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The response of green energy and technology investment to climate policy uncertainty: An application of twin transitions strategy

Shaiara Husain, Kazi Sohag () and Yanrui Wu

Technology in Society, 2022, vol. 71, issue C

Abstract: Twin transition strategy enforces the indisputable complementary relationship between green and digital transitions. This socio-technical process necessitates a paradigmatic shift to translate policy related uncertainties into twin transition strategies. With this background, the present study investigates the responsiveness of green markets to climate policy uncertainty (CPU) in the US economy by applying the cross-quantilogram approach and recently devised indices of CPU, green equity and green bond from July 30, 2014 to March 31, 2021. The empirical findings demonstrate that the asymmetric relationship between green financial investment and CPU is positively related in the longer memory during period of high uncertainty. At the bearish state of the market, the responsiveness of green equity returns to CPU is profound compared to green equities in the medium memory. In general, CPU provides more opportunities in the green equity market than in the green bond market. The asymmetric behaviour is more prominent in the long run, implying that both green bond and green equity indices demonstrate higher portfolio performance in the long term than in the short term. This study shows that CPU provides a better explanation for green market responsiveness than other uncertainty indices.

Keywords: Climate policy uncertainty; Social innovation; Green bond; Green equity; Spillover; Cross-quantilogram (search for similar items in EconPapers)
JEL-codes: G0 G1 O35 Q4 (search for similar items in EconPapers)
Date: 2022
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Persistent link: https://EconPapers.repec.org/RePEc:eee:teinso:v:71:y:2022:i:c:s0160791x22002731

DOI: 10.1016/j.techsoc.2022.102132

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