The role of artificial intelligence in promoting sustainable and responsible investments

Abstract

Artificial Intelligence (AI) is reshaping global finance by enabling advanced data driven investment strategies, risk assessment, and portfolio optimization. As sustainable finance becomes central to global economic priorities, AI plays a critical role in evaluating environmental performance, identifying potential green washing, and directing capital toward climate positive and socially responsible projects. This study investigates how AI strengthens decision making in green finance by assessing the technological mechanisms that support sustainable investment judgments, evaluating AI-based ESG assessment and climate risk forecasting models, and exploring the challenges and emerging opportunities associated with AI-driven sustainable investing. A qualitative research approach is adopted, drawing upon academic literature, financial regulatory reports, and real world industry applications. Findings reveal that AI-enabled climate risk models, ESG analytical engines, and predictive algorithms significantly enhance transparency, risk accuracy, and capital allocation for sustainability focused investments. Despite its transformative potential, the study identifies continued challenges related to data inconsistency, regulatory divergence, and ethical constraints, particularly the need for standardized ESG taxonomies and reliable sustainability datasets. The study concludes that AI accelerates sustainable economic growth by improving investor confidence, boosting climate aligned capital flows, and promoting regulatory compliance, while emphasizing the necessity for ethical safeguards, enhanced transparency, and globally harmonized sustainability data standards to ensure responsible and equitable deployment of AI in green finance.