This study investigates the causal relationship between artificial intelligence development and corporate ESG performance. We compiled data from 1,774 A-share listed companies in China between 2012 and 2023. Through text analysis of corporate financial statements, we identified whether companies underwent AI transformation and constructed a difference-in-differences model to assess the impact of AI transformation on corporate ESG performance. We find that AI transformation significantly enhances ESG performance, a conclusion that holds up after a series of robustness tests. Mechanism analysis indicates that green effects and governance effects are key pathways for enhancing corporate ESG performance. On one hand, AI transformation promotes green innovation and green production, and increases green total factor productivity, thereby improving ESG outcomes. On the other hand, it enhances regulatory compliance, mitigates managerial myopia, and reduces corporate risks, further boosting ESG performance. This study also reveals that AI technology exerts a more favorable ESG impact on state-owned enterprises, non-high-tech firms, and heavily polluting companies. Our text-based identification strategy and comprehensive research design contribute new firm-level evidence on how AI reshapes sustainability outcomes. The findings offer practical implications for managers and regulators seeking to align digital transformation with ESG objectives and to target supportive policies where the return to AI-enabled sustainability is likely to be largest. Overall, this study highlights AI as a practical lever for corporate sustainability in emerging markets.