Green bonds & clean energy in sustainable finance: Evidence from DCC-GARCH connectedness

Konstantinos Konstantakis, Pavlos Koulmas, Panayotis Michaelides, Thomas Porcher and Arsenios-Georgios N. Prelorentzos

International Review of Financial Analysis, 2025, vol. 103, issue C

Abstract: The paper examines green bonds and their relationship with clean energy and financial markets. With the world economy shifting towards a climate change-resilient model, green bonds—securities that finance environmentally friendly projects—are still in demand. Nonetheless, green bonds can still be considered a small portion of the overall bond market share. This paper establishes the transmission of the green bond market and its interaction with other financial assets such as metals, rare elements, and energy commodities by means of DCC-GARCH connectedness. Our paper estimates the degree of spillovers and dependencies among various green asset classes. We use a powerful approach that takes into account both cross-sectional and dynamic effects. The analysis shows that green bonds hold a central position in impacting other assets within the system, including commodities, clean energy, and oil. This suggests that green bonds function not only as standalone financial instruments but also offer diversification and hedging benefits. The findings offer valuable insights for investors aiming to manage sustainable portfolios and increase funds for low-carbon projects.

Keywords: Green bonds; Climate bonds; Clean energy; DCC-GARH; Connectedness (search for similar items in EconPapers)
Date: 2025
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Persistent link: https://EconPapers.repec.org/RePEc:eee:finana:v:103:y:2025:i:c:s1057521925002558

DOI: 10.1016/j.irfa.2025.104168

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