Hedging climate risks with green assets

Oguzhan Cepni, Riza Demirer and Lavinia Rognone

Economics Letters, 2022, vol. 212, issue C

Abstract: Utilizing two novel measures of transition and physical climate risks obtained from textual analysis, we examine the hedging benefits of various green assets and popular precious metals against climate uncertainty. We find that green bonds stand out from the rest of the assets in our sample, including gold, exhibiting a consistent positive correlation with both types of climate risks. The findings suggest that green bonds can offer reliable safe haven benefits against climate uncertainty, providing new insight into the role of these assets not only as an investment that offers benefits associated with socially responsible investing, but also as a tool to manage climate risk exposures in investment portfolios.

Keywords: Climate risk; Asymmetric DCC-GARCH; Hedging; Green bonds; Precious metals (search for similar items in EconPapers)
JEL-codes: C22 D81 G15 Q42 Q54 Q56 (search for similar items in EconPapers)
Date: 2022
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (58)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:ecolet:v:212:y:2022:i:c:s0165176522000222

DOI: 10.1016/j.econlet.2022.110312

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