Digital Transformation of Sustainable Finance: A Review of FinTech Applications in ESG Scoring, Climate Risk, and Green Bonds

Fahad Ullah Khan; Asad Amin

doi:10.55524/ijircst.2026.14.1.18

Abstract

Sustainable finance is booming globally. Investors, governments and institutions are now demanding environmentally responsible, socially responsible, and good governance financial systems. These goals are generally quantified using environmental, social and governance (ESG) indicators. However, traditional finance systems can have issues like poor quality of data, lack of transparency and slow reporting and lack of trust in ESG scores. These issues are causing it to be difficult to measure sustainability in a reliable way. Financial technology (FinTech) is revolutionizing sustainable finance. New digital tools like artificial intelligence (AI), machine learning, big data and blockchain are now being used to collect, process and analyse ESG and climate related information. These tools are used to help investors and policymakers to make better and faster decisions. This review paper provides an overview of recent research on how FinTech can contribute to sustainable finance. It is focused on three main areas; ESG scoring and measurement AI-based climate risk assessment and digital platforms for green bonds and other sustainable debt instruments. The study is based on integrative approach of narrative review with a clear and transparent search process of the literature. Academic articles and important institutional reports that were published in the recent years are reviewed. The findings reveal that FinTech contributes to more efficiency, better data coverage and accessibility to sustainability information. At the same time, important challenges remain such as biased algorithms, unclear AI models, weak regulation and the risk of greenwashing. This review highlights these issues and suggests directions for future research to improve trust, transparency and ethical use of digital technologies in sustainable finance.

Keywords

Sustainable Finance; FinTech; ESG Scoring; Climate Risk; Green Bonds; Artificial Intelligence; Digital Finance

