Abstract
This paper examines the relationship between clean energy stock indices and energy metals that are sensitive to the growth in demand for clean energy solutions, and makes inferences about whether energy metals can act as hedges or safe havens for clean energy stock indices. The sample period is April 2011 to April 2021, a period which saw substantial investments into the clean energy industry as the capital deployed to clean energy generation during this period was about three times higher than the preceding decade. The main results indicate statistically significant non-linear relationships among the markets under study. All energy metals, except cobalt, have a significant positive linkage with clean energy stock indices and such associations do hold during episodes of high volatility. While none of the energy metals under study acts as a hedge for clean energy stock markets, the results support previous evidence on the hedging properties of precious metals, showing that gold and silver serve as hedges for certain clean energy stock indices. These results have important implications amid tremendous growth in clean energy stock investments and the repeating occurrence of periods of uncertainty.
Highlights
Climate change and environmental degradation have been widely acknowledged by state actors, international organizations, and the general public as being urgent issues for the planet
The findings suggest that stock market volatility (VIX), oil prices and oil price volatility (OVX) are, in that order, the most effective hedges for clean energy stock risk
The results show that stock market index choice matters when analysing the link between clean energy stocks and commodity prices as oil is the better hedge for the Wilderhill Clean Energy Index, of the two, while gold is the better hedge for the S&P Global Clean Energy Index
Summary
Climate change and environmental degradation have been widely acknowledged by state actors, international organizations, and the general public as being urgent issues for the planet. Over the past 15 years, national governments, legislators, international organizations, and many industries have joined forces to find efficient and cleaner production solutions capable of reducing greenhouse gas (GHG) emissions. A large amount of investments have been poured into cleaner energies, leading to the development of a new massive industry around clean energy. The appearance of clean energy as an alternative to fossil fuels disrupts technology in a way akin to high growth technology companies. It is hardly a surprise that most literature concerning the relationship between clean energy and other markets is focused on oil and technology companies. As investors opt out of fossil fuels and the clean energy sector matures, oil and technology stocks become less relevant for the sector [5,6] and the role of other (non-energy) commodities becomes more pertinent for market participants
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