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Development finance facilities: Prospects for APAC
Sponsors and project developers across the renewables and energy transition space are currently facing a challenging macroeconomic environment.
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Canada | Publication | December 11, 2023
The Ontario Securities Commission (OSC) and Ernst & Young LLP recently released a report (the Report) exploring the use of artificial intelligence (AI) in Ontario’s capital markets. AI generally refers to technology that can generate output such as decisions, recommendations or predictions for a given set of objectives. Key findings of the Report are summarized below.
According to the Report, AI is used by capital market participants to enhance existing products and services rather than create new ones, whereby it serves three overarching purposes: efficiency improvement, revenue generation and risk management.
Efficiency Improvement
The Report finds that the most widespread adoption of AI in Ontario’s capital markets is for improving the efficiency of operational processes. Notable examples include:
Revenue Generation
The Report finds that capital market participants are also adopting AI to generate higher revenue, including in the following areas:
Risk Management
The Report also finds that capital market participants are adopting AI to enhance a broad range of risk management strategies, including:
Despite the many benefits of AI, the Report notes that major barriers remain for its adoption in capital markets. Consistent with the experience of AI users across all the economic sectors, market participants primarily face issues pertaining to the development or procurement of AI systems, including:
As the use of AI is widespread in certain areas (such as customer support) and more limited in others (such as hedging) it is generally described as being at an intermediate stage of adoption in Ontario’s capital markets. Significant and widespread advances are still to follow in the coming years.
However, as the popularity of AI tools in the capital markets grows, the risks and challenges associated with their deployment also grow and will invariably require careful monitoring and oversight by securities regulators and others.
In its concluding remarks, the OSC commits to continue studying AI’s current and future applications, value drivers and challenges, with the objective of understanding how to best support responsible innovation and practice.
The author would like to thank Maggie Shi, articling student, for her contribution to preparing this legal update.
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