Leveraging AI-Driven ESG Risk Management Models to Enhance Social Equity and Governance in Financial Institutions

In an era marked by rapid technological innovation and urgent social responsibility, financial institutions are increasingly called upon to align operational strategies with Environmental, Social, and Governance (ESG) principles. This paper explores how Artificial Intelligence (AI) can transform ESG risk management to enhance social equity and governance practices within the finance sector. We propose a comprehensive framework that leverages advanced AI techniques—including machine learning and generative modelling—to quantify, monitor, and mitigate ESG risks.Our approach integrates ESG scoring systems with robust social equity and governance metrics, enabling institutions to identify and address inequities in their operations and investment portfolios. By simulating risk scenarios and providing data-driven insights, AI tools help organizations adopt adaptive strategies that promote transparency, ethical leadership, and shared value creation for stakeholders. The framework is validated through a case study in a leading financial institution, demonstrating measurable improvements in ESG compliance, fair access to financial resources, and governance standards.The findings underscore the potential of AI-powered ESG risk management models to move beyond compliance, actively shaping a future where financial institutions play a central role in driving social equity and responsible governance. The paper concludes with recommendations for integrating such frameworks into mainstream practices and outlines avenues for future research in sustainable and equitable finance.