Central bankers have developed a new tool, using artificial intelligence (AI) to assess climate-related financial risks.

The Bank for International Settlements, a forum for central banks, has announced work on an experimental AI tool to analyse company disclosures on carbon emissions, green bond issuance and voluntary net-zero commitments.

The tool, called Gaia, focuses on simplifying reporting data across multiple jurisdictions, so that regulators of financial institutions can effectively assess the impact of climate change on organisations.

Currently, the absence of a single reporting standard across countries means regulators are often left with a large amount of disorganised data and legnthy data-collection processes.

Central bankers said Gaia was able to overcome the differences of definitions and discloure frameworks to offer greater transparency and provider higher-quality data, which makes it easier to compare indicators on climate-related financial risks.

Under the current format, each key performance indicator (KPI) and each new financial institution requires analysts to search for information available in the public domain, or to contact the institution for more information.

"With Gaia, adding new KPIs or new institutions is quick and easy. This makes it possible to extract and analyse a multitude of KPIs from a large number of institutions, opening up the possibility of climate risk analysis at a scale that was previously unimaginable," the central banks said in a joint statement.

They added that it may be possible to make Gaia available publicly for use for all analysts as part of an online service that would be open to all.

"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," it said.

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