ESG-Graph: Hierarchical Residual Graph Attention Network with Analyst-Defined ESG Taxonomy

Abstract

Environmental, Social, and Governance (ESG) text classification is important for applications in sustainable finance. However, it remains a challenging task due to domain terminology and regulatory constraints. While transformer-based models achieve strong predictive performance, they often lead to high energy costs and provide limited interpretability. To address these limitations, we introduce ESG-Graph, a lightweight and interpretable graph-based framework for modeling ESG disclosures. In our approach, each sentence is represented as a token-level dependency graph augmented with virtual nodes initialized from a European Sustainability Reporting Standards (ESRS)-based taxonomy, enabling the addition of new ESG concepts without retraining. A multi-layer Graph Attention Network is used instead of transformer encoders, allowing grammatical structure and domain semantics to be modeled jointly. Experiments on three ESG benchmark datasets show that ESG-Graph achieves performance comparable to efficient transformer baselines while consuming up to 60× less energy and using 10× fewer parameters. Additional attribution and ablation studies suggest the method’s policy alignment, interpretability, and robustness.