Sweet Spots or Dark Corners? An environmental sustainability examination of Big Data and AI in ESG

Big Data Analytics, AI, ML for Environmental, Social and Governance (ESG) Control, Performance and Risk Management, in Handbook of Big Data and Analytics in Accounting and Auditing. Editors: Dr Tarek Rana, Professor Alan Lowe, Dr Jan Svanberg

22 Pages Posted: 24 Mar 2022

See all articles by Beatrice Crona

Beatrice Crona

Stockholm Resilience Centre; Global Economic Dynamics and the Biosphere Program

Date Written: September 17, 2021

Abstract

This chapter examines environmental aspects of ESG and risks and opportunities for using big data and AI to capture these in ESG ratings. It starts by outlining the difference between relative and absolute sustainability and what this means for delivering on globally agreed upon targets, such as the Sustainable Development Goals. We then look at what the state-of-the-art climate and Earth System science has to offer investors interested in absolute environmental sustainability. Next we discuss the risks associated with a blurring of concepts relating to sustainability and materiality, and examine and contrast conventional ESG rating procedures with new approaches informed by big data (BD) and artificial intelligence (AI) to understand what this new generation of tools can offer investors interested in sustainability. We note a current misalignment between stated ambitions of investors, and the ability to deliver on stated goals through the use of current ESG metrics and ratings. We therefore finish with suggestions for how to better align these and how those interested in ESG can become more ‘sustainability savvy’ consumers of such ratings. 

Keywords: environmental, ESG, risks, challenges, big data, machine learning, opportunities, absolute sustainability, environmental controversies

JEL Classification: Q01; G00

Suggested Citation

Crona, Beatrice, Sweet Spots or Dark Corners? An environmental sustainability examination of Big Data and AI in ESG (September 17, 2021). Big Data Analytics, AI, ML for Environmental, Social and Governance (ESG) Control, Performance and Risk Management, in Handbook of Big Data and Analytics in Accounting and Auditing. Editors: Dr Tarek Rana, Professor Alan Lowe, Dr Jan Svanberg, Available at SSRN: https://ssrn.com/abstract=4037299 or http://dx.doi.org/10.2139/ssrn.4037299

Beatrice Crona (Contact Author)

Stockholm Resilience Centre ( email )

Kräftriket 2B
Stockholm, SE-114 19
Sweden

Global Economic Dynamics and the Biosphere Program ( email )

Sweden

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