Hedging Climate Risks with Green Assets

Oguzhan Cepni; Riza Demirer; Lavinia Rognone

doi:10.1016/j.econlet.2022.110312

Hedging Climate Risks with Green Assets

Oguzhan Cepni, Riza Demirer^*, Lavinia Rognone

^*Corresponding author for this work

Department of Economics

Research output: Contribution to journal › Journal article › Research › peer-review

Abstract

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 language	English
Article number	110312
Journal	Economics Letters
Volume	212
Number of pages	5
ISSN	0165-1765
DOIs	https://doi.org/10.1016/j.econlet.2022.110312
Publication status	Published - Mar 2022

Keywords

Climate risk
Asymmetric DCC-GARCH
Hedging
Green bonds
Precious metals

UN SDGs

This output contributes to the following UN Sustainable Development Goals (SDGs)

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Cite this

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title = "Hedging Climate Risks with Green Assets",

abstract = "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.",

keywords = "Climate risk, Asymmetric DCC-GARCH, Hedging, Green bonds, Precious metals, Climate risk, Asymmetric DCC-GARCH, Hedging, Green bonds, Precious metals",

author = "Oguzhan Cepni and Riza Demirer and Lavinia Rognone",

year = "2022",

month = mar,

doi = "10.1016/j.econlet.2022.110312",

language = "English",

volume = "212",

journal = "Economics Letters",

issn = "0165-1765",

publisher = "Elsevier",

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TY - JOUR

T1 - Hedging Climate Risks with Green Assets

AU - Cepni, Oguzhan

AU - Demirer, Riza

AU - Rognone, Lavinia

PY - 2022/3

Y1 - 2022/3

N2 - 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.

AB - 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.

KW - Climate risk

KW - Asymmetric DCC-GARCH

KW - Hedging

KW - Green bonds

KW - Precious metals

KW - Climate risk

KW - Asymmetric DCC-GARCH

KW - Hedging

KW - Green bonds

KW - Precious metals

U2 - 10.1016/j.econlet.2022.110312

DO - 10.1016/j.econlet.2022.110312

M3 - Journal article

SN - 0165-1765

VL - 212

JO - Economics Letters

JF - Economics Letters

M1 - 110312

ER -