The Connectedness among Green Bonds and Other Asset Classes: Evidence from Emerging Markets

Öz

As climate change intensifies, current climate finance remains insufficient to achieve Paris Agreement goals, particularly in developing countries. Closing this gap requires greater international private capital involvement. However, uncertainties about climate finance instruments in developing markets challenge private investment. This study examines green bonds issued in emerging markets, analyzing their dependencies with debt, equity, and commodity markets using the cross-quantilogram method. Results reveal short-term positive dependencies between green bonds and equity and debt markets, indicating high cross-market contagion initially. Yet, these dependencies diverge after a week. While green bonds maintain a positive medium-term relationship with other debt instruments, their medium-term dependence on equity and commodities turns negative. This negative relationship strengthens under normal market conditions but weakens during extreme market events. These findings highlight green bonds' potential as diversification tools for equity and commodity investors in emerging markets. However, short-term contagion remains a challenge for regulators, demanding further analysis of financial stability implications.

Anahtar Kelimeler

• Green Bonds
• Emerging Markets
• Financial Contagion
• Portfolio Diversification
• Cross-Quantilogram
• Sustainable Finance

Yeşil Tahvillerin Diğer Yatırım Araçları ile İlişkisinin İncelenmesi: Gelişmekte Olan Piyasalar Örneği

Öz

İklim değişikliği etkileri şiddetlenirken mevcut finansman akışı, özellikle gelişmekte olan ülkelerde Paris Anlaşması hedeflerini karşılamaya yetersiz kalmaktadır. Bu açığın kapatılması için uluslararası özel sermayenin katılımı şarttır. Ancak gelişmekte olan ülkelerdeki iklim finansmanı araçlarına dair belirsizlikler, özel sermayenin katılımını zorlaştırmaktadır. Bu çalışma, gelişmekte olan piyasalarda ihraç edilen yeşil tahvillerin, diğer borçlanma araçları, pay ve emtia piyasalarıyla bağımlılığını Çapraz-Kantilogram yöntemiyle incelemektedir. Sonuçlara göre, kısa vadede yeşil tahvillerin pay ve borçlanma araçlarıyla pozitif bağımlılığı bulunmakta ve piyasa bulaşıcılığı yüksektir. Ancak bağımlılık zamanla ayrışmaktadır; yeşil tahvillerin orta vadede diğer borçlanma araçlarıyla pozitif bağımlılığı sürerken, pay ve emtia piyasalarıyla ilişkisi negatif yönde gelişmektedir. Ayrıca, olağan piyasa koşullarında bu negatif bağımlılık güçlenirken, aşırı koşullarda zayıflamaktadır. Bulgular, gelişmekte olan piyasalar yeşil tahvilin portföy çeşitlendirmesi için potansiyelini ortaya koymaktadır. Kısa vadede gözlenen bulaşıcılık finansal istikrar açısından önem taşımakta ve regülatörlerin bu konuda dikkatli olması, risk aktarım mekanizmalarının ve risk-getiri performanslarının daha ayrıntılı incelenmesi gerekmektedir.

Anahtar Kelimeler

• Yeşil Tahviller
• Gelişmekte Olan Piyasalar
• Finansal Bulaşma
• Portföy Çeşitlendirmesi
• Çapraz Kantilogram
• Sürdürülebilir Finans

Kaynakça

1. Amerasinghe, N.M., Thwaites, J., Larsen, G. and Ballesteros, A. (2017). Future of the funds: Exploring the architecture of multilateral climate finance. Retrieved from https://www.wri.org/research/future-funds-exploring-architecture-multilateral-climate-finance
2. Amighini, A., Giudici, P. and Ruet, J. (2022). Green finance: An empirical analysis of the green climate fund portfolio structure. Journal of Cleaner Production, 350, 131383-131383. https://doi.org/10.1016/j.jclepro.2022.131383
3. Amundi and IFC. (2021). Emerging market green bonds report 2021. Retrieved from https://www.ifc.org/content/dam/ifc/doc/mgrt/202206-emerging-market-green-bonds-report-2021-vf-2.pdf
4. Bacon, C.R. (2004). Practical portfolio performance measurement and attribution. USA: John Wiley & Sons.
5. Bansal, R., Ochoa, M. and Kiku, D. (2016). Climate change and growth risks (NBER Working Paper Series No. 23009). Retrieved from http://www.nber.org/papers/w23009
6. Baur, D.G. and Lucey, B.M. (2010). Is gold a hedge or a safe haven? An analysis of stocks, bonds and gold. Financial Review, 45(2), 217-229. https://doi.org/https://doi.org/10.1111/j.1540-6288.2010.00244.x
7. Benedetti, D., Biffis, E., Chatzimichalakis, F., Fedele, L.L. and Simm, I. (2019). Climate change investment risk: Optimal portfolio construction ahead of the transition to a lower-carbon economy. Annals of Operations Research, 299(1-2), 847-871. https://doi.org/10.1007/s10479-019-03458-x
8. Buchner, B., Naran, B., Fernandes, P., Padmanabhi, R., Rosane, P., Solomon, M., … Guzmán, S. (2021). Global landscape of climate finance 2021. Retrieved from https://www.climatepolicyinitiative.org/publication/global-landscape-of-climate-finance-2021/

