Financial institutions must assess climate risk impacts on balance sheets, profitability, and compliance due to regulatory, investor, and societal pressure. Traditional models fall short in forecasting complex physical, transition, and alignment risks tied to climate change. Agent-Based Models (ABMs) offer a dynamic, bottom-up simulation approach, enabling banks and asset managers to model individual factors like emissions or sea level and their systemic interactions. ABMs help institutions understand, manage, and mitigate risks with greater precision, enhancing predictive capabilities and supporting strategic, regulatory, and investment decisions in an evolving climate landscape.

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