DOI https://doi.org/10.36719/3104-4727/1/17-29

Rahiba Abdulhasanova
Nakhchivan State University
PhD Student

https://orcid.org/0009-0003-8702-7766

ebdulhesenovarahibe@ndu.edu.az

Climate Risk, Financial Stability, and Green Investment in Emerging Markets: Evidence, Mechanisms, and Policy Imperatives

Abstract

The growing materialization of climate-related financial risks has placed emerging market economies in an increasingly precarious position, caught between the imperatives of sustainable development and the structural vulnerabilities inherent in their financial systems. This article offers a comprehensive, evidence-based synthesis of recent Scopus-indexed research spanning the period 2010–2026, examining how physical and transition climate risks destabilize banking systems, equity markets, and shadow financial intermediaries in developing economies. The paper evaluates the mitigating capacity of macroprudential policy frameworks and green finance instruments—principally green bonds and ESG (Environmental, Social, and Governance) assets—while systematically mapping the institutional and regulatory barriers that constrain the broader adoption of sustainable finance. A distinguishing feature of this synthesis is its integration of the education–technology–economy nexus (Mammadov et al., 2026) and geopolitical risk–green finance interactions (Dilanchiev et al., 2023) as foundational preconditions for effective sustainable investment. Seven testable research hypotheses are advanced and evaluated through the synthesized evidence. The findings carry substantive implications for financial regulators, central banks, government policymakers, and the international development community.

Keywords: climate risk, financial stability, green investment, green bonds, ESG performance, macroprudential policy, emerging markets, education–technology nexus, sustainable finance