Individual

Society

Environment

Markets

Geopolitics

Considerations for Investors

Myriad ethical concerns pervade the sector - from privacy-invasive hardware and biased algorithms to security flaws and addictive interfaces. Consequently, investors can consider measures that proactively address these issues: ethical software design, robust security, accountability, and data governance that centers on privacy and consent. Tackling these challenges will safeguard long-term shareholder value by preserving public trust, securing regulatory licenses, retaining talent, and upholding the moral mandate companies need to sustainably operate, responsibly innovate, and drive future growth.

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Communication Services - Individual

The key individual impacts of concern for investors are:

Privacy: Expanding networks, devices, and the vast collection of user data by telecoms and media companies raise a host of privacy concerns relating to surveillance and security. 

 

Addictive Design: Behavioral and psychological insights can be used to develop features such as auto-play that aim to maximize user engagement but may undermine user agency and mental wellbeing and lead to behavioral issues.

 

Mental health: Excessive screen time and problematic social media usage have been linked to issues like depression, anxiety, loneliness, and body image concerns.

 

Filter Bubbles: Engagement-optimized algorithms can amplify inflammatory misinformation, tighten filter bubbles, and foster polarization without thoughtful oversight and moderation.

Cyberbullying: Social media has enabled new avenues for the harassment, stalking, or humiliation of individuals.

Unless the above are proactively addressed, potential ramifications include:

 

  • Fines and law-suits related to cybersecurity, privacy, and safety issues.
  • Loss of customer trust (and sales) if products are shown to be exploitative or unsafe.

 

An increased compliance burden will likely result if companies don’t undertake self-regulation measures

Communication Services - Society

The key societal impacts of concern for investors are:

 

Decline of truth and trust: The proliferation of misinformation, conspiracy theories, and fake news could erode public trust and undermine social cohesion.

 

Digital divide: Uneven access to affordable broadband or devices and a lack of digital skills excludes many from full participation in an increasingly tech-driven world.

 

Bias and Discrimination: Flawed data and algorithms often disproportionately exclude or harm marginalized groups if unaddressed.

 

Youth Protection: Interconnected devices and services may expose young people to inappropriate, illegal, or harmful content and potential overuse. Adequate safeguarding measures can mitigate these harms.

 

Automated Moderation: Social media and other user-generated content platforms rely on AI for moderation at scale, risking the entrenchment of bias or abuse without oversight. Oversight measures for acceptable content can demonstrate company concern for consumers.

 

Whistleblowing: Increased access to platforms has driven significant increases in leaks and whistleblowing related to negligent practices. This has serious ramifications involving lawsuits and greater regulation.

 

Unless the above are proactively addressed, potential ramifications include:

 

  • Lawsuits, fines, and loss of consumer trust if technologies are shown to violate privacy (including data breaches), enable discrimination, undermine wellbeing.
  • Difficulty attracting and retaining top talent if employees view companies’ technologies as ethically negligent.
  • The cost of capital may increase as more patient, responsible investors steer clear of companies with opaque tech ethics.

 

Revenues from advertisers may decrease due to the reputational damage of being associated with companies seen to be causing societal harm

Communication Services - Environment

The key environmental impacts of concern for investors are:

 

Energy use: Expanding infrastructure, such as 5G networks and data centers, consumes immense amounts of energy. Optimized cooling systems, smart power management, and low-carbon design can help minimize footprint.

 

E-Waste: The short product lifecycles of much hardware lead to significant volumes of electronic waste. Deliberate design choices can limit device lifespan, or manufacturers can impede third-party repair shops, contributing to premature e-waste.

 

Space pollution: The increasing use of satellites to provide expanded broadband access creates potential space debris and ambient light pollution issues. This is likely to become a key area of regulatory focus at the international level in the coming years.

 

Environmental damage: Infrastructure development in the sector has significant environmental implications. Responsible routing, permitting, restoration, and collaboration with environmental groups can prevent impact.

 

Unless the above are proactively addressed, potential ramifications include:  

 

  • Fines and lawsuits for violations of environmental regulations related to issues like network infrastructure.
  • Reputational damage and loss of consumer trust if companies are seen to be “greenwashing” – about practices like recycling e-waste.
  • Difficulty attracting top talent, especially among more sustainability-focused younger workers, if companies cannot demonstrate credible environmental commitments.
  • Loss of access to green financing options or environmentally-focused funds.

Communication Services - Markets

The key market impacts of concern for investors are:

 

Piracy: Widespread illegal media dispersal – via illegal streaming, emulation software, and circumvention of DRM – requires balancing consumer access and creator rights, including for AI training data.

 

Monopoly power: Data and computing power can disadvantage third-parties, enabling anti-competitive impacts absent transparency or regulation.

 

Data Privacy Violations: Expanding user data collection across devices raises consent issues if transparency, security, and controls are inadequate. Selling or exposing aggregated user data compounds privacy risks.

 

Authenticity: Innovative creation tools like synthesized media raise authenticity questions.

 

Transparency: Opaque personal data usage, algorithms, and persuasive design hinder accountability.

 

Unless the above are proactively addressed, potential ramifications include:

 

  • Financial losses as cyber breaches attack advertising platforms, transactions, and customer data.
  • Legal exposure from anti-competitive practices such as acquiring nascent competitors.
  • Reputational damage if technologies spread misinformation or enable predatory offerings, aggravating inequality in the process.

Communication Services - Geopolitics

The key geopolitical impacts of concern for investors are:

 

Surveillance and sabotage: Space-based internet infrastructure could facilitate surveillance by hostile states or create sabotage vulnerabilities.

 

Geopolitical incident:  The proliferation of satellites and rockets makes it more likely to damage another state’s infrastructure, causing a geopolitical incident.

 

Suppression of human rights: Surveillance, censorship, and the shutdowns of networks and services by authoritarian regimes can violate freedom of expression and assembly. It can also impede companies’ ability to operate successfully in a given market and cause reputational damage.

Unless the above are proactively addressed, potential ramifications include:

 

  • Revenue loss and access restrictions if services are used to violate laws or undermine political stability in foreign markets.
  • Regulatory scrutiny and international disapprobation if companies are viewed as excessively bending policies to appease repressive regimes.
  • Cyberattacks by state-sponsored groups if companies inadequately safeguard network infrastructure and data flows from national security risks. Remediation costs may be high.

 

Loss of public trust if companies are seen to be enabling authoritarian regimes