This paper explores the impact of Artificial Intelligence (AI) on firms' Environmental, Social, and Governance (ESG) performance. Our empirical investigation reveals a positive relationship between AI adoption and enhanced ESG outcomes. AI facilitates green innovation, optimizes financial resource allocation, and attracts external monitoring, thereby promoting sustainable business practices. By examining the mechanisms underlying the AI-ESG relationship, this study provides actionable insights for policymakers, managers, and stakeholders. The findings suggest that supportive policies and strategic investment in AI can significantly advance ESG initiatives, contributing to sustainable development.