Introduction

As generative AI has grown from a fledgling concept to a force disrupting most industries, its broader implications have come under scrutiny. Public perception of generative AI has also evolved significantly due to its association with various Environmental, Social, and Governance (ESG) factors. In this article, we’ll offer an extensive ESG analysis of generative AI, focusing on how different industries react to it, the ESG risks it potentially fuels, and the ESG positive impact events it has given rise to.

Generative AI: Public Perception Since Launch

Generative AI was initially met with widespread enthusiasm as the next evolutionary step in artificial intelligence. OpenAI's ChatGPT garnered significant attention quickly upon its release in 2022, as it amassed 100 million monthly active users in just two months post-launch. However, as its capabilities have become more powerful and universal, many ESG controversies have emerged, impacting the public sentiment towards the technology. A notable drop in sentiment polarity was observed from October to December of ‘22, going from 0.4 to 0.22. The decline in polarity was attributed to some critical topics, notably the environmental toll of its energy consumption and the ethical difficulties posed by its potential to disseminate false information.

* Polarity, a proprietary metric developed by SESAMm,  ranging from -1 to 1, represents the aggregate of positive and negative sentiment.

Generative AI and its Implications on ESG

In What Industries Is Generative AI Mentioned More Often?

As expected, the IT industry was initially the most mentioned, along with Generative AI. However, as the technology became more widespread, other sectors have garnered more attention among web publications and social media. In particular, the communication and finance sectors are capturing a substantial share of the attention. In particular, data privacy in finance and communications are the main concerns, and fraud for finance is also being widely discussed on the web.

ESG Controversies Fueled by Generative AI

When we looked at ESG controversies and risks in detail, we found that most of the attention and mentions are related to social risks, particularly Human Rights (right to privacy), labor rights, and customer relations (customer privacy). Governance has also gotten its fair share of ESG controversies, primarily focused on anticompetitive practices (copyright infringement). On the environmental side, controversies are concentrated on water consumption (by Gen AI tools) and climate change, specifically energy consumption. However, the number of mentions and controversies has decreased considerably.

Data Breaches: The Focal Point

By far, the lion's share of ESG controversies and mentions gravitate towards social risks, specifically data breaches. From Italy banning Chat GPT in April to Samsung’s alleged data leak in August, controversies around data privacy have been among the most concerning topics surrounding Chat GPT ESG risks. In just five months, mentions of data breaches went from virtually 0% to over 10% of total mentions.

Digging deeper into data breaches at companies, we found that the number of breaches did increase significantly after generative AI tools became available. In particular, we see that the number of internal (employees) vs. external (non-company affiliated) data breaches increased by almost 50% when using generative AI tools from 14% to 21%.

The Silver Lining: ESG Initiatives Generated by Generative AI

Despite all the risks and controversies emerging, generative AI is also an enabler of positive ESG initiatives. Interestingly, on the positive impact side, we see a similar volume of mentions of initiatives on the three ESG dimensions.

Generative AI has shown promise in optimizing energy use, reducing waste, and even modeling and mitigating the impacts of climate change. On the environmental side, we see a rapid increase in mentions related to its applications in efficiency and productivity, asset reliability, operational safety, lower energy consumption, and reduced environmental impact.

The technology also has the potential to revolutionize healthcare by enabling more accurate and early diagnosis, thereby contributing to social well-being. Generative AI could also transform web surfing and make it easier for users to navigate the internet and find or generate information.

Conclusion

As our analysis shows, generative AI is bringing unprecedented capabilities and complex ESG risks and controversies. We expect to see it evolving, with public sentiment shifting and industries grappling with its ESG implications. But we are still in the very early stages of this new trend and will continue monitoring its evolution.

SESAMm’s AI Technology Reveals ESG Insights

Discover unparalleled insights into ESG controversies, risks, and opportunities across industries. Learn more about how SESAMm can help you analyze millions of private and public companies using AI-powered text analysis tools.

In theory, a portfolio with no ESG controversies signals low risk. In practice, experienced analysts treat it as a warning sign. The absence of alerts often reflects not resilience, but limited coverage, fragmented data, or incomplete aggregation. What looks like reassurance may instead point to a gap in visibility.

This dynamic came up repeatedly during our recent webinar, Private Markets in 2026: Macro Trends, ESG Shifts, AI Innovation and What It Means for Deal-Flow. The discussion highlighted how gaps in coverage and aggregation can shape investor perception, particularly when portfolios appear “quiet,” not because risks are absent, but because relevant information is not being captured.

This dynamic matters more than ever as private market due diligence intensifies. With fewer deals, longer holding periods, and higher selectivity, investors are spending more time scrutinizing assets before acquisition and monitoring them for longer after entry. Yet the informational foundation behind many ESG assessments has not caught up with these expectations.

