Regulators need to deploy AI, gather ‘granular’ data in bid to assess climate risk to financial markets, bankers say

Name: ‘Climate time bomb ticking’: UN chief says carbon emissions must be urgently cut
Uploaded: 2023-03-22T22:00:14.000Z
Duration: 1 min 40 s
Description: ‘Climate time bomb ticking’: UN chief says carbon emissions must be urgently cut

Artificial intelligence, improved data can help track risks from climate change and other factors to financial stability, central bankers say

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Chad Brayin London

Published: 6:00am, 23 Mar 2023

Better data and new technology is needed for central banks to be able to truly judge the risk of climate change to financial stability, according to bankers and regulators.

Speaking at the Bank of International Settlements’ Innovation Summit, Erik Thedeen, governor of Sveriges Riksbank, Sweden’s central bank, said bankers and regulators need to deploy new technology to better assess potential risks, from artificial intelligence-assisted text analysis of company disclosures to “granular level” data.

“Climate risk is something, that one way or the other, we know is a risk,” Thedeen said during a panel at the second day of the conference in Basel, Switzerland, on Wednesday. “It is a risk for industries in transition. There might be physical risks. This is one of the few risks out there that we some idea about.”

“Look what happened last week. A lot of the risk that evolved in California was risk we didn’t know about or we didn’t think about properly,” he added, referring to a banking crisis sparked by the collapse of Silicon Valley Bank this month. “We need technology to be better to track down risks for financial stability, not only climate risk.”

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‘Climate time bomb ticking’: UN chief says carbon emissions must be urgently cut

Better disclosure can help central banks identify companies that face larger transition risk or physical risks, which could be an important tool to understand financial stability risks posed by climate change, Thedeen said.