The Integration of Artificial Intelligence (AI) in ESG Investment Evaluation

Abstract

This paper examines how Artificial Intelligence (AI) is reshaping the way ESG (Environmental, Social, and Governance) investments are evaluated, and what that means for investor behaviour. While ESG investing has grown significantly in prominence, the evaluation methods underpinning it have long struggled with inconsistency, subjectivity, and reliance on outdated, static data. AI-driven tools offer a compelling alternative, capable of processing large and varied datasets in ways that manual approaches simply cannot match. Drawing on survey responses from 105 investors and financial industry professionals, we investigated how three dimensions of AI engagement — perceived effectiveness, usage frequency, and familiarity — relate to investor confidence, portfolio allocation decisions, and perceived transparency. Our findings suggest that AI’s effectiveness and investors’ familiarity with it meaningfully strengthen confidence and perceptions of transparency, while the relationship between usage frequency and investment allocation is more complex than initially anticipated.