IDEAS home Printed from https://ideas.repec.org/p/arx/papers/2403.05541.html
   My bibliography  Save this paper

AI in ESG for Financial Institutions: An Industrial Survey

Author

Listed:
  • Jun Xu

Abstract

The burgeoning integration of Artificial Intelligence (AI) into Environmental, Social, and Governance (ESG) initiatives within the financial sector represents a paradigm shift towards more sus-tainable and equitable financial practices. This paper surveys the industrial landscape to delineate the necessity and impact of AI in bolstering ESG frameworks. With the advent of stringent regulatory requirements and heightened stakeholder awareness, financial institutions (FIs) are increasingly compelled to adopt ESG criteria. AI emerges as a pivotal tool in navigating the complex in-terplay of financial activities and sustainability goals. Our survey categorizes AI applications across three main pillars of ESG, illustrating how AI enhances analytical capabilities, risk assessment, customer engagement, reporting accuracy and more. Further, we delve into the critical con-siderations surrounding the use of data and the development of models, underscoring the importance of data quality, privacy, and model robustness. The paper also addresses the imperative of responsible and sustainable AI, emphasizing the ethical dimensions of AI deployment in ESG-related banking processes. Conclusively, our findings suggest that while AI offers transformative potential for ESG in banking, it also poses significant challenges that necessitate careful consideration. The final part of the paper synthesizes the survey's insights, proposing a forward-looking stance on the adoption of AI in ESG practices. We conclude with recommendations with a reference architecture for future research and development, advocating for a balanced approach that leverages AI's strengths while mitigating its risks within the ESG domain.

Suggested Citation

  • Jun Xu, 2024. "AI in ESG for Financial Institutions: An Industrial Survey," Papers 2403.05541, arXiv.org.
    • Handle: RePEc:arx:papers:2403.05541
    as

