Paul Nixon, Head of Behavioural Finance at Momentum Investments
On a recent trip to Los Angeles, where I presented the work that Momentum Investments is doing in using machine learning to predict investor behaviour, an interesting research paper presented some fascinating findings.
Using a novel dataset from ‘Ant Forest’, a green fintech app in Alipay (a subsidiary of Alibaba accounting for about half of China’s non-bank online payment market), the study explored how gamified social interactions influenced users’ green investment decisions and to allocate money to environmental, social and governance (ESG) mutual funds.
Ant Forest allows users to earn “green energy points” by engaging in low-carbon daily activities. The possibilities to earn green points are extensive, spanning six categories and over 50 sub-categories. What is mind-boggling is the ability of the Chinese technology infrastructure to measure and track these activities accurately. Artificial intelligence (AI) flourishes when paired with big data and the Chinese technology infrastructure is very capable. The ‘smart cities’ our president spoke of in his 2023 address to the nation as a dream are ubiquitous in China where your movement, spending behaviour, and choices are easily tracked, making studies like this almost eerily simple.
In reality, many of us in South Africa remain blissfully unaware of the environmental impact of our choices – not so much in China. I listed the six categories on Ant Forest with a few of the trackable subcategory examples. The quantity of green points, measured in grams, is equivalent to the corresponding reduction in carbon emissions achieved through each activity. The calculation formula used by Ant Forest is a scientifically certified algorithm provided by the Beijing Environmental Exchange.
1. Green travel: Walking gives the biggest reduction in carbon footprint and is capped at 18 000 daily steps. Using an electric taxi produces half the carbon footprint of a bus (164g as opposed to 80g). You even get points for using an electronic boarding pass.
2. Reduced travel: Driving a vehicle with an internal combustion engine, which most of us in South Africa still do if we are lucky enough to have a car, produces staggering carbon emissions, measured in kilograms and not grams. Driving an electric car produces a fraction of this at around 250g (of course depending on whether coal is still used to charge the vehicle).
3. Recycling: The recycling of everything from laptops to coffee pods is measured and quantified. Interestingly, you are also rewarded for using a library (borrowing books instead of buying them) and using your own shopping bags.
4. Reduced paper and plastic use: Choosing no cutlery (using your own at home) with takeout meals will reduce your footprint by 16g. Using e-signing, QR codes to buy tickets, online purchases and even watching your favourite sports team at a green stadium will earn points (these stadiums don’t use or allow polystyrene cups, paper tickets and so on).
5. Energy: This one measures the amount of time you spend idling at toll booths. In China, traffic jams occur on a monumental scale, leaving commuters stuck for hours on end.
6. Conservation: Finally, you are rewarded for sharing battery chargers (the ratio of chargers to people in a household), using green appliances, and the proportion of food you discard (reducing food waste).
Users can then use their points to plant trees or protect ecologically damaged areas.
Finally, through a second-stage regression analysis, the authors then present evidence that this greater green consciousness results in a 5.63% uplift in the proportion of ESG funds used in these investor’s portfolios.
Overall, this is a wonderful demonstration of what is possible in driving behavioural change through gamification when accurate and timely feedback is provided. While the debate still rages around the effects of AI on lives and livelihoods, there is evidence here that AI is already helping us to understand the effective use of behavioural science techniques (like gamification) in changing our behaviour for the better.
ENDS
