Dynamics of Climate-Related Financial Risks on Financial Stability: Evidence from OECD Countries

The study examines the impact of climate change on the financial sector, focusing on the relationship between environmental taxes and financial stability in OECD nations. Results show a strong positive association between environmental taxation and financial stability, suggesting that raising environmental taxes can lead to financial sustainability. However, the study also highlights the negative trend in OECD nations' ability to adjust to natural disasters, which negatively affects their financial stability. The adaptive capacity dimension measures a country's ability to deal with disasters, considering government efforts, organized official activities, and existing infrastructure. The study found that OECD countries successfully established systems to handle calamities, thereby enhancing their financial stability.