Downside and upside risk spillovers between green finance and energy markets

This paper aims to build an incentive to mobilize the financial resources needed to accelerate the transition to a climate resilient economy. To this end, we examine the dependence structure using copulas theory and then the risk transmissions between green financial products and the energy commodity market index. This methodology provides opportunities to investors in green finance to protect their portfolios against downside or upside risk by taking long or long position. In our empirical study for the period July 2014 to September 2020, marginal equities show a long memory in the volatility process captured by FIGARCH model, justifying by the various crisis, the last of which is the ongoing COVID-19 pandemic. Using VaRs and CoVaRs measures, we find that green instruments (mainly the green bonds) are significantly affected by substantial price spillovers from energy commodity market during critical periods. Many obstacles to set up investments’ opportunities are discussed.