Dynamic relationship between green bonds and major financial asset markets from the perspective of climate change

Abstract

After the signing of the Paris Agreement, countries around the world paid more attention to climate change and made more efforts to enact policies. Under the dual pressure of policy and environment, each market is affected to different degrees. At the same time, as a new environmental protection tool, the green bond rose to prominence, causing a shock to various markets, but also has a certain hedging role. However, there are few studies on the dynamic co-movement and risk spillover effect between green bonds and stock markets, crude oil and gold in the existing literature. Therefore, it is necessary to explore the changes in the relationship between various markets for the reasonable avoidance of climate risks. Based on the relationship between the three green investment instruments (S&P green Bond, China Green Bond and climate bond) and the three markets, this paper adds the impact analysis on climate risk and policy risk. The conclusions obtained not only have guiding significance for investors interested in environmental protection in asset allocation and hedge selection, but also have reference significance for policymakers who want to realize green investment, which helps smooth the transition to a low-carbon economy.