Financial technology and climate risks in the financial market

Abstract

This study explores the role of financial technology (Fintech) in influencing climate risks within financial markets by introducing the Climate Risk Index in Financial Markets (CRIFM), which measures the return differences between green and traditional markets. Through theoretical analysis and empirical research, we find that the development of Fintech significantly increases climate risk in financial markets. The research identifies two main pathways: first, Fintech enhances investment efficiency, directing capital more effectively toward high-return green projects; second, it reduces information asymmetry, increasing transparency and trust in green investments. Our findings suggest that Fintech is essential in helping investors identify and evaluate climate-friendly companies, thereby supporting the growth of green investments. Based on these results, we recommend that governments and regulatory bodies actively promote Fintech innovations and their application in green finance to improve market fairness and transparency, ultimately contributing to sustainable development goals.