Dependency and Risk Spillover of China’s Industrial Structure Under the Environmental, Social, and Governance Sustainable Development Framework

Yucui Li, Piyapatr Busababodhin and Supawadee Wichitchan ()
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Yucui Li: Department of Mathematics, Faculty of Science, Mahasarakham University, Maha Sarakham 44150, Thailand
Piyapatr Busababodhin: Department of Mathematics, Faculty of Science, Mahasarakham University, Maha Sarakham 44150, Thailand
Supawadee Wichitchan: Department of Mathematics, Faculty of Science, Mahasarakham University, Maha Sarakham 44150, Thailand

Sustainability, 2025, vol. 17, issue 10, 1-22

Abstract: With the growing global emphasis on sustainable development goals, Environmental, Social, and Governance (ESG) factors have emerged as critical considerations in shaping economic policies and strategies. This study employs the ARMA-eGARCH-skewed t and Vine Copula models, combined with the CoVaR method, to investigate the dependence structure and risk spillover pathways across various industrial sectors in China within the ESG framework. By modeling the complex interdependencies among sectors, this research uncovers the relationships between individual industries and the ESG benchmark index, while also analyzing the correlations across different sectors. Furthermore, this study quantifies the risk contagion effects across distinct industries under extreme market conditions and maps the pathways of risk spillovers. The findings highlight the pivotal role of ESG considerations in shaping industrial structures. Empirical results demonstrate that industries such as agriculture, energy, and manufacturing exhibit significant systemic risk characteristics in response to ESG fluctuations. Specifically, the identified risk spillover pathway follows the sequence: agriculture → consumption → ESG → manufacturing → energy. The CoVaR values for agriculture, energy, and manufacturing indicate a significant potential for risk contagion. Moreover, sectors such as real estate, finance, and information technology exhibit significant risk spillover effects. These findings offer valuable empirical evidence and a theoretical foundation for formulating ESG-related policies. This study suggests that effective risk management, promoting green finance, encouraging technological innovation, and optimizing industrial structures can significantly mitigate systemic risks. These measures can contribute to maintaining industrial stability and fostering sustainable economic development.

Keywords: ESG; industrial structure; vine copula; dependency; risk spillover (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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