Insights

Artificial Intelligence (AI) from an ESG Perspective

ㅣ Karl Yang, Founder & Executive Director of KoSIF ㅣ

These days, Artificial Intelligence (AI) is king. Having once lingered in laboratories in the hands of a small number of developers, AI has overnight positioned itself at the very core of global corporate management. Across almost every industry—including finance, healthcare, logistics, and manufacturing—AI is now driving decision-making, risk management, and growth strategies.

However, amidst this rapid transformation, there is a question that is frequently overlooked: How should we view AI through the lens of ESG—Environmental, Social, and Governance?

From a sustainability standpoint, AI offers tremendous opportunities. Companies can utilize AI to forecast emissions, monitor labor rights violations within supply chains, and swiftly detect fraudulent activities like voice phishing. If leveraged properly, AI can maximize positive effects across all three domains of ESG. It can play a pivotal role in shrinking carbon footprints, enhancing worker safety, and boosting governance transparency.

Yet, hidden risks lurk on the flip side. Training and operating large-scale AI models consume staggering amounts of electricity and water resources. According to a recent publication by the Goldman Sachs Global Investment Research, while 40% of the power required by data centers can be met with renewable energy, the remaining 60% will have to rely on fossil fuels like natural gas. This is projected to add over 200 million tons of carbon emissions annually by 2030. Another study warns that by 2040, AI could account for up to 15% of global greenhouse gas emissions. In terms of responding to climate change, we may eventually need an international agreement that restricts the construction of data centers on a country-by-country basis.

On the social front, AI carries the potential to displace jobs on a massive scale, while biased algorithms risk replicating discrimination among people and eroding social trust. Regarding governance, we cannot avoid the irresponsibility and opacity that arise when executives surrender their decision-making to untransparent and unethical AI systems.

Above all, resolving ethical issues is of the utmost urgency. The misuse of AI—including bias and discrimination, privacy and data protection breaches, deepfakes, cyberattacks, and the spread of disinformation—poses a direct threat to democracy and social stability. Therefore, international countermeasures to control AI from an ethical standpoint must be established as soon as possible.

Regrettably, current ESG frameworks do not yet sufficiently address these potential risks of AI. The European Union’s AI Act (EU AI Act) is the first regulation to ban dangerous practices like social credit scoring systems. However, it has limitations: its scope of application is restricted, it struggles to keep pace with the velocity of technological change, and it cannot guarantee ethical or voluntary responsibility.

Consequently, companies committed to ESG must go beyond simple regulatory compliance and embed responsible AI utilization into the core of their corporate strategies. To achieve this, they must prioritize energy-efficient models, establish human oversight frameworks to prevent errors, ensure data transparency, and map out concrete, actionable internal AI policies. Simply declaring an AI policy is not enough; it must be practically operated and aligned with human rights and environmental goals.

Moving forward, it is highly probable that ESG disclosure frameworks will incorporate AI as an independent indicator. This reflects just how powerful and continuously expanding AI's influence is. Companies that fail to integrate AI into their ESG strategies will face not only regulatory violation risks but will also fall behind in building trust with investors, consumers, and local communities.

Ultimately, AI by itself is neither a contributor to sustainability nor inherently unethical. The character of AI shifts depending on how we design it, how we utilize it, and how we regulate it. Viewed through the lens of ESG, AI is both a crisis and an opportunity—and it serves as a timely reminder of the age-old principle that technology must serve people and the planet. It is now up to humanity to make the right choice.