    Download full text from publisher

    File URL: http://arxiv.org/pdf/2403.05541
    File Function: Latest version
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. Caroline D. Ditlev-Simonsen, 2022. "A Guide to Sustainable Corporate Responsibility," Springer Books, Springer, number 978-3-030-88203-7, December.
    2. Galaz, Victor & Centeno, Miguel A. & Callahan, Peter W. & Causevic, Amar & Patterson, Thayer & Brass, Irina & Baum, Seth & Farber, Darryl & Fischer, Joern & Garcia, David & McPhearson, Timon & Jimenez, 2021. "Artificial intelligence, systemic risks, and sustainability," Technology in Society, Elsevier, vol. 67(C).
    3. Evgeny Burnaev & Evgeny Mironov & Aleksei Shpilman & Maxim Mironenko & Dmitry Katalevsky, 2023. "Practical AI Cases for Solving ESG Challenges," Sustainability, MDPI, vol. 15(17), pages 1-15, August.
    4. Carmen Isensee & Kai-Michael Griese & Frank Teuteberg, 2021. "Sustainable artificial intelligence: A corporate culture perspective [Sustainable artificial intelligence: Eine unternehmenskulturelle Perspektive]," NachhaltigkeitsManagementForum | Sustainability Management Forum, Springer, vol. 29(3), pages 217-230, December.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Tironi, Martín & Rivera Lisboa, Diego Ignacio, 2023. "Artificial intelligence in the new forms of environmental governance in the Chilean State: Towards an eco-algorithmic governance," Technology in Society, Elsevier, vol. 74(C).
    2. Wilson, Christopher & van der Velden, Maja, 2022. "Sustainable AI: An integrated model to guide public sector decision-making," Technology in Society, Elsevier, vol. 68(C).
    3. Agbodoh-Falschau, Kouassi Raymond & Ravaonorohanta, Bako Harinivo, 2023. "Investigating the influence of governance determinants on reporting cybersecurity incidents to police: Evidence from Canadian organizations’ perspectives," Technology in Society, Elsevier, vol. 74(C).
    4. Wang, Feipeng & Wong, Wing-Keung & Wang, Zheng & Albasher, Gadah & Alsultan, Nouf & Fatemah, Ambreen, 2023. "Emerging pathways to sustainable economic development: An interdisciplinary exploration of resource efficiency, technological innovation, and ecosystem resilience in resource-rich regions," Resources Policy, Elsevier, vol. 85(PA).
    5. Metta, Matteo & Ciliberti, Stefano & Obi, Chinedu & Bartolini, Fabio & Klerkx, Laurens & Brunori, Gianluca, 2022. "An integrated socio-cyber-physical system framework to assess responsible digitalisation in agriculture: A first application with Living Labs in Europe," Agricultural Systems, Elsevier, vol. 203(C).
    6. Teichmann, Fabian & Boticiu, Sonia & Sergi, Bruno S., 2023. "RegTech – Potential benefits and challenges for businesses," Technology in Society, Elsevier, vol. 72(C).
    7. Adekoya, Oluwasegun B. & Oliyide, Johnson A. & Saleem, Owais & Adeoye, Habeeb A., 2022. "Asymmetric connectedness between Google-based investor attention and the fourth industrial revolution assets: The case of FinTech and Robotics & Artificial intelligence stocks," Technology in Society, Elsevier, vol. 68(C).
    8. Franzen, Philipp, 2022. "Einflussanalyse des Dow Jones Sustainability Europe Index auf den Unternehmenswert: Eine Ereignisstudie," Wismar Discussion Papers 02/2022, Hochschule Wismar, Wismar Business School.
    9. Nazari, Mohsen, 2022. "The journey from Corporate Social Responsibility to Corporate Social Innovation: The Whys and the Hows," Technium Business and Management, Technium Science, vol. 2(2), pages 27-39.
    10. Gillian K. Hadfield & Jack Clark, 2023. "Regulatory Markets: The Future of AI Governance," Papers 2304.04914, arXiv.org, revised Apr 2023.
    11. Ayman Batisha, 2023. "A lighthouse to future opportunities for sustainable water provided by intelligent water hackathons in the Arabsphere," Palgrave Communications, Palgrave Macmillan, vol. 10(1), pages 1-13, December.
    12. repec:thr:techub:v:2:y:2022:i:2:p:27-39 is not listed on IDEAS
    13. Avdimetaj, Valona & Loomans, Dirk & Zerres, Thomas, 2022. "Plädoyer für eine stärkere Berücksichtigung des Datenschutzes in der ESG-Dimension," Working Papers for Marketing & Management 67, Offenburg University, Department of Media and Information.
    14. Aurélie Halsband, 2022. "Sustainable AI and Intergenerational Justice," Sustainability, MDPI, vol. 14(7), pages 1-11, March.
    15. Abate, Gashaw T. & Abay, Kibrom A. & Chamberlin, Jordan & Kassim, Yumna & Spielman, David J. & Paul Jr Tabe-Ojong, Martin, 2023. "Digital tools and agricultural market transformation in Africa: Why are they not at scale yet, and what will it take to get there?," Food Policy, Elsevier, vol. 116(C).
    16. Vasiliy Andreevich Laptev & Inna Vladimirovna Ershova & Daria Rinatovna Feyzrakhmanova, 2021. "Medical Applications of Artificial Intelligence (Legal Aspects and Future Prospects)," Laws, MDPI, vol. 11(1), pages 1-18, December.
    17. Khaliq, Abdul & Waqas, Ali & Nisar, Qasim Ali & Haider, Shahbaz & Asghar, Zunaina, 2022. "Application of AI and robotics in hospitality sector: A resource gain and resource loss perspective," Technology in Society, Elsevier, vol. 68(C).
    18. Hoffmann, Christian Hugo, 2022. "Is AI intelligent? An assessment of artificial intelligence, 70 years after Turing," Technology in Society, Elsevier, vol. 68(C).
    19. Zahlan, Ahmed & Ranjan, Ravi Prakash & Hayes, David, 2023. "Artificial intelligence innovation in healthcare: Literature review, exploratory analysis, and future research," Technology in Society, Elsevier, vol. 74(C).
    20. Chih-Hung Hsu & Ru-Yue Yu & An-Yuan Chang & Wan-Ling Liu & An-Ching Sun, 2022. "Applying Integrated QFD-MCDM Approach to Strengthen Supply Chain Agility for Mitigating Sustainable Risks," Mathematics, MDPI, vol. 10(4), pages 1-41, February.
    21. Jingwen Xia, 2022. "A Systematic Review: How Does Organisational Learning Enable ESG Performance (from 2001 to 2021)?," Sustainability, MDPI, vol. 14(24), pages 1-22, December.

    More about this item

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:arx:papers:2403.05541. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: arXiv administrators (email available below). General contact details of provider: http://arxiv.org/ .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.