Using Artificial Intelligence (AI) to enhance the climate and ESG risk assessment process

DBS is a leading financial services group in Asia, offering a full range of services in consumer banking, wealth management, and institutional banking, creating differentiated customer solutions by leveraging digital technology. It is now testing the inclusion of Gen AI in the bank’s ESG risk management approach to generate responses to selected questions in the bank’s ESG Risk Questionnaires (ERQ). The ERQ is a key first step to assess clients on their commitment and ability to manage ESG issues and climate-related risks associated with their operations, which helps DBS evaluate whether a client’s business activities could trigger credit or reputational risks. ERQ information provides critical insights into a client’s alignment with DBS’ own net-zero commitments. DBS’ Gen AI pilot focused on generating responses to selected questions within the ERQ that cover topics including net-zero alignment, transition strategy, climate-related physical and transition risks, governance, and disclosure. To ensure appropriate source material, the responses and justifications are derived from relevant documents and disclosure uploaded by the relationship managers. Gen AI’s suggested responses and justifications are embedded within the ERQ tool to provide easy review by the relationship managers to support the broader due diligence process. DBS’ institutional banking and risk management teams, with the aid of AI-generated inputs, remain responsible for ESG risk assessments and related decision making.