Capgemini, in collaboration with Google Cloud, has launched the Business for Planet Modelling (BfPM) program aimed at equipping financial institutions with advanced tools to forecast and manage climate risks. This initiative comes at a time when the threat of climate change to the global economy has never been more pronounced.
Climate-related disasters are costing the global economy approximately $16 million per hour, with estimates suggesting that these losses could reach between $1.7 trillion and $3.1 trillion annually by 2050. The financial services sector, which encompasses banking, asset management, and insurance, faces significant exposure to these risks. Without effective climate risk management, firms are at risk of diminished portfolio performance, declining competitiveness, and escalating regulatory challenges.
Franco Amalfi, Director of Sustainability Strategic Initiatives at Capgemini North America, emphasized the growing importance of understanding climate change’s financial impacts. He noted that assessing climate shifts is vital to evaluating their potential consequences on banking and insurance portfolios. However, the sheer volume and complexity of climate-related data, from macroeconomic patterns to individual asset risks, make it increasingly difficult for institutions to draw meaningful insights.
Harnessing Technology to Manage Climate Risk
In response to these challenges, Capgemini has partnered with Google Cloud to harness the power of cutting-edge technology in managing climate-related risks. The Business for Planet Modelling (BfPM) platform integrates geospatial analytics, satellite observations, and real-time environmental data to provide financial institutions with tools to simulate and forecast climate risks. This data-driven approach enables users to predict how climate change could impact their assets and strategies.
Denise Pearl, Global Partner Lead for Sustainability and New Energy at Google Cloud, highlighted the company’s commitment to using advanced technologies to support sustainability efforts. By combining Google Cloud’s geospatial analytics, Vertex AI, and Earth observation technologies, Capgemini’s BfPM program provides a bridge between corporate financials and the environmental impact of climate change.
A New Approach to Climate Modelling
Traditional climate risk models often struggle with integrating the diverse data required to make accurate predictions. BfPM seeks to address this gap by utilizing AI to streamline data analysis. Many financial institutions face difficulty connecting broad economic trends with specific asset-level risks, leading to incomplete forecasts of climate-related costs.
BfPM introduces a hybrid modeling approach that merges economic, climate, and energy data with in-depth physical risk assessments. The program employs digital twin technology to create and stress-test climate scenarios, allowing users to visualize potential future states and make informed decisions based on robust scientific data. This advanced system processes data from over 300 models and 265,000 variables, refining risk assessments through machine learning techniques.
Financial Services and Regulatory Compliance
For financial services firms, integrating climate risk into their financial planning is no longer a choice but a necessity. With increasing regulatory pressure globally, companies must comply with new requirements for stress testing and sustainability reporting. BfPM offers a scalable, secure solution that integrates seamlessly with existing financial systems, enabling companies to meet regulatory demands while enhancing their climate risk management capabilities.
The program’s capabilities include climate stress testing, scenario analysis, and sustainability reporting. By providing a detailed view of climate risk at both macroeconomic and asset levels, BfPM empowers financial institutions to adjust their portfolios, invest in more resilient assets, and develop sustainable strategies that support long-term profitability.
A Proactive Approach to Climate Risk
As the financial costs of climate change continue to rise, Capgemini and Google Cloud’s collaboration is helping institutions take a proactive approach to managing these risks. By leveraging advanced technology and comprehensive data analysis, the BfPM program aims to safeguard both financial stability and environmental sustainability.
Amalfi concluded, “With the growing wealth of climate data available, we have the opportunity to unlock insights that can empower decision-makers to tackle climate change effectively and shape a sustainable future.”
In a world increasingly defined by climate challenges, BfPM represents a pivotal step toward a more resilient and environmentally-conscious financial sector.
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