Is it just green? Asymmetry behavior of returns in green investments

Green investments have gained significant attention over the past decade whether it be stocks or fixed-income securities. Such increasing coherence between the green assets is diluting diversification gains which is another reason for the increasing popularity of green investments. In this work, we examine returns comovement between green bonds and energy stocks of twelve different countries. Based on the sentimental aspect of these investments rather than sole profit orientation, we use a non-linear wavelet quantile correlation technique followed by a multiscale Sharpe ratio. Our results highlight that green bonds exhibit safe haven and hedging abilities against energy markets in all countries, except the US. Few countries show hedging and diversification benefits across varying periods. We further apply multiscale VaR and hedging effectiveness to add robustness to our analysis. Multiscale VaR ratios are generally higher in the short run than in the long run, indicating lower risk exposure for long-term investors. Our results carry implications regarding diversification within the green asset class (for investors) and sustainability (policymakers).