References

Dev, D., G. D. Sharma, M. Gupta, and A. K. Tiwari, “Sustainable finance in action: A comprehensive framework for policy and practice integration,” International Review of Economics & Finance, vol. 103, pp. 104511–104511, 2025. Available from: https://doi.org/10.1016/j.iref.2025.104511
Christine, A. F., D. F. Hakam, Y. A. Nainggolan, S. K. Wiryono, and L. I. Hakam, “Environmental, social, and governance (ESG) impact on corporate financial strategy of energy and utilities companies worldwide,” Energy Strategy Reviews, vol. 62, p. 101916, 2025. Available from: https://doi.org/10.1016/j.esr.2025.101916
Wang, M., and H. Njangang, “The unexpected outcomes: How does climate finance affect corruption in developing countries?” Journal of Environmental Management, vol. 389, p. 126065, 2025. Available from: https://doi.org/10.1016/j.jenvman.2025.126065
Zheng, M., L. Wu, G.-F. Feng, and C.-P. Chang, “The impact of green finance on sustainable development: An investigation into national ESG performance,” Journal of Applied Economics, vol. 28, no. 1, 2025. Available from: https://doi.org/10.1080/15140326.2025.2528672
Migliorelli, M., “Climate change, environmental sustainability, and financial risks: Are we close to an understanding?” Current Opinion in Environmental Sustainability, vol. 65, pp. 101388–101388, 2023. Available from: https://doi.org/10.1016/j.cosust.2023.101388
Lee, J.-Y., “Economic inequality, social determinants of health, and the right to social security,” Health and Human Rights, vol. 25, no. 2, p. 155, 2023. Available from: https://pmc.ncbi.nlm.nih.gov/articles/PMC10733760/
Hussain, I., S. Zhonggen, J. Aman, and S. Alam, “Impact of environmental, social, and governance risks and mitigation strategies of innovation and sustainable practices of host country on project performance of CPEC,” Sustainability, vol. 17, no. 15, pp. 6861–6861, 2025. Available from: https://doi.org/10.3390/su17156861
Moses, V., A. Narula, N. Chetan, C. Vidya, M. Sarode, and P. L. Muralidhara, “International agreements and government initiatives on policy regulatory frameworks for clean energy,” in Biotechnology Innovations for a Sustainable Future, pp. 2323–2344, 2026. Available from: https://doi.org/10.1007/978-981-97-9859-9_113
Chau, L., L. Anh, and V. Duc, “Valuing ESG: How financial markets respond to corporate sustainability,” International Business Review, vol. 34, no. 3, p. 102418, 2025. Available from: https://doi.org/10.1016/j.ibusrev.2025.102418
Ali, N. B. M., H. A. A. Ali Hussin, H. M. F. Mohammed, K. A. A. H. Mohmmed, A. A. S. Almutiri, and M. A. Ali, “The effect of environmental, social, and governance (ESG) disclosure on the profitability of Saudi-listed firms: Insights from Saudi Vision 2030,” Sustainability, vol. 17, no. 7, p. 2977, 2025. Available from: https://doi.org/10.3390/su17072977
Herman, A., Ž. J. Oplotnik, and T. Jagri?, “The impact of ESG on business performance: An empirical analysis of NASDAQ–NYSE-listed companies,” Sustainability, vol. 17, no. 21, pp. 9683–9683, 2025. Available from: https://doi.org/10.3390/su17219683
Ahmad, F., A. Boumaiza, A. Sanfilippo, and L. Al-Fagih, “A comprehensive review on green finance and its impact on net zero energy transition: From the perspective of renewable energy development,” Energy Strategy Reviews, vol. 62, p. 101948, 2025. Available from: https://doi.org/10.1016/j.esr.2025.101948
UNFCCC, “The Paris Agreement,” United Nations Climate Change, 2025. Available from: https://unfccc.int/process-and-meetings/the-paris-agreement
UNDP, “Sustainable development goals,” United Nations Development Programme; United Nations, 2025. Available from: https://www.undp.org/sustainable-development-goals
McCahery, J. A., P. C. Pudschedl, and M. Steindl, “Institutional investors, alternative asset managers, and ESG preferences,” European Business Organization Law Review, vol. 23, no. 4, pp. 821–868, 2022. Available from: https://doi.org/10.1007/s40804-022-00264-0
D’Orazio, P., “Climate risks and financial stability: Evidence on the effectiveness of climate-related financial policies,” International Review of Financial Analysis, vol. 105, p. 104304, 2025. Available from: https://doi.org/10.1016/j.irfa.2025.104304
Bao, X., M. Sadiq, W. Tye, and J. Zhang, “The impact of environmental, social, and governance (ESG) rating disparities on corporate risk: The mediating role of financing constraints,” Journal of Environmental Management, vol. 371, no. 1, p. 123113, 2024. Available from: https://doi.org/10.1016/j.jenvman.2024.123113
