Towards a sustainable and trustworthy recommitment system
vendredi 29 janvier 2021 à 04:00
The University of Luxembourg and the European Investment Bank (EIB) through the STAREBEI programme are working together to encourage private equity partners to invest in innovative and sustainable technologies. The research project “Sustainable and Trustworthy Artificial Intelligence Recommitment System (STAIRS)” will use the capacities of the High Performance Computing (HPC) centre to develop a robust and reliable guidance system.
Rise of environmental, social and governance factors
Environmental, social and governance considerations have significantly modified the private equity market by redesigning the standards of due diligence and adding new objectives on top of financial statements and growth plans. Building private equity portfolios remains a real challenge for limited partners investors with heavy consequences on sustainable investments. This lack of guidance is certainly the main barrier to overcome in order to give confidence to investors and encourage investing in innovative and sustainable technologies. Policy makers have tasked institutional investors such as the European Investment Bank (EIB) to invest in a sustainable future for all. Nevertheless, the different objectives, levels of risk aversion, societal exposure and time-horizons are subject to complex constraints and trade-offs. Under such circumstances, there is a real need to design guidance mechanisms to leverage responsible private equity investments.
Need of guidance and algorithms
Achieving and maintaining high allocation to private equity and keeping allocations at the targeted level through recommitment strategies is a complex task and needs to be balanced against the risk of becoming a defaulting investor. “When looking at recommitments we are quickly faced with a combinatorial explosion of the solution space, rendering explicit enumeration impossible. The multi-objective nature of the recommitment problem creates numerous alternatives that can be difficult to apprehend for investors. For this reason, investors need guidance and decision aid algorithms producing reliable and robust sustainable and trustworthy recommitment strategies. By trustworthy, we mean intelligible rules for investors and domain experts. Using an optimised artificial intelligence-assisted system in normal market conditions, strategies are likely to provide more guidance and flexibility while becoming a testbed for extraordinary market conditions.
“In this project, we propose an innovative approach to generate sustainable and trustworthy recommitment strategies with the aid of AI-based algorithms. Our main attempt is not only to develop an algorithm replacing human strategies but also to design a reliable and robust system guiding dynamically the search of recommitment strategies in order to build portfolios of responsible investments. To support the development and tests, this project will strongly rely on high performance computing (HPC) to deliver the computing power requested by such an AI-based system. The use of HPC hardware-accelerated code will be decisive to push back the frontiers of the achievable while reducing tremendously the time needed to provide satisfying solutions”, explains Dr. Emmanuel Kieffer, research scientist in the HPC group, who conducts the STAIRS project under the supervision of Prof. Pascal Bouvry, expert in computer science and HPC at the University of Luxembourg and Dr. Hakan Lucius, head of corporate responsibility and civil society at the European Investment Bank.
STAREBEI (STAges de REcherche BEI-EIB research internships) is a programme that provides grants to universities in order to finance junior researchers carrying out research projects proposed by the EIB Group under the joint supervision of a university tutor and an EIB co-tutor