Green Finance: A Pathway to Climate Risk Mitigation

Against the backdrop of escalating climate crises, economic losses from extreme weather pose challenges to the financial system, with traditional finance struggling to price climate risks effectively. This article explores how green finance, by integrating environmental considerations into investment and risk management, serves as a key pathway to address climate risks. The study distinguishes between transition and physical risks, analyzes the role of green finance in guiding low-carbon capital allocation, enhancing risk pricing transparency, and strengthening systemic resilience, while identifying challenges such as fragmented disclosure mechanisms and liquidity constraints. It proposes recommendations like improving infrastructure and promoting product innovation to foster the collaborative development of financial stability and climate resilience.