In the quest for a sustainable future, comprehending the interaction between conventional energy sources such as crude oil and the expanding realm of sustainable investments is essential, especially in emerging economies like India, where energy dependence and climate commitments exist in a fragile equilibrium. In particular, this paper aims to explore return co-movement and asymmetric volatility spillover between oil price uncertainty and green stocks in India and analyze how the market crises shape this dynamic relation.
This study used the Oil Volatility Index and green stock indices, specifically BSE GREENEX, BSE CARBONEX and BSE ESG 100, within the Bombay Stock Exchange of India from 2019 to 2023, including COVID-19 and the Russia–Ukraine war, and uses two sophisticated methods: wavelet coherence and asymmetric time-varying parameter vector autoregression.
The findings indicate that green investments are not entirely shielded from oil price uncertainty. Instead, their response to oil uncertainty is contingent upon prevailing market sentiment, which tends to be heightened during global events such as the COVID-19 pandemic. Furthermore, the result confirms the existence of asymmetry in oil shock spillover.
The reliance compromises the stability and attractiveness of green investments, posing a constraint to the attainment of Sustainable Development Goals (SDGs), particularly concerning climate action and clean energy objectives. Enhancing energy diversity and safeguarding green financing from oil fluctuations are essential for sustainable financial resilience.
This study presents a social risk by potentially restricting the involvement of socially responsible investors in green finance, hindering the transition to a low-carbon economy. Thus, ensuring the stability of green financial markets is essential for building public trust and facilitating broader societal changes toward the achievement of the SDGs.
This study uniquely contributes to the literature by analyzing the dynamic relationship between crude oil price uncertainty and green stocks in the Indian market, where the interaction between traditional energy reliance and sustainable financing remains underexplored.
