Climate change has significantly impacted lives worldwide and prompted governments to adopt policies promoting sustainability and use of clean energy sources. This shift to clean energy has triggered increased investments in renewable energy and technologies.

Clean energy assets possess a unique advantage—they are not affected by parameters influencing their traditional stock market counterparts. However, the interactions between the clean energy and traditional stock markets are not well understood.

To fill this gap, a group of researchers led by Professor Sang Hoon Kang from Pusan National University explored the relationship between clean energy indices and major international stock markets. The researchers investigated if clean energy investments could provide stability when traditional stock markets experience turbulence. Their findings were published online on 10 July 2024 in the journal of Energy Economics.

The researchers used a method called tail quantile connectedness regression to study how different financial assets interacted, especially during extreme market conditions. This method let them examine how shocks from major stock indices like the SP500 and the FTSE100, as well as the Renewable Energy and Clean Technology Index (RECTI), affect other indices such as Japan's Nikkei225 and the Global Clean Energy Index (GCEI).

Prof. Kang explains, "Investors seek to protect their portfolios from volatility by diversifying with assets that don't follow the same trends as traditional stocks. Clean energy assets are promising for this purpose because they are influenced by different factors, such as government policies and technological advancements in renewable energy."

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