De-risking green investments is crucial to unlocking climate finance and to spurring investors’ interest in allocating resources to activities consistent with a resilient low-carbon economy. We explore the extent to which green bonds could de-risk investments in low-carbon assets by considering different market circumstances. We characterize joint dependence between green bonds and low-carbon assets and consider a de-risking metric based on expected shortfall. Our analysis for the Chinese, European and US markets for 2016 to 2020 indicates that green-bond and low-carbon stock returns move in opposite directions or independently, and a fall in green-bond returns below the 5% quantile increases the expected value of low-carbon stocks by 8.6% and 15.1% in the Chinese and European markets, respectively, but has a negligible effect on the US market. We also document that green bonds have sizeable diversification benefits when they are included in low-carbon investment portfolios.

Reboredo, J., Ugolini, A., & Ojea-Ferreiro, J. (2022). Do green bonds de-risk investment in low-carbon stocks?. ECONOMIC MODELLING, 108(March 2022) [10.1016/j.econmod.2022.105765].

Do green bonds de-risk investment in low-carbon stocks?

Ugolini A.;
2022

Abstract

De-risking green investments is crucial to unlocking climate finance and to spurring investors’ interest in allocating resources to activities consistent with a resilient low-carbon economy. We explore the extent to which green bonds could de-risk investments in low-carbon assets by considering different market circumstances. We characterize joint dependence between green bonds and low-carbon assets and consider a de-risking metric based on expected shortfall. Our analysis for the Chinese, European and US markets for 2016 to 2020 indicates that green-bond and low-carbon stock returns move in opposite directions or independently, and a fall in green-bond returns below the 5% quantile increases the expected value of low-carbon stocks by 8.6% and 15.1% in the Chinese and European markets, respectively, but has a negligible effect on the US market. We also document that green bonds have sizeable diversification benefits when they are included in low-carbon investment portfolios.
Si
Articolo in rivista - Articolo scientifico
Scientifica
Copulas; de-risking; Expected shortfall; Green bonds; Low-carbon stocks;
English
Reboredo, J., Ugolini, A., & Ojea-Ferreiro, J. (2022). Do green bonds de-risk investment in low-carbon stocks?. ECONOMIC MODELLING, 108(March 2022) [10.1016/j.econmod.2022.105765].
Reboredo, J; Ugolini, A; Ojea-Ferreiro, J
File in questo prodotto:
Non ci sono file associati a questo prodotto.

I documenti in IRIS sono protetti da copyright e tutti i diritti sono riservati, salvo diversa indicazione.

Utilizza questo identificativo per citare o creare un link a questo documento: http://hdl.handle.net/10281/348585
Citazioni
  • Scopus 3
  • ???jsp.display-item.citation.isi??? 2
Social impact