Financial stability analysis has expanded to incorporate environmental and climate risks. Central banks and international bodies (such as the Network for Greening the Financial System – NGFS) recognize that climate change introduces material financial threats to the banking sector, insurance portfolios, and macroeconomic credit flows.

Climate-driven financial vulnerabilities are divided into two distinct operational categories:

[Climate Stability Risk Vectors]
  |- 1. Physical Risks ---> Direct losses from severe weather events damaging physical assets
  |- 2. Transition Risks -> Financial losses from policy shifts moving to a l