Cognitive Analytics and Reinforcement Learning

14Automating ESG Score Rating with Reinforcement Learning for Responsible Investment

Mohan Teja G.¹, Logesh Ravi², Malathi Devarajan³ and Subramaniyaswamy V.⁴*

¹School of Electronics Engineering, Vellore Institute of Technology, Chennai, India

²Centre for Advanced Data Science, Vellore Institute of Technology, Chennai, India

³School of Computer Science and Engineering, Vellore Institute of Technology, Chennai, India

⁴School of Computing, SASTRA Deemed University, Thanjavur, India

Abstract

This research presents a pioneering approach to calculating a company’s ESG score rating, encompassing Environment, Social, and Governance criteria—a key method for assessing ESG performance. To achieve this, we integrate reinforcement learning, which enables an autonomous agent to make data-driven decisions and determine ESG scores based on multiple factors, including environmental impact, employee treatment, and governance standards. By employing a rigorous, transparent, and unbiased reinforcement learning procedure, we ensure fairness, prevent sustainability performance, and foster informed decision-making. The primary objective of this study is to foster a sustainable and responsible business environment by promoting consistency and transparency in ESG data and criteria. Our ESG rating model remains closely aligned with relevant news and contextual factors, generating more reliable scores for investors seeking to align their investments with sustainable values. Emphasizing accountability ...