Systemic Tail Dependence Between Biodiversity, Clean Energy, and Financial Transition Assets: A Partial Correlation-Based Network Approach

Nader Naifar () and Mohammed Alhashim
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Nader Naifar: Department of Finance, College of Business, Imam Mohammad ibn Saud Islamic University (IMSIU), Riyadh 11564, Saudi Arabia
Mohammed Alhashim: Department of Finance, College of Business Administration, King Saud University, Riyadh 11451, Saudi Arabia

Sustainability, 2025, vol. 17, issue 14, 1-18

Abstract: This study investigates the systemic tail dependence among biodiversity, clean energy, and financial transition assets using a novel partial correlation-based network approach. Analyzing eleven indices from 2019 to 2025, we capture dynamic connectedness across normal and extreme market conditions. Empirical findings indicate that clean energy assets form a central hub of connectedness, while biodiversity-linked instruments increasingly influence systemic behavior under stress. Events such as the COVID-19 vaccine rollout, the Russia–Ukraine war, and El Niño intensify these dynamics. Compared to the traditional Generalized Forecast Error Variance Decomposition (GFEVD) framework, our approach better detects short-term shocks, offering actionable insights for climate-aware investment and risk management.

Keywords: biodiversity risk; clean energy; tail dependence; partial correlation network (search for similar items in EconPapers)
JEL-codes: O13 Q Q0 Q2 Q3 Q5 Q56 (search for similar items in EconPapers)
Date: 2025
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