Can Geopolitical Risks Significantly Affect Green Finance? Evidence from Top Green Bond Issuer Countries

This chapter in applied financial econometrics investigates whether geopolitical risks have significant impacts on the extent of green finance. It contributes to modelling of spillovers between different commodity and asset markets by explicitly considering geopolitical risk, macroeconomic considerations, and carbon emissions. Based on multivariate fixed effects model estimations for top five green bond issuer countries (the United States, China, Germany, France, and Japan), our empirical results reveal a significant negative relationship between the green bond volume issuances and geopolitical risks. Our empirical results have considerable implications suggesting that investors should consider the geopolitical risks as one of indicators for green investment.