9. Chatziantoniou, I., Abakah, E.J.A., Gabauer, D. and Tiwari, A.K. (2022). Quantile time–frequency price connectedness between green bond, green equity, sustainable investments and clean energy markets. Journal of Cleaner Production, 361, 132088–132088. https://doi.org/10.1016/j.jclepro.2022.132088
10. Cuculiza, C., Kumar, A., Xin, W. and Zhang, C. (2021). Climate change, analyst forecasts, and market behavior. Retrieved from https://doi.org/10.2139/ssrn.3781157
11. Elsayed, A.H., Naifar, N., Nasreen, S. and Tiwari, A.K. (2022). Dependence structure and dynamic connectedness between green bonds and financial markets: Fresh insights from time-frequency analysis before and during COVID-19 pandemic. Energy Economics, 107, 105842. https://doi.org/10.1016/j.eneco.2022.105842
12. Fama, E.F. (1965). The behavior of stock-market prices. The Journal of Business, 38(1), 34-105. Retrieved from http://www.jstor.org/stable/2350752
13. Ferrer, R., Shahzad, S.J.H. and Soriano, P. (2021). Are green bonds a different asset class? Evidence from time-frequency connectedness analysis. Journal of Cleaner Production, 292, 125988. https://doi.org/10.1016/j.jclepro.2021.125988
14. Giglio, S.W., Maggiori, M., Stroebel, J. and Weber, A. (2018). Long-run discounting and climate change: Evidence from real estate (Chicago Booth Research Paper No. 17-22). https://doi.org/10.2139/ssrn.2639748
15. Giglio, S., Kelly, B. and Stroebel, J. (2021). Climate finance. Annual Review of Financial Economics, 13(1), 15-36. https://doi.org/10.1146/annurev-financial-102620-103311
16. Glomsrød, S. and Wei, T. (2018). Business as unusual: The implications of fossil divestment and green bonds for financial flows, economic growth and energy market. Energy for Sustainable Development, 44, 1-10. https://doi.org/10.1016/j.esd.2018.02.005
17. Han, H., Linton, O., Oka, T. and Whang, Y.-J. (2016). The cross-quantilogram: Measuring quantile dependence and testing directional predictability between time series. Journal of Econometrics, 193(1), 251-270. https://doi.org/10.1016/j.jeconom.2016.03.001
18. Harrison, C., Chouhan, N., Costa, D., MacGeoch, M. and Xu, X. (2023). Sustainable debt market summary. Retrieved from https://www.climatebonds.net/resources/reports/h1-market-report-2023
19. Huynh, T.D. and Xia, Y. (2020). Climate change news risk and corporate bond returns. Journal of Financial and Quantitative Analysis, 56(6), 1985-2009. https://doi.org/10.1017/s0022109020000757
20. IFC & Amundi. (2023). Emerging market green bonds report 2022. Retrieved from https://www.ifc.org/en/insights-reports/2023/emerging-market-green-bonds-report
21. International Capital Markets Association. (2021). Green bond principles voluntary process guidelines for issuing green bonds. Retrieved from https://www.icmagroup.org/sustainable-finance/the-principles-guidelines-and-handbooks/green-bond-principles-gbp/
22. IPCC. (2021). Summary for policymakers 2021. https://doi.org/10.1017/9781009157896.001
23. IPCC. (2023). Summary for policymakers 2023. Retrieved from https://www.ipcc.ch/report/ar6/syr/downloads/report/IPCC_AR6_SYR_SPM.pdf
24. Global Index Research. (2022). J.P. Morgan EM GB diversified indices. Retrieved from https://www.jpmorgan.com/content/dam/jpm/cib/complex/content/markets/composition-docs/jpmorgan-green-bond-index.pdf
25. Karim, S., Naeem, M.A., Hu, M., Zhang, D. and Taghizadeh-Hesary, F. (2022). Determining dependence, centrality, and dynamic networks between green bonds and financial markets. Journal of Environmental Management, 318, 115618. https://doi.org/10.1016/j.jenvman.2022.115618
26. Komsta, L. and Novomestky, F. (2022). Moments: Moments, cumulants, skewness, kurtosis and related tests. https://doi.org/10.32614/CRAN.package.moments
27. Krueger, P., Sautner, Z. and Starks, L.T. (2019). The importance of climate risks for institutional investors. Retrieved from https://doi.org/10.2139/ssrn.3235190