When "No Data" Becomes "No Risk"

Private assets operate under persistent disclosure constraints. Unlike public companies, most private firms do not produce standardized, recurring ESG disclosures, nor do they benefit from consistent analyst coverage. These gaps are structural and unlikely to disappear in the near term.

In this context, silence is ambiguous. A clean ESG screen may indicate the absence of material issues, but it may just as easily signal that no relevant information was captured. Language limitations, fragmented sources, and uneven coverage across geographies and asset types all contribute to this uncertainty.

This dynamic is particularly visible in secondary transactions. Deal teams often need to assess large portfolios under tight time pressure, with limited access to management and incomplete identifiers. In such cases, relying on the absence of signals can create false confidence rather than reduce risk.

How Weak Coverage and Duplicated Signals Create Blind Spots

Even when information exists, it is not always immediately actionable. Adverse media has become a valuable substitute where structured ESG data is limited, offering outside-in visibility into private assets. However, it is not without challenges. Without robust aggregation and cross-language consolidation, the same issue can appear repeatedly across multiple articles, jurisdictions, and languages, creating duplication rather than clarity. At the same time, gaps in coverage or weak filtering can allow other material risks to go undetected.

At the same time, some portfolios appear unusually quiet simply because the underlying assets fall outside the scope of traditional datasets. ESG and reputational expectations in private markets remain fragmented, with bespoke workflows driven by LP-specific requirements. This lack of convergence makes it difficult to distinguish between genuinely low exposure and analytical gaps.

More data does not automatically resolve this problem. Without traceability, source quality, and a way to assess financial, legal, or operational materiality, increased volume can add noise without improving decisions. In that environment, silence can be just as misleading as signal overload.

What Meaningful ESG Visibility Looks Like Under Disclosure Constraints

A core takeaway from the webinar was that point-in-time ESG assessments are no longer fit for purpose in private markets. A single diligence exercise conducted at entry cannot capture emerging governance failures, litigation, reputational issues, or supply chain risks over multi-year holding periods.

Instead, meaningful ESG visibility combines three elements:

• Broad coverage, to avoid portfolios appearing "low risk" simply because assets are not captured.
• Aggregation and severity assessment, to separate isolated news from controversies with real financial or operational implications.
• Continuous monitoring, so the original risk thesis evolves as new information emerges rather than remaining static.

This approach reframes ESG from a compliance exercise into a source of informational advantage. Rather than concluding that no alerts mean no risk, investors use ESG signals to guide follow-up questions, prioritize deeper diligence, and identify issues that were not visible at entry.

Replacing False Comfort with Informed Uncertainty

Private markets will continue to operate with imperfect information. Disclosure gaps, opaque supply chains, and bespoke reporting demands are inherent to the asset class.

Treating “no issues detected” as a conclusion creates false comfort. Treating it as a hypothesis, contingent on coverage quality and monitoring depth, aligns ESG analysis with how risk actually emerges in private assets.

SESAMm’s AI Technology Reveals ESG Insights

Discover unparalleled insights into ESG controversies, risks, and opportunities across industries. Learn more about how SESAMm can help you analyze millions of private and public companies using AI-powered text analysis tools.

Over the past decade, many organizations have improved their carbon footprints, from recyclable and biodegradable packaging and single-use plastic to planting trees and reducing their greenhouse gas emissions. However, some businesses and companies looking to boost their eco-friendly image without committing to serious changes and addressing environmental issues have been associated with false green marketing. We call this "Greenwashing."

What is Greenwashing?

Greenpeace and the Environmental Protection Agency define greenwashing as making false and misleading claims about a product's environmental benefits or practices, services, technology, or company practices. Greenwashing typically involves companies spending more money on advertising and marketing than on implementing sustainable business practices that minimize environmental impact. These false green claims can deceive consumers into believing that a product or company is more environmentally friendly than it is, leading to increased sales and profits. As a result, false advertising, misleading initiatives, and groundless claims have increased green investors' exposure to risks emerging from potential lawsuits from activist groups, image deterioration, and some heavy loss in assets invested.

Why is Spotting Greenwashing Important?

Greenwashing is a growing concern for investors as they look to make sustainable and responsible investments. Therefore, spotting greenwashing practices is important for these firms. Here's why.

The deceptive practices used by greenwashers can have significant implications for the integrity of investments made in what investors believe to be sustainably operated companies or sustainable funds. In other words, greenwashing makes it difficult for investors to distinguish between genuinely committed to sustainability companies and those merely making false claims about their environmental practices. As a result, investors may unknowingly invest in companies that are not as sustainable as they claim to be, which can harm their financial returns and the environment. Therefore, it's essential for investors to be aware of greenwashing tactics and to carefully research companies before investing in them to ensure that their investments align with their values and contribute to a more sustainable future.

