 Do green bonds de-risk investment in low-carbon stocks?Juan Reboredo,
Andrea Ugolini and
Javier Ojea-Ferreiro
Economic Modelling, 2022, vol. 108, issue C 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. Keywords: Green bonds; Low-carbon stocks; de-risking; Copulas; Expected shortfall (search for similar items in EconPapers) Downloads: (external link) Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: https://EconPapers.repec.org/RePEc:eee:ecmode:v:108:y:2022:i:c:s0264999322000116 DOI: 10.1016/j.econmod.2022.105765 Access Statistics for this article Economic Modelling is currently edited by S. Hall and P. Pauly More articles in Economic Modelling from Elsevier |
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