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Dynamic Interconnectedness of ESG Indices and Crude Oil Prices: A Wavelet Coherence Approach in Asia‐Pacific Markets

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  • Chandan Sharma
  • Priya Rani

Abstract

This study examines the interconnectedness between crude oil prices and ESG (environmental, social, and governance) indices in major Asian economies, using wavelet coherence analysis to explore their dynamic co‐movements. The analysis includes daily data from January 2019 to March 2024 for nine economy‐specific ESG indices, an ASEAN regional ESG index, and the Dow Jones Brent Crude Oil Index. Wavelet coherence results reveal high coherence amidst ESG indices and the crude oil index during the COVID‐19 pandemic, indicating a significant synchronized impact on global markets. Post‐2020, the relationship becomes more variable, with intermittent coherence reflecting different phases of economic recovery and responses to new market conditions. Notably, ESG indices often lead crude oil prices, suggesting that they respond anticipatorily to economic signals, sustainability trends, and policy changes. The results highlight the complex and diverse relationships between oil prices and ESG indices. This underscores important implications for investors and policy‐makers striving to balance sustainability goals with economic stability. By contributing to the understanding of regional market dynamics, this research offers valuable insights for developing resilient investment strategies and policies in the context of sustainable finance in Asia.

Suggested Citation

  • Chandan Sharma & Priya Rani, 2025. "Dynamic Interconnectedness of ESG Indices and Crude Oil Prices: A Wavelet Coherence Approach in Asia‐Pacific Markets," Australian Economic Papers, Wiley Blackwell, vol. 64(3), pages 289-298, September.
    • Handle: RePEc:bla:ausecp:v:64:y:2025:i:3:p:289-298
    DOI: 10.1111/1467-8454.12392
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    Cited by:

    1. Tomiwa Sunday Adebayo, 2026. "Who leads, who follows? A multiscale nonparametric quantile causality analysis of ESG uncertainty and implied volatility indices," Review of Financial Economics, John Wiley & Sons, vol. 44(2), April.
    2. Meng Qin & Cheng‐To Lin & Chi‐Wei Su & Santiago Budría, 2026. "Towards Sustainability Under Crude Dynamics: Exploring the Relation Between Oil Price and Sustainable Uncertainty," Sustainable Development, John Wiley & Sons, Ltd., vol. 34(4), pages 5162-5178, August.

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