Quantitative Finance and Risk Management

MATLAB for Climate Risk and ESG

Incorporate climate factors and ESG considerations into risk management and investment processes

MATLAB lets you integrate physical and transition climate factors, as well as ESG considerations, into risk management and investment processes.

With MATLAB, you can:

  • Analyze and visualize climate datasets
  • Simulate climate risks
  • Apply machine learning for data analysis
  • Combine climate and economic data
  • Securely scale, compute, and store data in the cloud

Working with Climate Scenarios

MATLAB lets you analyze and model climate scenarios, enabling teams to assess the impacts of climate change and make informed decisions on risk management and investment strategies.

With MATLAB, you can:

  • Import, process, and analyze large climate datasets, including historical emissions data and climate projections
  • Develop and run complex Integrated Assessment Models (IAMs) using prebuilt functions, toolboxes, or third-party models
  • Leverage advanced visualization techniques to display and analyze model results like 3D plots and interactive animations
  • Use machine learning to optimize model parameters and identify key drivers of climate change
  • Assess model results and projections by working with large ensemble scenarios
  • Integrate industry-standard scenarios, like those from IIASA and NGFS, into your analyses

Modeling Climate Transition Risk

MATLAB enables you to assess climate transition risk that arises from the global shift towards a more sustainable, net-zero economy, impacting businesses and assets due to changes in policy, technology, consumer preferences, and investor expectations.

With MATLAB, you can:

  • Integrate diverse data sources, including climate, financial, and economic data, for comprehensive climate transition risk modeling
  • Develop custom analytics and machine learning models to uncover insights and inform data-driven decisions
  • Generate visualizations and reports to communicate the potential impact of transition risks on businesses, assets, and investments

Analyzing and Managing Physical Climate Risks

You can use MATLAB to assess, model, and manage the risks associated with climate-related natural disasters by integrating historical data, climate projections, and geospatial information.

With MATLAB, you can:

  • Import vector and raster GIS and geospatial data into the MATLAB environment
  • Normalize different coordinate systems, addresses, and locations
  • Visualize and analyze the intersection of physical risks like flooding and asset locations
A composite 3D map of San Francisco created with functions in Mapping Toolbox.

3D composite map of San Francisco.

Aligning Investments with Climate Goals and ESG Factors

MATLAB enables investors to incorporate ESG factors and climate data into investment decision-making and risk management processes.

With MATLAB, you can:

  • Develop ESG scoring models based on climate and other ESG factors
  • Incorporate climate data into portfolio optimization models for temperature alignment, such as the Paris Aligned SBTi framework
  • Apply advanced analytics and machine learning for trading opportunities and risk forecasting
  • Generate transparent reports and visualizations of ESG performance
  • Manage model risk effectively with the built-in validation and risk management tools in MathWorks Modelscape
ESG constrained efficient frontiers.

 Efficient frontier for different ESG levels.

Climate Stress Testing for Financial Institutions

IAM Explorer and Risk Management Toolbox let you combine portfolio, macro-economic, and climate scenarios for stress testing as recently required by regulators such as the Bank of England, ECB, and the Federal Reserve.

Graph showing three different scenarios of distribution of changes in loan values.

Distribution of changes in loan values under different scenarios.


Learn about the products used for climate finance and ESG applications.

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