An artificial intelligence (AI) application developed by the Bank for International Settlements (BIS) and its project partners, the Bank of Spain, the Deutsche Bundesbank and the European Central Bank, enables analysis of climate-related risks in the financial system.

 

	Botta building, BIS headquater in Basel

Project Gaia created a proof of concept and tested it in financial climate risk analysis use cases. The proof of concept used large language models (LLMs) to automatically extract climate-related indicators from publicly available corporate reports.
 

Project Gaia, an initiative of the BIS Innovation Hub and the Bank of Spain, the Deutsche Bundesbank and the European Central Bank, has leveraged AI to enable the comprehensive analysis of climate-related risks in the financial system.

Central banks, supervisors and financial institutions need high-quality and accessible data to model the financial risks posed by climate change. A lack of global reporting standards makes this difficult. The project report describes how Gaia was able to overcome differences in definitions and disclosure frameworks across jurisdictions to offer much-needed transparency and make it easier to compare information on climate-related financial risks.
 

Banco de España in Madrid

The experiment was coordinated by the BIS Innovation Hub Eurosystem Centre and aimed to help analysts and supervisors search corporate climate-related disclosures and extract data quickly and efficiently on indicators such as total emissions, green bond issuance and voluntary net-zero commitments. Using AI and, in particular, LLMs, Gaia delivered a proof of concept demonstrating it is possible to automate the task of identifying such indicators across a large set of reports, significantly reducing manual effort in climate assessments.
 

Gaia has broken new ground by integrating LLMs into an application and using it for the extraction of data on climate-related financial risks. The flexible design may serve as a model for AI-enabled applications in a broader range of use cases for central banks and the financial sector.

Note
BIS Innovation Hub projects are experimental in nature, for the purpose of investigating technological and practical feasibility.

 

Release: Deutsche Bundesbank, Frankfurt am Main

 

Project Gaia: Enabling climate risk analysis using Generative AI (bis.org)