Project Gaia: Enabling climate risk analysis
On 18 April 2023, the Bank of International Settlements (BIS) has published information on the Global Adoption of Innovative Accelerators (GAIA) project, an initiative that aims to explore the potential of emerging technologies such as artificial intelligence (AI), machine learning (ML), and natural language processing (NLP) in the field of financial regulation. It represents a collaborative effort between the BIS and their Euro system project partners, the Deutsche Bundesbank, the Bank of Spain, and the European Central Bank. The project will establish an open, web-based tool to facilitate climate and environmental risk assessments based on a large pool of publicly available reports.
Central banks and regulators recognise the urgency to account for the financial stability risks posed by climate change as it can affect collateral values or exposures of other financial institutions. The data quality is the essential component for properly assessing the climate-related risks. Currently, most of the climate-related data from entities comes in inconsistent formats ranging from data grouped in tables, images, or graphs in different regulatory documents. The potential to utilise this publicly available data is immense, however, it heavily depends on the appropriate digital infrastructure.
Therefore, the GAIA project aims to leverage AI, ML and NLP, such as GPT, to integrate them into reliable workflow for fact-finding. This would help analysists navigate the inconsistency in formats of sustainability information published by entities. The goal would be enhancing regulatory reporting and improving compliance by reducing its cost and complexity and enhancing the quality of regulatory data. Ideally, the project will create a unified reporting platform that can be used by financial institutions to report regulatory data in a more efficient and effective manner.
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