Impact of Climate-Related Risks on Economic Uncertainty and Global Financial System Stability

DOI

10.2991/978-94-6463-817-2_49How to use a DOI?

Keywords

climate-related risk; economic uncertainty; financial stability; market volatility; risk management

Abstract

This research investigates how climate-induced risks influence economic stability and the global financial system. The objective is to comprehend the extent of the impact on various sectors and geographical regions, the mechanisms through which these risks disseminate within financial markets, and the interconnections among them. We discern critical patterns and ramifications by systematically reviewing contemporary literature from prominent economic, financial, and climate science journals. The results indicate that climate risks exert a substantial economic influence—return on investments in agriculture, energy, and real estate decline by 2.3%, 1.8%, and 1.5%, respectively. Firms with elevated emissions encounter increased borrowing costs, while climate-related policies account for 18% of the volatility observed in stock markets. Furthermore, financial systems are exhibiting heightened vulnerability, with developed markets recording a 15-20% escalation in cross-market correlations and emerging markets experiencing a 25-30% surge in financial instability amid climate events. These findings emphasize the escalating interrelation between climate risk, economic uncertainty, and financial stability, thereby underscoring the imperative for enhanced risk management and global collaboration to tackle climate-induced financial challenges effectively.

Copyright

© 2025 The Author(s)

Open Access

Open Access This chapter is licensed under the terms of the Creative Commons Attribution-NonCommercial 4.0 International License (http://creativecommons.org/licenses/by-nc/4.0/), which permits any noncommercial use, sharing, adaptation, distribution and reproduction in any medium or format, as long as you give appropriate credit to the original author(s) and the source, provide a link to the Creative Commons license and indicate if changes were made.

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TY  - CONF
AU  - Mahadi Pardede
AU  - Ikaputera Waspada
PY  - 2025
DA  - 2025/09/12
TI  - Impact of Climate-Related Risks on Economic Uncertainty and Global Financial System Stability
BT  - Proceedings of the 9th Global Conference on Business, Management and Entrepreneurship (GCBME 2024)
PB  - Atlantis Press
SP  - 400
EP  - 409
SN  - 2352-5428
UR  - https://doi.org/10.2991/978-94-6463-817-2_49
DO  - 10.2991/978-94-6463-817-2_49
ID  - Pardede2025
ER  -