<p>The relationship between energy transition and climate physical risk remains complex and uncertain. It depends on several factors that are often controversial and difficult to achieve simultaneously. In this context, we chose to investigate this relationship in interaction with green finance, green technology innovation, environmental policy stringency, and institutional quality. Using the Generalized Method of Moments (GMM) on a panel of 32 OECD countries over a 22-year period (2000–2021), our results reveal a significant negative relationship between energy transition and climate physical risk. The transition to renewable energy sources significantly mitigates extreme weather events. Specifically, a one-unit increase in our energy transition indicator decreases climate risk threefold. Investigating the key factors interacting with this relationship, we found that green finance, green technology innovation, environmental policy stringency and quality of institutions reinforce the negative impact of the energy transition on climate physical risk. The stronger these pillars are, the more pronounced the risk reduction. Robustness checks confirm the reliability of our results across different regressions, supporting these findings. These insights are valuable for policymakers, financial institutions and other stakeholders seeking to navigate a successful energy transition that effectively mitigates climate physical risk.</p>