What Are the Challenges to Detecting Greenwashing?

It's challenging to produce an accurate assessment of environmental, social, and governance (ESG) factors, which gives companies the opportunity to cover or hide ineffective and fake green initiatives.
According to Regtank, some of the main challenges to detecting greenwashing practices are the following:

• Lack of reporting standards: some investors believe that we haven’t universally agreed upon a set of standards to determine whether a product is ESG compliant.
  
• Lack of transparency: greenwashing companies don’t disclose the specificities of their “green campaigns,” which makes it difficult for investors and consumers to fact-check and evaluate their sustainability claims.
• Limited consumer awareness: false marketing strategies could be based on a combination of the consumer’s eco-consciousness and brand loyalty. As a result, consumers become less aware of the misleading strategies greenwashing companies use to sell their products.

Ultimately, these factors may contribute to the inaccuracy and limitations of ESG data and scores, which makes it easier for greenwashers to get away with their false marketing campaigns. Consequently, detecting greenwashing requires scrutiny of environmental claims made by companies and an understanding of the complex supply chains and manufacturing processes involved in producing products and services.

To learn more about greenwashing and have access to real-life case studies, download this comprehensive report:

How Does Artificial Intelligence Detect Greenwashing?

As greenwashing practices increase, activist investors, experts, journalists, and even the general public are spreading awareness of the issue using social media, news outlets, forums, and blogs, among other means.
Recently, artificial intelligence (AI), particularly natural language processing (NLP), has proven to be effective in the early detection of greenwashing by analyzing vast amounts of qualitative data publicly available on the web. At SESAMm, for example, we apply our NLP capabilities to identify companies likely to engage in greenwashing practices by analyzing text in billions of web-based articles. Our data lake contains over 25 billion web–sourced articles, sourced from four million news, blogs, social media, and forum discussions on five million public and private companies in more than 100 languages. We run these articles through our AI platform tool, TextReveal®, and systematically craft reliable, timely, and comprehensive insights to detect greenwashing, generate ESG alerts, and identify related risks.

The Rise of Greenwashing

Greenwashing, the deceptive practice where companies claim to be more environmentally friendly than they actually are, has become a growing concern in recent years. By analyzing the frequency of web mentions of greenwashing over time, we can observe important trends and understand the factors contributing to this phenomenon.

Recent analyses indicate a significant increase in greenwashing mentions since late 2019. This rise aligns with a growing public awareness of the climate emergency and the increase in media outlets and social media accounts dedicated to exposing greenwashing. The number of mentions escalated from fewer than 200 to over 23,000 in the last quarter of 2023, highlighting the increasing scrutiny of corporate environmental claims.

A noteworthy pattern is the regular occurrence of spikes in greenwashing mentions during the third quarter over the past three years. This timing corresponds with the "pre-COP" periods, leading to critical international climate change management conferences. These periods see heightened discussions around sustainability, with increased attention on companies' environmental practices.

Greenwashing in the Energy Sector

The energy sector, particularly the oil industry, has faced significant scrutiny regarding greenwashing. In this context, companies like Shell and ENI have been prominent due to the frequency of greenwashing mentions associated with them.

For Shell and ENI, the volume of greenwashing mentions has fluctuated, with notable increases in specific quarters. For example, Shell saw spikes in mentions during the second quarter of both 2021 and 2022 while experiencing a drop in the third quarter of 2022. ENI has faced similar fluctuations, often linked to legal actions and publicized environmental issues.

Shell's Greenwashing Mentions, ESG Risks, and Initiatives

Shell, a British multinational and prominent player in this sector, has faced considerable scrutiny for such practices. The company has experienced notable spikes in greenwashing mentions and has been involved in several ESG-related risks.

Greenwashing Mentions

We can see an increase in greenwashing mentions in the first half of 2023. Around that period, Shell faced allegations and lawsuits concerning its environmental claims. The company was criticized for misleading U.S. authorities and investors about its energy transition efforts. Additionally, Shell faced public backlash for labeling fossil gas as 'renewable' while reporting record profits. A notable incident involved a shareholder suing Shell's executives over climate risks.

ESG Risks

Shell has faced several ESG-related risks, including legal challenges and pollution issues. In 2021, the company was sued by New York City over climate change-related advertising and filed an arbitration claim against Nigeria concerning a spill dispute. In March 2023, Shell faced another oil spill, this time in another region in Nigeria,  Rivers State, and also saw institutional investors backing a lawsuit against its board over climate risks. The mid-2023 period saw Shell agreeing to pay $10 million for air pollution violations at a Pennsylvania petrochemical plant. Despite its net-zero pledge, the company announced plans to increase fossil fuel production.

