI: The Solution To Many Problems

Now that we have touched upon the first part of our equation, it is time to take on the other and see how the rise of the ever-blossoming AI industry will transform the investment landscape of the future. The first thing to note here is that while millennials, the next big spenders and investors, do seem to like AI – at least, in their customer support – they also have their own fair share of concerns regarding the technology. Nevertheless, as the generation with the highest level of exposure to the AI tech, they are set to be the main market for it, and seeing how big the AI industry is right now, an AI-centered ETF is probably a good long-term investment.


Even more interesting is the idea that AI could actually help in dealing with climate change, at least in as much as the energy sector is concerned. The key problem with the clean renewable energy so far is that it is localized and inefficient. Using AI, one can build a hybrid energy system, where smart algorithms would predict and optimize the power supply in a way that would allow one to maximize the utility of renewable energy. This smart grid may not necessarily be enough to help us avoid all the apocalyptic events we touched upon in the previous section, but every little bit helps, doesn’t it?

Finally, and most excitingly, AI is transforming the way investment is done. Yesterday, you did extensive research on the companies to invest in, but today, you can outsource this to a smart AI that is capable of predicting the market movements. In fact, with an AI like that, you can even opt for trading instead of investment, building an algorithm that would operate on the market all by itself and make you money with no further input from you.

Now, predictive AI algorithms modeling the stock market are already a reality, but most of them have been trained behind the closed doors of major institutional players and are not accessible to the broad public. But what you can do instead is make use of the tech-savvy startups disrupting the world of finance – and among them, one of the leaders is I Know First, an Israeli AI-driven stock market predictions company.

I Know First Predictive Algorithm: Future Of Investment Is Here

I Know First has trained a deep learning stock predictions algorithm on a dataset covering 15 years of trading. Its proprietary AI looks at the market from a holistic perspective, looking for trends and patterns in the fresh market data. It models and predicts the price dynamics for more than 10,500 assets, including ETFs, stocks, currency pairs and interest rates. Drawing upon genetic programming, it goes through a learning cycle on every iteration; in other words, it keeps tracks of its own successes and failures and re-configures its models to reflect the current state of the market. This feature allows it to adapt to new situations, making sure it will not be completely dumbfounded by a pattern it had never encountered before.   

The stock predictions algorithm’s output is presented as a heatmap with two indicators – signal and predictability. Signal stands for the overall performance of the asset against others on the forecast, while predictability demonstrates how well the algorithm has been able to predict the stock before. It is calculated as the correlation coefficient between the AI’s predictions and the actual stock price movements, weighted to give the more recent forecasts more power, and ranges from -1 to 1.

With the system picking out the most predictable assets by default, customers are guaranteed to make the most out of all stock predictions get. The forecasts are delivered for a wide variety of time horizons, ranging from 3 to 365 days, to include both the best stocks to short and the optimal options for long-term investment, which gives the customer all the power and intelligence in tailoring the exact course of action to their needs.

The stock predictions AI demonstrates an impressive accuracy rate: a recent trial has seen it demonstrating an accuracy of up to 79% in predicting the dynamics of the S&P500 index. The results for all time horizons stay well above the watershed 50%, meaning that the algorithm mas been able to perform with an impressive consistency. The wide range of stork predictions it delivers makes it easily usable for a wide variety of investment strategies, from sector rotation to investing into a specific industry.