AI-Powered Sustainable Finance: An Integrative Taxonomy and Framework of AI Applications for Sustainable Investment Decision-Making

Abstract

The integration of Artificial Intelligence into sustainable finance represents a transformative paradigm shift in how Environmental, Social, and Governance factors are analyzed, predicted, and incorporated into investment decisions. This review provides a comprehensive taxonomy of AI approaches applicable to sustainable investment decision-making, categorizing methodologies based on their underlying algorithms and their impact on ESG-related financial processes. The proposed AI Taxonomy includes machine learning paradigms -- including supervised, unsupervised, and reinforcement learning -- as well as natural language processing techniques and optimization algorithms, examining their specific applications in ESG score prediction, controversy detection, portfolio management, and sustainability report analysis. By synthesizing findings from the recent literature, a framework emerges on AI-powered sustainable finance that identifies technological applications to overcome ESG data barriers.