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Climate–biodiversity–finance nexus: Comparative evidence from the U.S. and China

Author

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  • Chen, Guorong
  • Xing, Xiaoyun
  • Deng, Jing

Abstract

This study investigates asymmetric spillover effects among climate policy uncertainty (CPU), biodiversity attention (BA), and financial markets (stocks, bonds, gold) in the U.S. and China across various market conditions. Utilizing a QVAR-DY framework with newly developed indices — China CPU (CCPU) and China BA (CBA) — we identify three key findings. (1) CCPU predominately exhibits spillovers to stocks during downturns and gold during upturns, while U.S. CPU primarily spills over bonds during extremes; CBA predominantly contributes to stocks’ variance under extremes, whereas U.S. BA spills over bonds during downturns and gold during upturns. (2) The spillover from CBA to CCPU surpasses the reverse during upturns. Spillovers from CCPU to CBA exceed U.S. counterparts, with CBA to CCPU spillovers surpassing the reverse during upturns. (3) Spillovers from CCPU to CBA and from UBA to U.S. CPU surged after 2021, with CCPU’s spillovers on financial markets peaking between August 2021–2022. CBA’s spillover to financial markets is weaker than that of UBA. The findings reveal different risk spillover patterns between the two economies, offering valuable insights for governments in formulating relevant policies, as well as for businesses and individuals in conducting financial risk management.

Suggested Citation

  • Chen, Guorong & Xing, Xiaoyun & Deng, Jing, 2025. "Climate–biodiversity–finance nexus: Comparative evidence from the U.S. and China," Finance Research Letters, Elsevier, vol. 86(PA).
    • Handle: RePEc:eee:finlet:v:86:y:2025:i:pa:s1544612325015259
    DOI: 10.1016/j.frl.2025.108271
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