Hedging Climate Risks with Green Assets

Oguzhan Cepni, Riza Demirer*, Lavinia Rognone

*Corresponding author for this work

Research output: Contribution to journalJournal articleResearchpeer-review


Utilizing two novel measures of transition and physical climate risks obtained from textual analysis, we examine the hedging benefits of various green assets and popular precious metals against climate uncertainty. We find that green bonds stand out from the rest of the assets in our sample, including gold, exhibiting a consistent positive correlation with both types of climate risks. The findings suggest that green bonds can offer reliable safe haven benefits against climate uncertainty, providing new insight into the role of these assets not only as an investment that offers benefits associated with socially responsible investing, but also as a tool to manage climate risk exposures in investment portfolios.
Original languageEnglish
Article number110312
JournalEconomics Letters
Number of pages5
Publication statusPublished - Mar 2022


  • Climate risk
  • Asymmetric DCC-GARCH
  • Hedging
  • Green bonds
  • Precious metals

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