ARENDAL, Norway, Aug 16 (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 ( MSFT ), Apple ( AAPL ),

Amazon ( AMZN ) and Meta Platforms ( META ). 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.