ORIGINAL RESEARCH article
Front. Clim.
Sec. Climate Risk Management
Climate-related risks and resilience of conventional banks: the role of sustainable development
Provisionally accepted
- 1Universite de Jendouba Faculte des Sciences Juridiques Economiques et de Gestion de Jendouba, Jendouba, Tunisia
- 2Imam Muhammad Ibn Saud Islamic University, Riyadh, Saudi Arabia
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This paper examines the impact of climate risk on bank stability and investigates the moderating role of sustainable development. Using an unbalanced panel of 68 conventional banks from 10 Middle East and North Africa (MENA) countries over the period 2005–2022, the study applies a dynamic panel data approach estimated by the System Generalized Method of Moments (SGMM) to address potential endogeneity. The climate risk index (CRI) was rescaled so that higher values indicate higher climate risk. The empirical results indicate that climate risk has a negative and statistically significant impact on bank stability measured by Z-score (ROA). In contrast, sustainable development is found to have a positive and significant effect on bank stability. Furthermore, the interaction between climate risk and sustainable development (CRI*SDI) is positive and significant, suggesting that higher levels of sustainable development mitigate the adverse impact of climate risk on banks. These results are robust across three alternative measures of bank stability, namely portfolio risk and leverage risk.
Keywords: Bank stability, Climate risk, MENA banks, sustainable development, System Generalized Method of Moments
Received: 26 Aug 2025; Accepted: 06 Feb 2026.
Copyright: © 2026 Hakimi, Saidi and Khemiri. This is an open-access article distributed under the terms of the Creative Commons Attribution License (CC BY). The use, distribution or reproduction in other forums is permitted, provided the original author(s) or licensor are credited and that the original publication in this journal is cited, in accordance with accepted academic practice. No use, distribution or reproduction is permitted which does not comply with these terms.
* Correspondence: Abdelaziz Hakimi
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