Measuring the combining effects of financial stability and climate risk for green economic recovery

Climate change is the financially important primary green economic recovery source. In recent years, central banks and financial authorities have recommended shareholders and banking institutions assess climate change-related financial risks. This study uses a sample of Vietnamese banks from 1990 to 2020 to explore how climate risk affects bank profitability. Our empirical findings link financial stability to environmental sustainability, green economic recovery, and exchange asset endogenous recovery. Econometric analysis shows that climate change affects energy price co-movements and financial stability. We go from modeling intricacies and limits to showing how erroneous estimations and climate change might enhance rather than diminish physical risk, financial instability, and concerns about green economic growth. Finally, banks can coordinate capital with the low-carbon transition and improve financial stability by adjusting loan supply conditions based on companies' carbon profiles before climate policy implementation.