# DeepGreen: Effective LLM-Driven Greenwashing Monitoring System Designed for Empirical Testing -- Evidence from China

arXiv: https://arxiv.org/abs/2504.07733 · HTML: https://mlsanity.com/paper/2504.07733/

## Key facts

- No citing papers in the map yet (data through 14 Oct 2026).
- Builds on 22 of its 119 references that are in the map.
- First posted on arXiv 10 Apr 2025.

## Builds on (most cited first, 22 of 22)

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- [ESGReveal: An LLM-based approach for extracting structured data from ESG reports](https://mlsanity.com/paper/2312.17264/) (2023)
- [Generalization in Neural Networks: A Broad Survey](https://mlsanity.com/paper/2209.01610/) (2022)
- [Towards Robust ESG Analysis Against Greenwashing Risks: Aspect-Action Analysis with Cross-Category Generalization](https://mlsanity.com/paper/2502.15821/) (2025)
- [Glitter or Gold? Deriving Structured Insights from Sustainability Reports via Large Language Models](https://mlsanity.com/paper/2310.05628/) (2023)
- [Evaluating the performance of state-of-the-art esg domain-specific pre-trained large language models in text classification against existing models and traditional machine learning techniques](https://mlsanity.com/paper/2410.00207/) (2024)

## Abstract (arXiv)

Motivated by the emerging adoption of Large Language Models (LLMs) in economics and management research, this paper investigates whether LLMs can reliably identify corporate greenwashing narratives and, more importantly, whether and how the greenwashing signals extracted from textual disclosures can be used to empirically identify causal effects. To this end, this paper proposes DeepGreen, a dual-stage LLM-Driven system for detecting potential corporate greenwashing in annual reports. Applied to 9369 A-share annual reports published between 2021 and 2023, DeepGreen attains high reliability in random-sample validation at both stages. Ablation experiment shows that Retrieval-Augmented Generation (RAG) reduces hallucinations, as compared to simply lengthening the input window. Empirical tests indicate that "greenwashing" captured by DeepGreen can effectively reveal a positive relationship between greenwashing and environmental penalties, and IV, PSM, Placebo test, which enhance the robustness and causal effects of the empirical evidence. Further study suggests that the presence and number of green investors can weaken the positive correlation between greenwashing and penalties. Heterogeneity analysis shows that the positive relationship between "greenwashing - penalty" is less significant in large-sized corporations and corporations that have accumulated green assets, indicating that these green assets may be exploited as a credibility shield for greenwashing. Our findings demonstrate that LLMs can standardize ESG oversight by early warning and direct regulators' scarce attention toward the subsets of corporations where monitoring is more warranted.