In Unreal Engine, the environment is the color or texture used as background when the camera ray doesn't hit any geometry in the 3D level. The environment in Predict Engine works exactly the same, but it is important to notice that the Predict environment is actually lighting the scene : it is an image-based lighting.
Without specific settings, in Unreal Engine, you can define RGB non polarized environments.
Unreal Engine provides us with many different components to create the environment : Sky Atmosphere, Sky Light, Volumetric Cloud, etc. Predict Engine does not support dynamic elements. In order to use them in Predict Engine, the final environment must be baked to an equirectangular texture.
The capture of the environment is not automatically enabled as in some scenarios the user will want to ignore it. To enable the capture of the Unreal Engine environment, you must add anywhere in the level an actor with the UvrCaptureEnvironment component.
This component enables you to define the resolution of the texture that will be captured. Once the render is started, you can also require the capture to be refreshed : the texture will be baked again.
If you hide the Actor holding this component in the hierarchy, the environment will also be hidden in Predict Engine.
Example of capture for an environment defined using Unreal Engine components
After modifying the environment in Unreal Engine, the baked capture is not automatically refreshed. Baking the texture is a heavy behaviour that cannot be repeated at each frame and would be too consuming if it were called everytime the user drags a value in the interface for instance. When you want to update the environment in Predict Engine, you must call the "Refresh Capture" button on the UvrCaptureEnvironment component. The baked texture is also updated when you reload the scene using the Reload button on the Predict Engine View.
In Unreal Engine, you can also define an environment using an equirectangular HDRI texture. To do so, you must first enable the HDRI Backdrop plugin in the Plugins menu (menu "Edit/Plugins", search for HDRI Backdrop). You can then add an HDRI Backdrop Actor to your scene and define the Cubemap to use.
The environment defined on an HDRI Backdrop component is automatically loaded to Predict Engine, you don't have anything more to do.
The cubemap must be an HDR file imported as a TextureCube.
In Unreal Engine, the backdrop is projected to a flattened dome. In Predict Engine, the environment is projected to an infinite sphere. This can lead to some differences in the final simulation.
Example of texture that can be used as an HDRI Backdrop
More details on the Unreal Engine HDRI Backdrop behaviour here : https://dev.epicgames.com/documentation/en-us/unreal-engine/hdri-backdrop?application_version=4.27 .
Spectral and polarized environments require an HDRI Backdrop using an .EXR texture. This feature is not supported yet in the Alpha plugin.