ESG Initiatives

Despite its challenges, Shell has also engaged in various sustainability initiatives. In late 2021, the company announced plans to purchase power from the world's largest offshore wind farm. Mid-2022 saw a leadership change with the company's CEO stepping down as Shell aimed to align with its climate goals. The company also planned to deploy 10,000 EV chargers across India as part of its global strategy. In mid-2023, Shell committed to investing $10–15 billion in developing low-carbon energy solutions. Although the company abandoned its lower oil production target, it maintained its commitment to reducing emissions.

Shell's journey underscores the challenges of aligning environmental claims with real actions, emphasizing the importance of transparency and genuine sustainability efforts.

ENI's Greenwashing Mentions, ESG Risks, and Initiatives

ENI, an Italian multinational oil and gas company, has faced scrutiny for such practices. The company has experienced fluctuations in greenwashing mentions and has been involved in a number of ESG-related risks.

Greenwashing Mentions

ENI's greenwashing mentions are fairly low. However, the company has been featured in discussions about greenwashing, especially with recent developments. In early 2022, the company faced criticism for inconsistencies in emissions data and greenwashing activities, as highlighted by the Sereno Regis Study Center. Greenpeace also criticized ENI for using the Sanremo Music Festival as a platform for greenwashing. In May 2023, ENI faced a lawsuit for allegedly lobbying and greenwashing to promote fossil fuels despite being aware of their environmental risks. Greenpeace sued the company, accusing it of knowingly contributing to climate change.

ESG Risks

Over the past 4 years, the oil giant's ESG risks have been few but not inexistent. ENI has encountered several risks, including legal challenges and pollution issues. In 2022, ENI's environmental strategy was deemed a failure, and concerns arose about a pipeline spill into the East Irish Sea. The company also faced legal actions in 2021, including an appeal against a court ruling in an illegal waste case and warnings from the Legality Network to reduce greenhouse gas emissions or face prosecution.

The company faced a lawsuit in early 2023 for allegedly having prior knowledge of the climate crisis. In another incident, a report found that ENI and Shell were responsible for significant pollution in Bayelsa, requiring a $12 billion cleanup.

ESG Initiatives

Despite facing ESG risks, it is visible that ENI has also pursued various sustainability initiatives. In early 2022, ENI and British Petroleum finalized an agreement to create a new independent joint venture in Angola, which will support the energy needs of Angola's growing economy and its decarbonization path and strengthen its role as a global LNG player. In late 2023, the company received Gold Standard recognition from the United Nations for its commitment to reducing methane emissions. ENI also partnered with Luiss University to launch an international network focused on African energy transition and collaborated with RINA to accelerate maritime decarbonization.
ENI has shown interest in renewable energy, as demonstrated by its wave energy project in Pantelleria and its plans for fusion energy in collaboration with Commonwealth Fusion Systems. The company also focuses on sustainable mobility, developing diesel from 100% renewable materials, and promoting clean energy through partnerships.

Shell and ENI both face the challenge of balancing economic interests with environmental responsibility. Despite allegations of greenwashing and environmental risks, both companies have taken steps towards sustainability, such as investing in low-carbon solutions and renewable energy projects. Their experiences highlight the importance of transparency, genuine commitment to environmental responsibility, and the role of public scrutiny in holding companies accountable.

Greenwashing and ESG Investing

In sum, certain companies advertise their sustainability and green initiatives, while in reality, they are making false claims and practicing greenwashing, as evidenced by our analysis using SESAMm's AI and ESG reports. We use AI through TextReveal to generate alternative data for use cases, such as ESG and SDG, sentiment, private equity due diligence, corporate studies, and more. Our technologies can reliably ensure the credibility of ecological initiatives and serve global investment firms, corporations, and investors, such as private equity firms, hedge funds, and other asset management firms, to enhance their investment strategies.

Conclusion

In conclusion, the issue of greenwashing represents a substantial obstacle in the journey towards genuine environmental sustainability, misleading consumers and investors and diluting the efforts of genuine sustainable enterprises. Nevertheless, the emergence of advanced technologies such as Artificial Intelligence (AI) and Natural Language Processing (NLP) indicated a new era of accountability. Innovators like SESAMm are at the forefront, deploying these technologies to effectively unravel and counteract greenwashing practices. This empowers investors, asset, and portfolio managers to discern and align their resources with legitimately sustainable entities. The call to action is clear: a collective demand for transparency and responsibility is crucial.

Reach out to SESAMm

TextReveal’s web data analysis of over five million public and private companies is essential for keeping tabs on ESG investment risks. To learn more about how you can analyze web data or to request a demo, reach out to one of our representatives.