A Design Science Approach to Predicting ESG Performance Using Ensemble Machine Learning

Environmental, Social, and Governance (ESG) metrics have become a cornerstone to sustainable finance, yet their measurement and predictability remain constrained by data heterogeneity, methodological divergence, and disclosure bias. This study develops a comprehensive ESG prediction framework grounded in the Design Science Research paradigm, integrating advanced machine learning techniques with rigorous data preprocessing, feature selection, and temporal validation. Using firm-level data from Refinitiv and Bloomberg, the analysis distinguishes between ESG composite performance and disclosure-based robustness, addressing a critical gap in the literature. Ensemble learning models, including Random Forest and XGBoost, are evaluated alongside deep learning architectures using multiple sampling strategies and rolling-window validation. The results demonstrate that ESG performance is moderately forecastable, with ensemble methods consistently outperforming neural networks in structured datasets. In contrast, disclosure robustness exhibits lower predictability, reflecting its dependence on discretionary strategic reporting and institutional factors. The findings highlight the importance of data quality, model selection, and validation design in ESG analytics, while emphasizing the limitations of deep learning in tabular financial contexts. The integration of explainable artificial intelligence further enhances interpretability by identifying key predictors of ESG outcomes. Overall, the study contributes to the literature by providing a robust, interpretable, and methodologically rigorous framework for ESG prediction, with implications for investors, regulators, and corporate decision-making.

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Publication Details

Journal
International Journal of Financial Studies
Published
2026-05-19
DOI
https://doi.org/10.3390/ijfs14050133
Primary Topic
Corporate Social Responsibility Reporting
Type
article
Field-Weighted Citation Impact
0.00
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article

A Design Science Approach to Predicting ESG Performance Using Ensemble Machine Learning

International Journal of Financial Studies
Corporate Social Responsibility Reporting
article

A Design Science Approach to Predicting ESG Performance Using Ensemble Machine Learning

article en

Abstract

Environmental, Social, and Governance (ESG) metrics have become a cornerstone to sustainable finance, yet their measurement and predictability remain constrained by data heterogeneity, methodological divergence, and disclosure bias. This study develops a comprehensive ESG prediction framework grounded in the Design Science Research paradigm, integrating advanced machine learning techniques with rigorous data preprocessing, feature selection, and temporal validation. Using firm-level data from Refinitiv and Bloomberg, the analysis distinguishes between ESG composite performance and disclosure-based robustness, addressing a critical gap in the literature. Ensemble learning models, including Random Forest and XGBoost, are evaluated alongside deep learning architectures using multiple sampling strategies and rolling-window validation. The results demonstrate that ESG performance is moderately forecastable, with ensemble methods consistently outperforming neural networks in structured datasets. In contrast, disclosure robustness exhibits lower predictability, reflecting its dependence on discretionary strategic reporting and institutional factors. The findings highlight the importance of data quality, model selection, and validation design in ESG analytics, while emphasizing the limitations of deep learning in tabular financial contexts. The integration of explainable artificial intelligence further enhances interpretability by identifying key predictors of ESG outcomes. Overall, the study contributes to the literature by providing a robust, interpretable, and methodologically rigorous framework for ESG prediction, with implications for investors, regulators, and corporate decision-making.

International Journal of Financial StudiesVol. 14(5)
Bangor University (GB), Egypt-Japan University of Science and Technology (EG)
Openalex Percentile: Top 4%
Corporate Social Responsibility Reporting
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