Paradigm Shift in Sustainability Disclosure Analysis: Empowering Stakeholders with CHATREPORT, a Language Model-Based Tool

Abstract: This paper introduces a novel approach to enhance LLMs with expert knowledge to automate the analysis of corporate sustainability reports by benchmarking them against the Task Force for Climate-Related Financial Disclosures (TCFD) recommendations. Corporate sustainability reports are crucial in assessing organizations' environmental and social risks and impacts. However, analyzing these reports' vast amounts of information makes human analysis often too costly. As a result, only a few entities worldwide have the resources to analyze these reports, which could lead to a lack of transparency. While AI-powered tools can automatically analyze the data, they are prone to inaccuracies as they lack domain-specific expertise. This paper introduces a novel approach to enhance LLMs with expert knowledge to automate the analysis of corporate sustainability reports. We christen our tool CHATREPORT, and apply it in a first use case to assess corporate climate risk disclosures following the TCFD recommendations. CHATREPORT results from collaborating with experts in climate science, finance, economic policy, and computer science, demonstrating how domain experts can be involved in developing AI tools. We make our prompt templates, generated data, and scores available to the public to encourage transparency.