Natural Language Processing (NLP) is a tool used in ESG investing to analyze and quantify large amounts of textual data related to environmental, social, and governance (ESG) factors. The technology involves the automatic manipulation of natural language by software, enabling the extraction of meaningful information from unstructured text such as news articles, reports, and social media posts.
NLP in ESG Investing: NLP helps investors process and analyze large volumes of textual data to identify trends, risks, and opportunities associated with ESG factors. This capability is crucial for assessing the sentiment and context of ESG-related information, which can impact investment decisions.
Quantifying Online Text: NLP quantifies online text by identifying and categorizing relevant ESG risk areas. This includes monitoring media sources, regulatory filings, and corporate disclosures to capture real-time data on ESG issues. By quantifying these texts, investors can better understand the potential impact of ESG risks on their investments.
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