Liu, R., D. Wang, S. Zheng, and N. Cai, “The retrospective and predictive effectiveness of ESG ratings: Evidence from China,” Sustainability, vol. 17, no. 11, pp. 4819–4819, 2025. Available from: https://doi.org/10.3390/su17114819
Sneideriene, A., and R. Legenzova, “Greenwashing prevention in environmental, social, and governance (ESG) disclosures: A bibliometric analysis,” Research in International Business and Finance, vol. 74, p. 102720, 2025. Available from: https://doi.org/10.1016/j.ribaf.2024.102720
Shi, Y., and T. Yao, “ESG rating divergence: Existence, driving factors, and impact effects,” Sustainability, vol. 17, no. 10, p. 4717, 2025. Available from: https://doi.org/10.3390/su17104717
Galeone, G., S. Ranaldo, and A. Fusco, “ESG and FinTech: Are they connected?” Research in International Business and Finance, vol. 69, pp. 102225–102225, 2024. Available from: https://doi.org/10.1016/j.ribaf.2024.102225
Polireddi, N. S. A., “An effective role of artificial intelligence and machine learning in banking sector,” Measurement: Sensors, vol. 33, pp. 101135–101135, 2024. Available from: https://doi.org/10.1016/j.measen.2024.101135
Haleem, A., M. Javaid, M. A. Qadri, R. P. Singh, and R. Suman, “Artificial intelligence (AI) applications for marketing: A literature-based study,” International Journal of Intelligent Networks, vol. 3, no. 3, pp. 119–132, 2022. Available from: https://doi.org/10.1016/j.ijin.2022.08.005
Liu, Y., J. Song, B. Zhou, and J. Liu, “Artificial intelligence applications and corporate ESG performance,” International Review of Economics & Finance, vol. 104, p. 104559, 2025. Available from: https://doi.org/10.1016/j.iref.2025.104559
Aydogmus, M., G. Gulay, and K. Ergun, “Impact of ESG performance on firm value and profitability,” Borsa Istanbul Review, vol. 22, no. 2, pp. S119–S127, 2022. Available from: https://doi.org/10.1016/j.bir.2022.11.006
Liu, Y., J. Osterrieder, B. H. Misheva, N. Koenigstein, and L. J. Baals, “Navigating the environmental, social, and governance (ESG) landscape: Constructing a robust and reliable scoring engine,” Open Research Europe, vol. 3, pp. 119–119, 2023. Available from: https://doi.org/10.12688/openreseurope.16278.1
Offiong, U. P., K. Szopik-Depczy?ska, K. Cheba, and G. Ioppolo, “FinTech as a digital innovation in microfinance companies – systematic literature review,” European Journal of Innovation Management, vol. 27, no. 9, pp. 562–581, 2024. Available from: https://doi.org/10.1108/ejim-04-2024-0462
Li, Y., L. Zheng, C. Xie, and G. Sun, “Big data development and enterprise ESG performance: Empirical evidence from China,” International Review of Economics & Finance, vol. 93, 2024. Available from: https://doi.org/10.1016/j.iref.2024.05.027
Lee, H., S. H. Lee, H. Park, J. H. Kim, and H. S. Jung, “ESG2PreEM: Automated ESG grade assessment framework using pre-trained ensemble models,” Heliyon, vol. 10, no. 4, p. e26404, 2024. Available from: https://doi.org/10.1016/j.heliyon.2024.e26404
Gómez, C., and B. Garbinato, “Blockchain technology to improve traceability in the coffee supply chain: A systematic literature review,” International Journal of Information Management Data Insights, vol. 5, no. 2, p. 100359, 2025. Available from: https://doi.org/10.1016/j.jjimei.2025.100359
Gong, X., X. Tao, M. Zhang, Y. Xu, H. H. L. Kwok, J. Dai, and J. C. P. Cheng, “Secure environmental, social, and governance (ESG) data management for construction projects using blockchain,” Sustainable Cities and Society, vol. 114, pp. 105582–105582, 2024. Available from: https://doi.org/10.1016/j.scs.2024.105582
Bhatt, G. D., and A. Emdad, “Blockchain’s role in environmental sustainability: Bibliometric insights from Scopus,” Green Technologies and Sustainability, vol. 3, no. 4, p. 100236, 2025. Available from: https://doi.org/10.1016/j.grets.2025.100236
Tronstad, J., “The role of FinTech in sustainable finance and ESG investing,” S&P Global Market Intelligence, 2025. Available from: https://doi.org/10.2139/ssrn.5182517
Yu, X., L. Fan, and Y. Yu, “Artificial intelligence and corporate ESG performance: A mechanism analysis based on corporate efficiency and external environment,” Sustainability, vol. 17, no. 9, p. 3819, 2025. Available from: https://doi.org/10.3390/su17093819
Li, J., and Y. Zhang, “Does ESG rating divergence affect the disclosure behavior of key audit matters?” International Review of Economics & Finance, vol. 103, p. 104591, 2025. Available from: https://doi.org/10.1016/j.iref.2025.104591
