ESGReveal: An LLM-based approach for extracting structured data from ESG reports

TL;DR

ESGReveal leverages Large Language Models with retrieval techniques to extract and analyze ESG data from corporate reports, achieving high accuracy and revealing insights into disclosure practices across industries.

Contribution

The paper introduces ESGReveal, a novel LLM-based framework that enhances ESG data extraction and analysis from reports, outperforming baseline models in accuracy.

Findings

Achieved 76.9% data extraction accuracy with GPT-4.

Discovered 69.5% environmental and 57.2% social disclosure rates.

Demonstrated improved ESG reporting analysis over existing methods.

Abstract

ESGReveal is an innovative method proposed for efficiently extracting and analyzing Environmental, Social, and Governance (ESG) data from corporate reports, catering to the critical need for reliable ESG information retrieval. This approach utilizes Large Language Models (LLM) enhanced with Retrieval Augmented Generation (RAG) techniques. The ESGReveal system includes an ESG metadata module for targeted queries, a preprocessing module for assembling databases, and an LLM agent for data extraction. Its efficacy was appraised using ESG reports from 166 companies across various sectors listed on the Hong Kong Stock Exchange in 2022, ensuring comprehensive industry and market capitalization representation. Utilizing ESGReveal unearthed significant insights into ESG reporting with GPT-4, demonstrating an accuracy of 76.9% in data extraction and 83.7% in disclosure analysis, which is an improvement over baseline models. This highlights the framework's capacity to refine ESG data analysis precision. Moreover, it revealed a demand for reinforced ESG disclosures, with environmental and social data disclosures standing at 69.5% and 57.2%, respectively, suggesting a pursuit for more corporate transparency. While current iterations of ESGReveal do not process pictorial information, a functionality intended for future enhancement, the study calls for continued research to further develop and compare the analytical capabilities of various LLMs. In summary, ESGReveal is a stride forward in ESG data processing, offering stakeholders a sophisticated tool to better evaluate and advance corporate sustainability efforts. Its evolution is promising in promoting transparency in corporate reporting and aligning with broader sustainable development aims.