Dynamic interrelations and the potential of global industrial sectors to function as a refuge for the global transition towards a low-carbon economy

The article analyzes the interconnections among ten global industrial sectors and the returns associated with low-carbon investments across a spectrum of investment horizons. The findings derived from a time-varying parameter and quantile connectedness reveal that volatility primarily stems from transient economic and financial events rather than lasting structural changes within the market. The global low-carbon returns exhibit a remarkable resilience against the volatility inherent in the global industrial sectors across diverse market conditions and within various temporal frameworks. The findings from cross-quantilograms indicate that during periods of reduced low-carbon emissions, the utilities, consumer staples, energy, materials, financial, and communication sectors act to hedge against losses, thus providing potential stability to investors seeking refuge during economic downturns. Additionally, the estimation results reveal a significant influence of monetary policy and bitcoin valuation on connectedness. A tightening monetary policy is inversely linked, and this effect is more pronounced in a declining market. Similarly, the increase in bitcoin valuations diminishes interconnectedness, indicating that cryptocurrencies may serve as alternative investment vehicles during episodes characterized by market turbulence. Overall, the outcome highlights the importance of integrating financial strategies that align with environmental sustainability.