Central banks have begun using artificial intelligence (AI) to assess climate-related financial risks. The Bank for International Settlements, the Bank of Spain, Germany’s Bundesbank, and the European Central Bank have launched an experimental AI project named Gaia. This project analyzes company disclosures on carbon emissions, green bond issuance, and voluntary net-zero commitments.
Gaia overcomes differences in definitions and disclosure frameworks across jurisdictions, providing transparency and making it easier to compare indicators on climate-related financial risks. Despite variations in how companies report the same data, Gaia focuses on the definition of each indicator, rather than how the data is labeled.
With Gaia, adding new key performance indicators (KPIs) or new institutions is quick and easy, enabling the extraction and analysis of a multitude of KPIs from a large number of institutions. This opens up the possibility of climate risk analysis at a scale that was previously unimaginable. As new global, U.S., and European Union rules mandate climate-related disclosures for listed companies, including banks and insurers, more detailed information will become available compared to the voluntary approaches to date.
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