By Gwladys Fouche

ARENDAL, Norway (Reuters) – Companies need to do more to get to grips with AI at board level to govern how it is being used and to minimise risks, a top official at Norway’s $1.7 trillion sovereign wealth fund, one of the world’s largest investors, told Reuters.

Norges Bank Investment Fund holds stakes in close to 9,000 companies globally, equivalent to 1.5% of all listed stocks and has set the pace on many issues in the field of environmental, social and corporate governance (ESG).

Last August, it issued guidance to companies it invests in, calling on them to engage with AI as a way to drive profits, but to do so responsibly.

A year on, companies generally need to do more, said Carine Smith Ihenacho, the fund’s Chief Governance and Compliance Officer.

“Overall, a lot of competence building needs to be done at board level,” she said in an interview this week.

“It doesn’t mean we need one AI person that’s an expert on AI … We need the board to understand, as a group, how AI is being used … have a policy at board level and whether or not it is being used responsibly or not.”

“They should know: ‘what’s our policy on AI? Are we high risk or low risk? Where does AI meet customers? Are we transparent around it?’ It’s a big picture question they should be able to answer,” she added.

She did not name specific companies, but the fund has “shared its view (on AI) with the boards of 60 of the fund’s largest portfolio companies”, it said in a 2023 report on responsible investments.

Last August, the fund said it is focusing on the use of AI in the healthcare sector because the technology will have an especially strong impact on consumers.

The fund is also paying special attention to Big Tech companies since they develop AI-based products.

In those conversations, Smith Ihenacho said the fund is pressing for tech firms to have proper regimes in place to understand the risks posed by AI products.

“What we spend more time on there is on the governance structure,” she said. “Is the board involved? Do you have a proper policy on AI?”

Nine out of the ten biggest equity holdings in the fund are tech companies, including Microsoft, Apple, Amazon and Meta Platforms. These companies helped drive a 12.5% return on the fund’s stock portfolio in the first half of this year.

Overall, some 26% of the fund’s equity investments are in tech – up from 21% at the same time last year – so the sector’s performance has a direct impact on the fund’s overall return.

While the fund does not “want to discourage the use of AI”, companies must develop the technology responsibly, Smith Ihenacho said.

“It is fantastic what AI may be able to do to support innovation, efficiency and productivity … we support that,” she said.