AI use in climate, sustainability could unlock US$600 billion in annual value: Temasek, BCG

[SINGAPORE] Deploying artificial intelligence across the climate and sustainability sectors could generate US$600 billion globally in annual value, indicated a report by Temasek and Boston Consulting Group (BCG) published on Tuesday (May 19).

This is on the basis of efficiency gains, cost reductions and new revenue enabled if present-day AI capabilities are deployed at scale across 40 areas – such as water quality monitoring, sustainable logistics and building energy management systems.

The US$600 billion figure “is a directional indicator of the opportunity’s magnitude, not a forecast of realised returns”, the organisations said in the report, which was released at the annual Ecosperity Week conference.

AI deployment can also improve asset utilisation by extending equipment life and deferring capital expenditure. It can also cut expenses in areas such as maintenance, as well as generate new revenue streams, the report noted.

It added: “Examples include asset-level climate risk scores that enable new insurance products, grid orchestration platforms that turn distributed batteries into tradable capacity, and adaptive learning systems that reach students conventional instruction cannot serve.”

The report highlighted five areas where AI could unlock a collective US$423 billion in annual value: industrial systems and equipment efficiency; climate risk modelling; grid, storage and system flexibility management; inclusive education; and materials discovery.

Some US$300 billion could be unlocked in the area of industrial systems and equipment efficiency, which is one of the largest contributors of carbon emissions, noted Temasek managing director for sustainability Franziska Zimmermann.

AI has tangible use cases in this area: for instance, AI-driven process optimisation can reduce total emissions in cement manufacturing by 10 per cent.

“This goes hand in hand with lowering fuel consumption and... operating costs,” she said during a presentation at the Ecosperity conference on Tuesday.

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Daniel Oehling, a managing director at BCG, highlighted that AI was “changing the economics of materials discovery” by predicting material properties before synthesis and reducing the number of field experiments.

The commercialisation of new materials could benefit green sectors such as batteries and carbon capture, accelerating the climate transition, he added.

Temasek and BCG said that AI is expanding what counts as climate and sustainability investing by making environmental and social performance “both measurable and improvable”.

“Sectors not historically viewed through a climate or sustainability lens – such as industrial process control, catastrophe risk pricing and grid congestion management – are becoming central to the landscape,” they noted in the report.

That said, they called for a “clear-eyed view” of AI’s resource demands, acknowledging that “communities in several regions have raised legitimate concerns about rising utilities bills and emissions”.

“The relevant question, however, is whether the systems that could be optimised by AI would consume fewer resources in aggregate than they currently do.”

This question should be evaluated on a sector-by-sector basis and reviewed over time, they added.