Central banks use AI to assess climate-related risks

Central banks said on Tuesday they had opened new horizons by using artificial intelligence to collect data to assess climate-related financial risks, at a time when the volume of disclosures by banks and other companies is set to increase.

According to “Reuters”, banks including the Bank for International Settlements, a forum for central banks, the Bank of Spain, the German Central Bank and the European Central Bank, said that they used their pilot project (Jaya Artificial Intelligence) to analyze companies’ disclosures about carbon emissions, green bond issuance and voluntary commitments to achieve zero emissions. Of carbon.

The authorities supervising banks, insurance companies, and asset management need high-quality data to assess the impact of climate change on financial institutions, but they find that public information is spread across texts, tables, and footnotes in annual reports in the absence of a reporting standard.

The central banks said in a joint statement that Gaia was able to overcome differences in definitions and disclosure frameworks between jurisdictions to provide much-needed transparency, as well as facilitate the comparison of indicators linked to climate-related financial risks.

Despite differences in how companies present the data themselves, Jaya focuses on the definition of each indicator rather than the way the data is classified.

With the traditional approach, each KPI and each new organization requires the analyst to either look up the information in public company reports or contact the organization to obtain the information.

With Jaya, adding new KPIs or new organizations is quick and easy. This makes it possible to extract and analyze multiple key performance indicators from a large number of organizations, and enables climate risk to be analyzed on a previously unimaginable scale.

Listed companies, including banks and insurance companies, must make new mandatory climate-related disclosures under new global, US and European rules, which will lead to more detailed information compared to current methods.