Network dynamics of systemic losses and sustainable financial contagion in global financial systems with ESG integration

This paper develops an integrated framework to investigate the network dynamics of systemic losses and sustainable financial contagion in global financial systems with ESG integration. The framework begins by constructing a global financial network based on inter-institutional interconnectedness and correlation structures, enabling the identification of key transmission channels of systemic risk. We analyze the evolution of network topology and systemic loss propagation under various stress scenarios, including market disruptions and liquidation shocks, to assess the resilience of the financial system over time. Furthermore, advanced machine learning techniques are employed to evaluate and predict abnormal volatility among systemically important financial institutions, enhancing the detection of emerging contagion risks. The study also examines the role of ESG integration in mitigating financial contagion and influencing the transmission of systemic losses across global markets. Empirical findings indicate that stronger and more diversified network connections improve the resilience of financial systems against systemic shocks, while higher ESG adoption contributes to reducing the intensity of risk spillovers and promotes financial stability. Overall, the results highlight the importance of incorporating ESG considerations into financial network analysis to support a more sustainable, resilient, and interconnected global financial system. The proposed framework offers a comprehensive approach for understanding systemic risk dynamics and evaluating sustainable financial contagion in an increasingly complex financial environment.