Alotaibi, E. M., and A. M. Alwathnani, “AI-enabled ESG compliance audit for stakeholders,” Sustainability, vol. 17, no. 21, pp. 9513–9513, 2025. Available from: https://doi.org/10.3390/su17219513
Ángel, L., A. van Klyton, A. Rojas, and J. Muñoz, “Climate risk and its impact on the cost of capital—A systematic literature review,” Sustainability, vol. 16, no. 23, pp. 10727–10727, 2024. Available from: https://doi.org/10.3390/su162310727
Vogl, M., M. Koji?, and S. Schlüter, “Decrypting the triad of climate policies, macroeconomic interdependencies and quantitative modelling: A literature review on quantifying climate risks,” Regional Science Policy & Practice, vol. 17, no. 11, p. 100229, 2025. Available from: https://doi.org/10.1016/j.rspp.2025.100229
Olawade, D. B., O. Z. Wada, A. O. Ige, B. I. Egbewole, A. Olojo, and B. I. Oladapo, “Artificial intelligence in environmental monitoring: Advancements, challenges, and future directions,” Hygiene and Environmental Health Advances, vol. 12, pp. 100114–100114, 2024. Available from: https://doi.org/10.1016/j.heha.2024.100114
Pimenow, S., O. Pimenowa, P. Prus, and A. Niklas, “The impact of artificial intelligence on the sustainability of regional ecosystems: Current challenges and future prospects,” Sustainability, vol. 17, no. 11, p. 4795, 2025. Available from: https://doi.org/10.3390/su17114795
Zhou, Q., J. Ni, and C. Yang, “Climate transition risk and industry returns: The impact of green innovation and carbon market uncertainty,” Technological Forecasting and Social Change, vol. 214, p. 124056, 2025. Available from: https://doi.org/10.1016/j.techfore.2025.124056
Wu, Q., and P. Zhou, “How does artificial intelligence change carbon emission intensity? A firm lifecycle perspective,” Applied Economics, pp. 1–18, 2025. Available from: https://doi.org/10.1080/00036846.2025.2482927
Weber, O., “Climate stress testing in the financial industry,” Current Opinion in Environmental Sustainability, vol. 66, pp. 101401–101401, 2024. Available from: https://doi.org/10.1016/j.cosust.2023.101401
Huang, L., Q. Duan, Y. Liu, Y. Wu, Z. Li, Z. Guo, M. Liu, X. Lu, P. Wang, F. Liu, F. Ren, C. Li, J. Wang, Y. Huang, B. Yan, M.-A. Kioumourtzoglou, and P. L. Kinney, “Artificial intelligence: A key fulcrum for addressing complex environmental health issues,” Environment International, 2025. Available from: https://doi.org/10.1016/j.envint.2025.109389
Saarela, M., and V. Podgorelec, “Recent applications of explainable AI (XAI): A systematic literature review,” Applied Sciences, vol. 14, no. 19, pp. 8884–8884, 2024. Available from: https://doi.org/10.3390/app14198884
Ahn, D., A. Almaatouq, M. Gulabani, and K. Hosanagar, “Will we trust what we don’t understand? Impact of model interpretability and outcome feedback on trust in AI,” arXiv, Nov. 15, 2021. Available from: https://doi.org/10.48550/arXiv.2111.08222
Vitor, P., B. Belchior, N. C. Chaves, R. M. Chaves, C. E. Barbosa, and Jano, “The future of AI in government services and global risks: Insights from design fictions,” European Journal of Futures Research, vol. 13, no. 1, 2025. Available from: https://doi.org/10.1186/s40309-025-00253-9
European Environment Agency, “Green bonds,” Apr. 28, 2023. Available from: https://www.eea.europa.eu/en/analysis/indicators/green-bonds-8th-eap
Bajra, U. Q., and N. Wagner, “Analyzing the impact of eco-friendly bond on economic growth and environmental sustainability,” Borsa Istanbul Review, vol. 24, no. 4, 2024. Available from: https://doi.org/10.1016/j.bir.2024.04.003
Khan, M. A., and S. Vismara, “Green bond issuance and corporate environmental and financial performance: A meta-analysis,” International Review of Economics & Finance, vol. 102, p. 104313, 2025. Available from: https://doi.org/10.1016/j.iref.2025.104313
Narong Kiettikunwong and W. Sangsarapun, “G-token implications and risks for the financial system under state-issued digital instruments in Thailand,” Journal of Risk and Financial Management, vol. 18, no. 10, pp. 555–555, 2025. Available from: https://doi.org/10.3390/jrfm18100555
Layosa, J., “Reassessing blockchain in global development: Tokenization of infrastructure, social impacts, and the Axie Infinity case in the Philippines,” Social Sciences & Humanities Open, vol. 13, pp. 102340–102340, 2025. Available from: https://doi.org/10.1016/j.ssaho.2025.102340
Tanveer, U., S. Ishaq, and T. G. Hoang, “Tokenized assets in a decentralized economy: Balancing efficiency, value, and risks,” International Journal of Production Economics, vol. 282, p. 109554, 2025. Available from: https://doi.org/10.1016/j.ijpe.2025.109554