28. Liu, N., Liu, C., Da, B., Zhang, T. and Guan, F. (2021). Dependence and risk spillovers between green bonds and clean energy markets. Journal of Cleaner Production, 279, 123595. https://doi.org/10.1016/j.jclepro.2020.123595
29. Lundgren, A.I., Milicevic, A., Uddin, G.S. and Kang, S.H. (2018). Connectedness network and dependence structure mechanism in green investments. Energy Economics, 72, 145-153. https://doi.org/10.1016/j.eneco.2018.04.015
30. Markowitz, H. (1952). Modern portfolio theory. Journal of Finance, 7(11), 77-91. Retrieved from https://www.raymondjames.com/
31. Martinez-Diaz, L. and Keenan, J.M. (2020). Managing climate risk in the US financial system. Retrieved from https://www.cftc.gov/sites/default/files/2020-09/9-9-20%20Report%20of%20the%20Subcommittee%20on%20Climate-Related%20Market%20Risk%20-%20Managing%20Climate%20Risk%20in%20the%20U.S.%20Financial%20System%20for%20posting.pdf
32. Naeem, M.A., Farid, S., Ferrer, R. and Shahzad, S.J.H. (2021). Comparative efficiency of green and conventional bonds pre- and during COVID-19: An asymmetric multifractal detrended fluctuation analysis. Energy Policy, 153, 112285. https://doi.org/10.1016/j.enpol.2021.112285
33. Nguyen, T.T.H., Naeem, M.A., Balli, F., Balli, H.O. and Vo, X.V. (2021). Time-frequency comovement among green bonds, stocks, commodities, clean energy, and conventional bonds. Finance Research Letters, 40, 101739. https://doi.org/10.1016/j.frl.2020.101739
34. Office of Financial Research. (n.d.). OFR financial stress index. Retrieved from https://www.financialresearch.gov/financial-stress-index/
35. Oka, T. (2022). Quantilogram: Cross-quantilogram. Retrieved from https://CRAN.R-project.org/package=quantilogram
36. Patton, A., Politis, D.N. and White, H. (2009). Correction to “Automatic block-length selection for the dependent bootstrap” by D. Politis and H. White. Econometric Reviews, 28(4), 372-375. https://doi.org/10.1080/07474930802459016
37. Peterson, B.G. and Carl, P. (2020). Performance analytics: Econometric tools for performance and risk analysis. Retrieved from https://CRAN.R-project.org/package=PerformanceAnalytics
38. Pham, L. (2021). Frequency connectedness and cross-quantile dependence between green bond and green equity markets. Energy Economics, 98, 105257. https://doi.org/10.1016/j.eneco.2021.105257
39. Politis, D.N. and Romano, J.P. (1994). The stationary bootstrap. Journal of the American Statistical Association, 89(428), 1303-1313. https://doi.org/10.2307/2290993
40. Politis, D.N. and White, H. (2004). Automatic block-length selection for the dependent bootstrap. Econometric Reviews, 23(1), 53-70. https://doi.org/10.1081/ETC-120028836
41. Reboredo, J.C. (2018). Green bond and financial markets: Co-movement, diversification and price spillover effects. Energy Economics, 74, 38-50. https://doi.org/10.1016/j.eneco.2018.05.030
42. Sautner, Z., Van Lent, L., Vilkov, G. and Zhang, R. (2023). Firm‐level climate change exposure. The Journal of Finance, 78(3), 1449-1498. https://doi.org/10.1111/jofi.13219
43. Trapletti, A., Hornik, K. and LeBaron, B. (2023). Tseries: Time series analysis and computational finance. https://doi.org/10.32614/CRAN.package.tseries
44. Uddin, G.S., Rahman, M.L., Hedström, A. and Ahmed, A. (2019). Cross-quantilogram-based correlation and dependence between renewable energy stock and other asset classes. Energy Economics, 80, 743-759. https://doi.org/10.1016/j.eneco.2019.02.014
45. Ulrich, J. (2021). TTR: Technical trading rules. Retrieved from https://CRAN.R-project.org/package=TTR
46. UNFCCC. (1992). United Nations conference on environment and development: Framework convention on climate change. International Legal Materials, 31(4), 849-873. Retrieved from http://www.jstor.org/stable/20693716
47. Wuertz, D., Setz, T., Chalabi, Y., Maechler, M., Boshnakov, G.N. and Boshnakov, M.G.N. (2023). Time series: Financial time series objects (Rmetrics). Retrieved from https://CRAN.R-project.org/package=timeSeries