Dynamic dependence and network analysis between renewable energy tokens, sustainability-driven investments and equity markets: Implications for portfolio management

Sagheer Muhammad and Xiaoxia Huang

Renewable Energy, 2025, vol. 251, issue C

Abstract: As global markets transition toward a climate-resilient economy, policymakers, regulators, and investors are increasingly focusing on clean and renewable investment avenues. This study examines the time-varying interconnectedness and portfolio management between renewable energy tokens, sustainability-driven investments, and Gulf Cooperation Council (GCC) stock market indices using a set of methodologies namely, DY spillover index, quantile vector autoregression, and TVP-VAR frameworks. The results reveal that interconnectedness among these assets intensifies significantly under extreme market conditions, with spillover effects becoming more pronounced during crises such as the COVID-19 pandemic and the Russia–Ukraine war. Network analysis indicates that GCC stock indices primarily act as shock transmitters in bearish markets, while renewable energy tokens serve as net shock receivers in bullish conditions. Sustainable investments, particularly the Dow Jones Sustainability Index (DJSI), consistently transmit shocks, whereas the S&P Green Bond Index (SPGBI) remains a stable shock absorber across all market environments. Uncertainty indices, OVX and VIX, exhibit dynamic roles depending on market fluctuations. Additionally, portfolio analysis highlights the diversification potential of renewable energy tokens during health crises and the resilience of sustainable investments during geopolitical tensions. The findings offer valuable insights for investors and portfolio managers on asset allocation, hedging strategies, and risk management in sustainable financial markets.

Keywords: RE tokens; Sustainability-driven investments; Equity stocks; Interconnectedness; Portfolio implications (search for similar items in EconPapers)
JEL-codes: C58 F36 G11 (search for similar items in EconPapers)
Date: 2025
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Persistent link: https://EconPapers.repec.org/RePEc:eee:renene:v:251:y:2025:i:c:s0960148125009188

DOI: 10.1016/j.renene.2025.123256

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