Agi, M. A. N., and A. K. Jha, “Blockchain technology for supply chain management: An integrated theoretical perspective of organizational adoption,” International Journal of Production Economics, vol. 247, p. 108458, 2022. Available from: https://www.sciencedirect.com/science/article/pii/S0925527322000570
Wu, D., and X. Zuo, “Curbing financial greenwashing: Policy tools, legal mechanisms, and corporate responsibility for sustainable development,” International Review of Economics & Finance, vol. 103, p. 104480, 2025. Available from: https://doi.org/10.1016/j.iref.2025.104480
Schilke, O., and M. Reimann, “The transparency dilemma: How AI disclosure erodes trust,” Organizational Behavior and Human Decision Processes, vol. 188, p. 104405, 2025. Available from: https://doi.org/10.1016/j.obhdp.2025.104405
Tayan, B., D. Larcker, E. Watts, and L. Pomorski, “ESG ratings: A compass without direction,” The Harvard Law School Forum on Corporate Governance, Aug. 24, 2022. Available from: https://corpgov.law.harvard.edu/2022/08/24/esg-ratings-a-compass-without-direction/
Dhar, B. K., M. M. Roshid, S. Dissanayake, U. Chawla, and M. Faheem, “Leveraging FinTech and GreenTech for long-term sustainability in South Asia: Strategic pathways toward Agenda 2050,” Green Technologies and Sustainability, vol. 4, no. 1, p. 100263, 2025. Available from: https://doi.org/10.1016/j.grets.2025.100263
Ferilli, G. B., Y. Altunbas, V. Stefanelli, E. Palmieri, and V. Boscia, “Fintech governance and performance: Implications for banking and financial stability,” Research in International Business and Finance, vol. 70, pp. 102349–102349, 2024. Available from: https://doi.org/10.1016/j.ribaf.2024.102349
Kokina, J., S. Blanchette, T. H. Davenport, and D. Pachamanova, “Challenges and opportunities for artificial intelligence in auditing: Evidence from the field,” International Journal of Accounting Information Systems, vol. 56, no. 1, p. 100734, 2025. Available from: https://doi.org/10.1016/j.accinf.2025.100734
Hassija, V., V. Chamola, A. Mahapatra, A. Singal, D. Goel, K. Huang, S. Scardapane, I. Spinelli, M. Mahmud, and A. Hussain, “Interpreting black-box models: A review on explainable artificial intelligence,” Cognitive Computation, vol. 16, no. 1, pp. 45–74, 2023. Available from: https://doi.org/10.1007/s12559-023-10179-8
Hassan, R., N. Nguyen, S. R. Finserås, L. Adde, I. Strümke, and R. Støen, “Unlocking the black box: Enhancing human-AI collaboration in high-stakes healthcare scenarios through explainable AI,” Technological Forecasting and Social Change, vol. 219, p. 124265, 2025. Available from: https://doi.org/10.1016/j.techfore.2025.124265
Khan, H. H., S. Khan, and A. Ghafoor, “Fintech adoption, the regulatory environment and bank stability: An empirical investigation from GCC economies,” Borsa Istanbul Review, vol. 23, no. 6, 2023. Available from: https://doi.org/10.1016/j.bir.2023.10.010
Tumpa, R. J., L. M. Naeni, F. Afzal, and A. N. Ghanbaripour, “Leveraging digital technology to improve environmental, social, and governance performance of infrastructure projects,” Management Decision, vol. 63, no. 13, pp. 455–496, 2025. Available from: https://doi.org/10.1108/md-04-2024-0818
Laviola, F., and N. Cucari, “From promise to concern: Public perceptions of AI in ESG frameworks over time,” Technology in Society, vol. 85, pp. 103219–103219, 2026. Available from: https://doi.org/10.1016/j.techsoc.2026.103219
Anselmi, G., and G. Petrella, “ESG ratings: Disagreement across providers and effects on stock returns,” Journal of International Financial Markets, Institutions and Money, vol. 100, p. 102133, 2025. Available from: https://doi.org/10.1016/j.intfin.2025.102133
Pei, P., “Artificial intelligence in ESG investing: A scoring model for accuracy and accountability,” SHS Web of Conferences, vol. 225, p. 03017, 2025. Available from: https://doi.org/10.1051/shsconf/202522503017
Bagherifam, N., S. Naghdi, V. Ahmadian, A. Fazlzadeh, and M. Baghalzadeh Shishehgarkhaneh, “Digital regulatory governance: The role of RegTech and SupTech in transforming financial oversight and administrative capacity,” International Journal of Financial Studies, vol. 13, no. 4, p. 217, 2025. Available from: https://doi.org/10.3390/ijfs13040217
Bu, Y., X. Du, H. Li, X. Yu, and Y. Wang, “Research on the FinTech risk early warning based on the MS-VAR model: An empirical analysis in China,” Global Finance Journal, vol. 58, pp. 100898–100898, 2023. Available from: https://doi.org/10.1016/j.gfj.2023.100898

