<p>Geological formations used for CO₂ storage and sealing, particularly caprocks such as shales, commonly exhibit transverse isotropy. However, its impact on the geomechanical behavior of these formations has not been understood. This study examines how the transverse isotropy of rocks influences their poroelastic response during CO₂ injection and the resulting geomechanical risks. Both mechanical and permeability transverse isotropy are investigated via 3D transversely isotropic poroelasticity modeling. Modeling results indicate that, near the injection well, reservoir sandstones and sealing shales exhibiting only mechanical transverse isotropy experience a greater reduction in horizontal effective stress and a smaller reduction in vertical effective stress compared to their isotropic counterparts. Furthermore, increased mechanical transverse isotropy in both reservoir sandstones and sealing shales leads to the earlier onset of rock failure. These findings suggest that assuming isotropic elasticity for reservoir and caprocks underestimates the geomechanical risks in the vicinity of the injection well. This study also investigates the effects of both varying transversely isotropic plane (TIP) angles and the presence of a single fracture (with inclination angles of 90° and 45°) on geomechanical stability. Shifts in failure zones are observed with different TIP orientations, highlighting the significant influence of TIP orientations on geomechanical responses. Fracture angles alter the timing of rock failure, where a single 90° fracture in the caprock can postpone failure near the injection well due to the reduced pore pressure at the location, but it may compromise the long-term sealing capacity of the formation due to the increased pore pressure at the fracture location. A single 45° fracture within the caprock leads to earlier failure near the injection well, mainly because the inclined fracture decreases the rock elastic modulus.</p>