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European Central Bank considers regulating the use of AI in finance

Microsoft’s carbon emissions 30% higher today than in 2020 (due to AI)

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European Central Bank considers regulating the use of AI in finance

Blick von der Osthafenbrücke auf die EZB und die frankfurter Skyline bei Sonnenuntergang View of the ECB and the Frankfurt skyline from the Osthafen Bridge at sunset

European Central Bank (Unsplash).

Though it might be moving a bit more slowly than other industries, parts of the financial industry — in everything from AI platforms to robo advisors — have lately been adopting AI technology.

In a post Wednesday, the European Central Bank acknowledged the growing interest in AI & the ways the tech could improve the financial and banking sectors. But it also noted that a greater integration of AI in the financial sector poses a number of risks (that might call for a dash of regulation).  

The gist: 

  • Misuse of AI models “could have an impact on public trust in financial intermediation, which is a cornerstone of financial stability … The implementation of AI across the financial system needs to be closely monitored as the technology evolves. Additionally, regulatory initiatives may need to be considered if market failures become apparent that cannot be tackled by the current prudential framework.”

The details: 

  • The bank cited known issues of bias, hallucination and explainability, which it said makes LLMs “less robust,” adding that there is a clear potential for “misuse or overreliance.”

  • The bank said that if financial institutions allow AI models to make decisions, it could result in economic losses and “disorderly” market moves. 

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Microsoft’s carbon emissions 30% higher today than in 2020 (due to AI)

Valley of windmills

Image Source: Unsplash

One of the oft-repeated promises of AI is simple: It will help us “solve” climate change. The reality of the past year, however, has been less magical – both training and running AI have proven to demand an exorbitant amount of energy, which has spiked data center emissions and water consumption all in one. 

  • In 2020, Microsoft pledged to be carbon-negative by 2030. 

  • Since then, Microsoft’s emissions have increased by about 30%, according to its recent environmental report

Brad Smith, president of Microsoft, told Bloomberg that the culprit is AI. 

  • “In 2020, we unveiled what we called our carbon moonshot. That was before the explosion in artificial intelligence,” he said. “The moon is five times as far away as it was in 2020.”

Microsoft said in the report that increasing investments in AI will do more for the climate than scaling things back. 

AI researchers I’ve spoken with have said that, although AI can be leveraged to help us combat climate change, that work must be more narrowly focused through small models (which emit less). This current race between Big Tech to outdo itself with genAI-enhanced products isn’t helping the environment by any stretch of the imagination; it’s just hurting.

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