Connectedness between low carbon portfolios, economy and finance: the role of pandemic crisis and Ukrainian war
ISSN: 1746-5680
Article publication date: 9 February 2023
Issue publication date: 29 June 2023
Abstract
Purpose
The purpose of this work is to study the connections generated between stock market indices, representing firms whose practices focus on fighting climate change and several global risk factors in accordance with the sustainability objectives defined in the 2030 Agenda. An endogenous perspective is adopted, considering the spillovers generated within the low carbon stock market sector, as well as the latter’s exposure to exogenous shocks of an economic and financial nature.
Design/methodology/approach
This work uses a multivariate model of dynamic correlation (GARCH-corrected dynamic conditional correlation [cDCC]), which can accompany the correlations generated over time.
Findings
Considering five low carbon indices, representing various parts of the world, and four global macro-economic and financial variables, over a period of approximately eight years, it was possible to understand that the variables studied transmit between each other a statistically significant spillover. The period of the pandemic crisis shows a sharp increase in the information transmission process. It was also possible to conclude that some global variables are risk factors, performing the role of transmission channels for the spillover effects to low carbon indices, increasing the risk of contagion and reducing the possibilities of diversifying the investment portfolio.
Originality/value
Firstly, this work analyses the connection and spillover effects between low carbon indices. Secondly, considers an extended sample covering different market phases, particularly that of the pandemic crisis and the Ukrainian War, creating conditions to compare connection patterns between those indices. Thirdly, it studies the variable influence over time of global risk factors in the transmission of spillover between low carbon indices.
Keywords
Acknowledgements
The first author recognizes and is grateful for the financial support received from FCT – Portuguese Foundation for Science and Technology under the project UIDB/04007/2020.
This work is supported by national funds, through the FCT – Portuguese Foundation for Science and Technology under the project UIDB/04011/2020.
This work is supported by the Research Unit on Governance, Competitiveness and Public Policy (UIDB/04058/2020), funded by national funds through FCT – Fundação para a Ciência e Tecnologia.
This paper is funded by National Funds through the FCT – Foundation for Science and Technology, I.P., within the scope of the project Refª UIDB/05583/2020. Furthermore, we would like to thank the Research Centre in Digital Services (CISeD) and the Instituto Politécnico de Viseu, for their support.
Citation
Gabriel, V.M.d.S., Neves, M.E.D., Vieira, E. and Reis, P.M.N. (2023), "Connectedness between low carbon portfolios, economy and finance: the role of pandemic crisis and Ukrainian war", Society and Business Review, Vol. 18 No. 3, pp. 463-483. https://doi.org/10.1108/SBR-06-2022-0179
Publisher
:Emerald Publishing Limited
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