ESG and the Capital Market: How AI is Changing Sustainable Investing in South Asian Developing Nations

DOI

10.2991/978-94-6463-898-1_11How to use a DOI?

Keywords

ESG; FDI; Macroeconomic factors; AI; GDP

Abstract

The current chapter tries to investigate how the integration of Artificial Intelligence (AI) and the development of financial markets contribute to the growth of Environmental, Social, and Governance (henceforth called ESG) investing in South Asian developing countries. Utilizing an instrumental variable approach for mitigating endogeneity concerns, analysis reveals that AI-driven data infrastructure plays a pivotal role in advancing ESG-focused capital allocation. The adoption of AI technologies; particularly in processing large datasets; significantly enhances sustainability evaluations, enabling more accurate and timely investment decisions. On the other hand, financial market development demonstrates a slight positive correlation with the worldwide activity of ESG investments. While more developed markets provide improved platforms for ESG-related instruments, their impact is not as substantial as AI-based data systems in driving sustainable finance. An important macroeconomic insight from the study is the inverse relationship between inflation and ESG investment levels. Elevated inflation rates appear to undermine investor confidence and divert capital away from long-term sustainable initiatives. Conversely, traditional macroeconomic indicators show no statistically significant effect on ESG investment, implying that economic growth alone is insufficient to propel sustainability objectives. The findings suggest that emerging economies can stimulate ESG investment by embracing AI technologies, enhancing financial market frameworks, and maintaining macroeconomic stability. Policymakers are encouraged to prioritize digital innovation, regulatory reforms, and inflation management to create a conducive environment for sustainable finance.

Copyright

© 2025 The Author(s)

Open Access

Open Access This chapter is licensed under the terms of the Creative Commons Attribution-NonCommercial 4.0 International License (http://creativecommons.org/licenses/by-nc/4.0/), which permits any noncommercial use, sharing, adaptation, distribution and reproduction in any medium or format, as long as you give appropriate credit to the original author(s) and the source, provide a link to the Creative Commons license and indicate if changes were made.

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TY  - CONF
AU  - Diksha Dubey Jaroliya
AU  - Suyog Chachad
AU  - Pavan Mishra
AU  - Neha Shrivastav
PY  - 2025
DA  - 2025/11/18
TI  - ESG and the Capital Market: How AI is Changing Sustainable Investing in South Asian Developing Nations
BT  - Proceedings of the International Conference on Artificial Intelligence in Management for Business and Industrial Growth (AIMBIG 2025)
PB  - Atlantis Press
SP  - 132
EP  - 143
SN  - 2352-5428
UR  - https://doi.org/10.2991/978-94-6463-898-1_11
DO  - 10.2991/978-94-6463-898-1_11
ID  - Jaroliya2025
ER  -