Green bonds and other assets: Evidence from extreme risk transmission

Muhammad Abubakr Naeem, Thomas Conlon, John Cotter

Research output: Contribution to journalArticlepeer-review

77 Citations (Scopus)


Green bonds (GB) are gaining a prominent role in sustainable development because of their ability to fund environment-friendly projects. This study aims to investigate if investors can benefit from the risk diversification properties of including GB with other assets, particularly within the context of the ongoing COVID-19 pandemic. To do so, we utilize a quantile-connectedness approach to examine a set of GB and traditional assets, i.e., commodities, stocks, and bonds, from 2008 to 2020. We find higher total time-varying risk spillovers during extreme high volatility periods than those with average and low volatility. For pairwise risk spillovers, GB offers more diversification opportunities when volatility is very low. Nevertheless, the diversification benefits increase during the COVID period. The strong bidirectional risk spillovers between GB and conventional bonds imply that GB can be considered a good alternative to traditional bonds while benefiting from their diversification potential, particularly with energy and agriculture. Our findings are useful for investors wishing to implement green diversification portfolio strategies in extreme volatility periods and act as an encouragement to policymakers to establish efficient policies to promote green finance.

Original languageEnglish
Article number114358
JournalJournal of Environmental Management
Publication statusPublished - Mar 1 2022


  • COVID-19
  • Diversification benefits
  • Extreme risk spillovers
  • Green bonds

ASJC Scopus subject areas

  • Environmental Engineering
  • Waste Management and Disposal
  • Management, Monitoring, Policy and Law


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