How AI is helping you invest sustainably
A trading platform that uses artificial intelligence (AI) to help you time when you buy and sell stocks is helping investors go green.
Jaaims allows users to buy and sell stocks using an AI algorithm that combines fundamental financial information with market sentiment, and has now expanded to include environmental, social and governance (ESG) data from research provider Sustainalytics.
The algorithm can analyse a stock in 73 seconds, with real-time data every 15 minutes, and uses more than 250 different data points to generate stock recommendations for users.
Jaaims CEO Tui Eruera says investing is not a matter of listening to the head over the heart.
"We'd like to think that stocks are driven 100% by fundamentals, but they're not," he says.
"There's FOMO [fear of missing out], and emotion in investing.
"We track historic performance of stocks, and the platform is constantly learning about the individual behaviour of the stock to see what has the stock done in the past and how can we use it to predict the future."
This hybrid approach of utilising emotional influence with strong fundamentals can help to produce short term positions that can deliver stronger returns, according to the Jaiims team.
And adding ESG data provides a broader picture and meets customer demand, Eruera says.
"When it comes to the ESG space, we know that climate change factors are really playing in," he says. "Obviously, in Australia, there is a big movement away from coal. You can see that in big institutions and you can see that in super fund members who are speaking to super funds to ask questions like, are you invested in Whitehaven Coal, etc.
"The good thing about the technology is we're picking up on that sentiment change and the volume changes as well."
Jaiims allows users to see an ESG performance summary of the company across three categories - underperformance, average performance and over performance, and can flag key risk industries such as production of palm oil, coal and weapons.
The platform also plans to modify its Smart Portfolio product to allow its 3000-plus users to filter out the stocks that may not meet their ESG goals.
Eruera also pointed to investor questions around governance issues as also influencing stock movements.
"The second one that people are thinking of now are governance - are boards diversified, who is on the board, do boards have policies around lobbying," he says. "That sort of stuff plays into the understanding of companies as well. We also use data on senior executives in companies - we look to understand the makeup of the senior executive teams to see if they are, say, 50/50 female, which obviously the aren't.
"What we learnt is that these factors are starting to play a crucial role on how retail investors are analysing this data, especially the small and mid-cap stocks."
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