Eduardo Chukr, Finance and M&A Director at V.tal and FGV EAESP Alumnus, and Helena Margem, PhD, share their research into how Artificial intelligence (AI) applications have the potential to bridge the gap between investors’ growing demand for ESG information and the limited availability of detailed and transparent reports

Code Green: How AI is Reshaping Sustainable Finance by Eduardo Chukr Mafra Ney and Helena Rangel Margem. Originally published in Portuguese in GVexecutivo – FGV EAESP, V. 24 N. 1 | 2025. With kind acknowledgements to Juliana Bonomi Santos.

As environmental, social and governance (ESG) factors become central to capital allocation, sustainable finance is reaching a critical turning point. Yet despite growing investor interest, sustainable investing still faces a credibility gap. Inconsistent, incomplete and sometimes misleading ESG data makes decision-making difficult — and trust elusive.

Enter artificial intelligence (AI). From automating financial analysis to detecting greenwashing, AI is emerging as a transformative force in sustainable finance. It bridges the gap between the growing demand for ESG insights and the limited supply of transparent, reliable data.

A Turning Point in ESG Transparency

According to a joint study by Deloitte and Tufts University, 83% of investment managers now incorporate ESG criteria into their decision-making. But nearly two-thirds cite information quality and consistency as a major barrier. ESG remains, in many cases, more a marketing slogan than a material risk factor.

AI can help correct that. With machine learning and natural language processing (NLP), AI can analyze data from a multitude of sources, assess ESG controversies in real time, and uncover inconsistencies in sustainability reporting. Satellite data powered by AI can monitor environmental risks like deforestation or methane emissions. Predictive models can help firms and investors anticipate regulatory shifts, reputational threats, or climate hazards.

And the applications aren’t theoretical. Morgan Stanley, BlackRock, HSBC, and Amazon are already using AI to optimize sustainability portfolios, manage risk exposure, and reduce carbon footprints. AI is not just crunching numbers — it’s redefining how finance interacts with the planet.

Five Ways AI Is Transforming Sustainable Finance

Drawing from recent academic and market research, here are five key domains where AI is unlocking value in ESG finance:

1. Sustainable Financial Management
AI enhances the accuracy of ESG metrics and automates analysis across complex datasets. It helps investors select assets aligned with sustainability goals, reduces operational costs, and increases data transparency — all of which boost efficiency and impact alignment.

2. Green Capital Allocation
AI prioritizes high-impact projects by evaluating environmental outcomes and predicting long-term benefits. Smart algorithms can distinguish truly sustainable initiatives from trendy but ineffective ones, enabling better decisions in green bonds and impact investing.

3. Risk Analysis and Mitigation
Traditional ESG ratings often conflict or lack transparency. AI enables deeper, more consistent risk assessment by integrating satellite data, financial reports, media coverage, and supply chain intelligence. It models climate-related risks and provides early warnings for investors and companies alike.

4. Operational Efficiency and Emission Reduction
By optimizing logistics, inventory management, and energy use, AI improves both business performance and environmental outcomes. It helps organizations identify and address high-emission processes, reducing their carbon footprint while enhancing competitiveness.

5. Combating Greenwashing
Perhaps AI’s most disruptive role lies in accountability. NLP tools can scan reports and social media for vague language or inflated ESG claims. AI exposes discrepancies between stated goals and real-world behavior, increasing market trust and reducing reputational risk.

Risks and Dilemmas of AI in ESG

Despite these benefits, deploying AI in sustainable finance raises complex ethical and governance questions. Key concerns include:

• Algorithmic transparency: Many AI models function as “black boxes,” making it difficult to verify that decisions align with ESG principles.
• Automation vs. human judgment: Delegating decisions to algorithms risks sidelining human oversight in matters that demand ethical reasoning.
• AI’s own ESG impact: Training large AI models consumes significant energy and can entrench social biases if not carefully managed.

These issues demand robust oversight. Companies must invest in AI governance frameworks, conduct regular algorithmic audits, and ensure human supervision remains central — especially in decisions with deep environmental or societal implications.

AI as an Ally, Not a Replacement

AI should not replace human decision-making but rather enhance it. When thoughtfully implemented, it becomes a strategic tool: accelerating climate solutions, improving resource allocation, and boosting financial returns in alignment with sustainability goals.

By enabling faster, smarter, and more accountable finance, AI can help scale the next generation of ESG investments. But to succeed, it must be applied responsibly — with transparency, fairness, and a human-centered approach.

In short, artificial intelligence may be the key to unlocking the full potential of sustainable finance. But we must write the code — the code green — with care.

_______________________________________

Useful links:

• Link up with Eduardo Chukr and Helena Margem on LinkedIn
• Browse and download the FGV EAESP GVexecutivo magazine series
• Read a related article: Responsible finance and accounting
• Discover FGV EAESP and apply for an undergraduate or graduate programme.

Learn more about the Council on Business & Society

The Council on Business & Society (The CoBS), visionary in its conception and purpose, was created in 2011, and is dedicated to promoting responsible leadership and tackling issues at the crossroads of business and society including sustainability, diversity, ethical leadership and the place responsible business has to play in contributing to the common good.  

• Follow the CoBS on LinkedIn
• Download magazines and learning content from the CoBS website downloads page.

Member schools of the Council on Business & Society.

• ESSEC Business School, France, Singapore, Morocco
• FGV-EAESP, Brazil
• School of Management Fudan University, China
• IE Business School, Spain
• Indian Institute of Management Bangalore, India
• Keio Business School, Japan
• Monash Business School, Australia, Malaysia, Indonesia
• Olin Business School, USA
• Smith School of Business, Queen’s University, Canada
• Stellenbosch Business School, South Africa
• Trinity Business School, Trinity College Dublin, Ireland
• Warwick Business School, United Kingdom.