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Systemic Tail Dependence Between Biodiversity, Clean Energy, and Financial Transition Assets: A Partial Correlation-Based Network Approach

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  • Nader Naifar

    (Department of Finance, College of Business, Imam Mohammad ibn Saud Islamic University (IMSIU), Riyadh 11564, Saudi Arabia)

  • Mohammed Alhashim

    (Department of Finance, College of Business Administration, King Saud University, Riyadh 11451, Saudi Arabia)

Abstract

This study investigates the systemic tail dependence among biodiversity, clean energy, and financial transition assets using a novel partial correlation-based network approach. Analyzing eleven indices from 2019 to 2025, we capture dynamic connectedness across normal and extreme market conditions. Empirical findings indicate that clean energy assets form a central hub of connectedness, while biodiversity-linked instruments increasingly influence systemic behavior under stress. Events such as the COVID-19 vaccine rollout, the Russia–Ukraine war, and El Niño intensify these dynamics. Compared to the traditional Generalized Forecast Error Variance Decomposition (GFEVD) framework, our approach better detects short-term shocks, offering actionable insights for climate-aware investment and risk management.

Suggested Citation

  • Nader Naifar & Mohammed Alhashim, 2025. "Systemic Tail Dependence Between Biodiversity, Clean Energy, and Financial Transition Assets: A Partial Correlation-Based Network Approach," Sustainability, MDPI, vol. 17(14), pages 1-18, July.
    • Handle: RePEc:gam:jsusta:v:17:y:2025:i:14:p:6568-:d:1704644
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