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Climate and Financial Markets
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Climate and Financial Markets

A special issue of Journal of Risk and Financial Management (ISSN 1911-8074). This special issue belongs to the section "Financial Markets".

Deadline for manuscript submissions: 31 August 2026 | Viewed by 2296

Special Issue Editors

Dr. Ihtisham Abdul Malik

E-Mail Website
Guest Editor
1. Department of Finance, College of Business Administration, Ajman Univeristy, Ajman, United Arab Emirates
2. School of Business, Univeristy of Queensland, Brisbane, Australia
Interests: environment finance; asset pricing; investments
Prof. Dr. Rajesh Mohnot

E-Mail Website
Guest Editor
Department of Finance, Ajman University, Ajman 346, United Arab Emirates
Interests: market efficiency; volatility estimation and forecasting; corporate governance; behavioral finance; mergers & restructuring; valuation; economic variables and stock market performance; renewable energy investments; risk assessment and hedging strategies

Special Issue Information

Dear Colleagues,

Climate risks, including physical, transitional, and regulatory risks, are increasingly affecting asset management, investment strategies, and financial risk management practices. As markets respond to environmental uncertainties, policy changes, and regulatory shifts, understanding how these risks influence financial decisions becomes crucial.

This Special Issue aims to examine how climate risks affect financial markets, particularly in terms of asset valuation, portfolio allocation, and risk management strategies. We seek contributions exploring the impacts of physical risks (e.g., extreme weather events, rising sea levels), transitional risks (e.g., shifts in policy, technology, and market behavior), and regulatory risks (e.g., evolving climate policies and disclosure requirements). Research on stress testing, scenario analysis, and innovative financial tools for managing climate risk is especially encouraged.

By bridging climate finance, asset management, and risk management, this Special Issue aims to provide valuable insights that will help strengthen financial resilience and guide decision makers in navigating the challenges presented by climate-related risks

Dr. Ihtisham Abdul Malik
Prof. Dr. Rajesh Mohnot
Guest Editors

Manuscript Submission Information

Manuscripts should be submitted online at www.mdpi.com by registering and logging in to this website. Once you are registered, click here to go to the submission form. Manuscripts can be submitted until the deadline. All submissions that pass pre-check are peer-reviewed. Accepted papers will be published continuously in the journal (as soon as accepted) and will be listed together on the special issue website. Research articles, review articles as well as short communications are invited. For planned papers, a title and short abstract (about 250 words) can be sent to the Editorial Office for assessment.

Submitted manuscripts should not have been published previously, nor be under consideration for publication elsewhere (except conference proceedings papers). All manuscripts are thoroughly refereed through a single-blind peer-review process. A guide for authors and other relevant information for submission of manuscripts is available on the Instructions for Authors page. Journal of Risk and Financial Management is an international peer-reviewed open access monthly journal published by MDPI.

Please visit the Instructions for Authors page before submitting a manuscript. The Article Processing Charge (APC) for publication in this open access journal is 1600 CHF (Swiss Francs). Submitted papers should be well formatted and use good English. Authors may use MDPI's English editing service prior to publication or during author revisions.

Keywords

  • climate risk
  • financial markets
  • asset valuation
  • portfolio allocation
  • investment strategies
  • risk management
  • stress testing
  • scenario analysis
  • regulatory shifts
  • sustainable finance

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Further information on MDPI's Special Issue policies can be found here.

Published Papers (2 papers)

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Research

24 pages, 1689 KB  
Article
Inflation and CO2 Emissions: Asymmetric Moderating Effects of Financial Development in Fiji
by Nikeel Nishkar Kumar, Ravinay Amit Chandra and Rajesh Mohnot
J. Risk Financial Manag. 2026, 19(3), 211; https://doi.org/10.3390/jrfm19030211 - 11 Mar 2026
Viewed by 602
Abstract
This study explores the asymmetric moderating effect of inflation and financial development on carbon (CO2) emissions using annual data from Fiji over the period from 1970 to 2023. This study is motivated by the dearth of evidence on the ecological implications [...] Read more.
This study explores the asymmetric moderating effect of inflation and financial development on carbon (CO2) emissions using annual data from Fiji over the period from 1970 to 2023. This study is motivated by the dearth of evidence on the ecological implications of macroeconomic variables in climate-vulnerable small island developing states. We find that an increase in inflation more strongly reduces CO2 emissions compared to by how much an equivalently sized decrease in inflation increases CO2 emissions. We further find that positive shocks to financial development accentuate the negative effect of inflation on CO2 emissions. Negative shocks, by contrast, attenuate the negative effect of inflation on CO2 emissions. This pattern of asymmetries implies the presence of credit-constrained consumers who may be highly sensitive to cost-of-living pressures. The results further imply the role of demand suppression in mitigating CO2 emissions. The policy implication is that macroeconomic indicators such as inflation tend to have ecological implications, which must be recognized by policymakers in determining stabilization policies. Full article
(This article belongs to the Special Issue Climate and Financial Markets)
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34 pages, 575 KB  
Article
Spatial Stress Testing and Climate Value-at-Risk: A Quantitative Framework for ICAAP and Pillar 2
by Francesco Rania
J. Risk Financial Manag. 2026, 19(1), 48; https://doi.org/10.3390/jrfm19010048 - 7 Jan 2026
Viewed by 1010
Abstract
This paper develops a quantitative framework for climate–financial risk measurement that combines a spatially explicit jump–diffusion asset–loss model with prudentially aligned risk metrics. The approach connects regional physical hazards and transition variables derived from climate-consistent pathways to asset returns and credit parameters through [...] Read more.
This paper develops a quantitative framework for climate–financial risk measurement that combines a spatially explicit jump–diffusion asset–loss model with prudentially aligned risk metrics. The approach connects regional physical hazards and transition variables derived from climate-consistent pathways to asset returns and credit parameters through the use of climate-adjusted volatilities and jump intensities. Fat tails and geographic heterogeneity are captured by it, which conventional diffusion-based or purely narrative stress tests fail to reflect. The framework delivers portfolio-level Spatial Climate Value-at-Risk (SCVaR) and Expected Shortfall (ES) across scenario–horizon matrices and incorporates an explicit robustness layer (block bootstrap confidence intervals, unconditional/conditional coverage backtests, and structural-stability tests). All ES measures are understood as Conditional Expected Shortfall (CES), i.e., tail expectations evaluated conditional on climate stress scenarios. Applications to bank loan books, pension portfolios, and sovereign exposures show how climate shocks reprice assets, alter default and recovery dynamics, and amplify tail losses in a region- and sector-dependent manner. The resulting, statistically validated outputs are designed to be decision-useful for Internal Capital Adequacy Assessment Process (ICAAP) and Pillar 2: climate-adjusted capital buffers, scenario-based stress calibration, and disclosure bridges that complement alignment metrics such as the Green Asset Ratio (GAR). Overall, the framework operationalises a move from exposure tallies to forward-looking, risk-sensitive, and auditable measures suitable for supervisory dialogue and internal risk appetite. Full article
(This article belongs to the Special Issue Climate and Financial Markets)
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