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<p>The Indian government’s efforts to reduce carbon emissions through green projects have brought green investments to the forefront. However, these green investments are subject to market risks such as commodities, foreign exchange, equity, and interest rate fluctuations. Understanding how these risks impact price discovery in green indices is crucial, as the relatively new nature of these investments makes them vulnerable to cross-market dynamics. We analyse daily data from April 2014 to December 2023. Using Wavelet Coherence, Partial Wavelet Coherence and wavelet correlation the study reveals significant spillovers of market risk proxies on green investments, as reflected in the CARBONEX and GREENEX indices. Notably, commodities like crude oil, gold, silver and aluminium exhibit strong co-movements with CARBONEX and GREENEX, particularly during periods of COVID-19 crises, indicating their role as leading indicators. Furthermore, longer-term U.S. government bond yields (10-year and 5-year) serve as precursors for green equity returns over the long and medium term. COVID period witnesses’ strong co-movement of S&amp;P 500, Russell 2000, and NASDAQ 100 with CARBONEX and GREENEX across all time-frequency scales. Forex pairs AUD/USD, GBP/USD and CAD/USD lead CARBONEX and GREENEX over all durations during COVID. Significant, though moderate, comovement was observed during the Chinese stock market crash, Brexit, and the Russia-Ukraine war. Overall, varying degrees of integration between commodity, conventional equity, forex, interest rates and green equity indices suggest differential sensitivity to financial shocks across time scales.</p> Graphical Abstract <p></p>

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Navigating Market Risks in Green Investments in India: An Evaluation of Interest Rate, Equity, Commodity, and Forex Market Influences

  • 期刊论文

  • 发表日期：

    2025年6月28日

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  • Rupinder Katoch,
  • Ubaid Ahmad Peer

摘要

The Indian government’s efforts to reduce carbon emissions through green projects have brought green investments to the forefront. However, these green investments are subject to market risks such as commodities, foreign exchange, equity, and interest rate fluctuations. Understanding how these risks impact price discovery in green indices is crucial, as the relatively new nature of these investments makes them vulnerable to cross-market dynamics. We analyse daily data from April 2014 to December 2023. Using Wavelet Coherence, Partial Wavelet Coherence and wavelet correlation the study reveals significant spillovers of market risk proxies on green investments, as reflected in the CARBONEX and GREENEX indices. Notably, commodities like crude oil, gold, silver and aluminium exhibit strong co-movements with CARBONEX and GREENEX, particularly during periods of COVID-19 crises, indicating their role as leading indicators. Furthermore, longer-term U.S. government bond yields (10-year and 5-year) serve as precursors for green equity returns over the long and medium term. COVID period witnesses’ strong co-movement of S&P 500, Russell 2000, and NASDAQ 100 with CARBONEX and GREENEX across all time-frequency scales. Forex pairs AUD/USD, GBP/USD and CAD/USD lead CARBONEX and GREENEX over all durations during COVID. Significant, though moderate, comovement was observed during the Chinese stock market crash, Brexit, and the Russia-Ukraine war. Overall, varying degrees of integration between commodity, conventional equity, forex, interest rates and green equity indices suggest differential sensitivity to financial shocks across time scales.

Graphical Abstract