Cites this article as

F. U. Khan, A. Amin, "Digital Transformation of Sustainable Finance: A Review of FinTech Applications in ESG Scoring, Climate Risk, and Green Bonds", International Journal of Innovative Research in Computer Science and Technology (IJIRCST), Vol-14, Issue-1, Page No-168-178, 2026. Available from: https://doi.org/10.55524/ijircst.2026.14.1.18

Corresponding Author

Fahad Ullah Khan

School of Management, Air University, Islamabad, Pakistan

Download Full Paper

Download PDF

No. of Downloads: 2 | No. of Views: 31

Policy Recommendations for New Jersey’s Artificial Intelligence Leadership in K-12, Higher Education, and Workforce Development

Satyadhar Joshi.

January 2026 - Vol 14, Issue 1
Machine Learning-Based Credit Risk Classification Using German Credit Data

Fitria, Emy Iryanie, Heldalina, Muhammad Syahid Pebriadi, Anhar Khalid.

January 2026 - Vol 14, Issue 1
How Artificial Intelligence Tools Assisting Persons with Disabilities (PWDs) in Global South

Iftikhar Bhatti, Gnanesh Methari.

November 2025 - Vol 13, Issue 6

Digital Transformation of Sustainable Finance: A Review of FinTech Applications in ESG Scoring, Climate Risk, and Green Bonds

Citations

Download Full Paper PDF

Total View 31

Total Download 2