The impact of climate risk on financial stability in CEMAC countries

The objective of this article is to analyse the impact of climate risk on macro-financial stability in the CEMAC sub-region, in light of the increase in natural disasters and their effect on growth and the stability of financial systems. The methodology is based on an empirical approach using an autoregressive vector panel over the period 1996 to 2022 for member countries. The study is based in particular on the analysis of impulse response functions based on Monte Carlo simulations to measure the reaction of the financial system to climate shocks, while integrating macroeconomic indicators. The results show that climate risk has a significant and immediate influence on the stability of the financial system, causing lasting reactions in the financial sector. Dependence on hydrocarbons, the intensification of extreme events such as floods and droughts, and the transition to a more sustainable economy increase this vulnerability. These risks lead to asset degradation, increased credit defaults, and a decline in macroeconomic stability, threatening the sub-region's growth and financial stability. In response to these challenges, two main recommendations are made. First, regulatory authorities would benefit from strengthening financial regulation by explicitly incorporating climate risk into banking supervision. Second, regulatory authorities will also need to develop anticipation and adaptation mechanisms to better manage the effects of climate disasters and support a resilient and inclusive economic transition. JEL Codes : F36, G01, Q01, Q54