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Does Artificial Intelligence Invariably Enhance ESG Performance?

Author

Listed:
  • Yi WANG

    (School of Economics and Management, Wuchang Shouyi University, Hubei, China. Research Center for Hubei Agricultural Modernization and Rural Development, Hubei, China.)

  • Yiting XU

    (Hunan Academy of Social Sciences, Hunan, China.)

  • Yufei ZHONG

    (School of Economic and Management, Qingdao Preschool Education College, Qingdao, China，266318.)

Abstract

Understanding the intricate roles of artificial intelligence (AI) is crucial for enhancing environmental, social and governance (ESG) performance. For this purpose, this paper adopts a methodology encompassing full and sub sample approaches to delve into the intricate connection between AI and ESG. The empirical results underline that AI has both a facilitative and an inhibitory influence on ESG. The positive aspect indicates that, under certain circumstances, AI can potentially boost ESG performance. However, negative impacts, such as privacy violations, algorithmic bias, energy consumption, job losses, and regulatory risks, counteract this. In addition, when AI is relatively stable, ESG might improve due to policies, investor preferences, corporate awareness, and scrutiny. Thus, AI does not consistently enhance ESG performance. ESG, in turn, has a two-way impact on AI. While it boosts AI by fostering demand for safe, eco-friendly tech, increased ESG scrutiny and trade wars crowd out investment, harming AI funding and market confidence. Amid a new technological revolution, we formulate targeted policy recommendations designed to leverage the beneficial aspects of AI while minimising its detrimental impacts on ESG performance.

Suggested Citation

  • Yi WANG & Yiting XU & Yufei ZHONG, 2025. "Does Artificial Intelligence Invariably Enhance ESG Performance?," Journal for Economic Forecasting, Institute for Economic Forecasting, vol. 0(2), pages 24-40, July.
    • Handle: RePEc:rjr:romjef:v::y:2025:i:2:p:24-40
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    JEL classification:

    • C32 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes; State Space Models
    • O33 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Technological Change: Choices and Consequences; Diffusion Processes
    • Q56 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Environment and Development; Environment and Trade; Sustainability; Environmental Accounts and Accounting; Environmental Equity; Population Growth

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