AI-Driven Financial Risk Assessment for Circular Business Models
RISE partners with major Swedish banks to develop AI models that reduce financial uncertainty in circular economy transitions, making sustainable business models more attractive to investors.
Manufacturing firms transitioning to circular business models are one important part of the solution to the climate crisis, and the financial sector is a key enabler to make the shift happen. RISE research has highlighted the need to reduce risk perception in circular business models to accelerate this transition.
The Challenge
When companies shift from selling products to functional sales models - where customers pay for service rather than ownership - traditional financial risk assessment becomes difficult. How do you predict the residual value of products that will be refurbished and resold multiple times? This uncertainty makes banks hesitant to finance circular transitions.
The AI Solution
Working with major Swedish banks Nordea and SEB, RISE researchers:
- Collected open marketplace data on product resale values
- Employed machine learning to predict residual values across 3-4 product categories
- Developed an AI model and application prototype for financial decision-making
Project Details
The AID-CBM project ran for 2.5 years with a budget of 4.4 million SEK, funded by Vinnova’s Innovations for a Sustainable Society program.
Impact on the Financial Ecosystem
The research explored not just the technical AI model, but also:
- How to scale and disseminate the use of AI for circular risk assessment
- How a large-scale shift to circular business models would affect banks and insurance companies
- The role of enabling technology firms in the circular economy transition
Sustainability Contribution
This work directly supports UN Sustainable Development Goals:
- Goal 12: Responsible Consumption and Production
- Goal 13: Climate Action
The Path Forward
By reducing financial uncertainty around circular business models, AI can unlock the capital needed for Sweden’s transition to a more sustainable economy. When banks can accurately assess risk, they become willing partners in the green transition.
