The dynamics between clean energy, green bonds, grain commodities, and cryptocurrencies: evidence from correlation and portfolio hedging

This study explores the dynamic interconnections among sustainable assets (clean energy, green bonds), grain commodities, and cryptocurrencies, anchored in theories of financial contagion, commodity market financialization, and sustainable investment. Employing TVP-VAR-DY and TVP-VAR-BK methods, we analyze time- and frequency-varying connectedness during the COVID-19 pandemic, elucidating how systemic shocks reshape risk transmission across these asset classes. The pandemic markedly intensified market linkages, with corn, soybeans, and the S&P Clean Energy Index consistently transmitting spillover shocks, propelled by biofuel demand and policy sensitivity. Notably, brown rice shifted from a net receiver to a transmitter, driven by supply chain disruptions and speculative demand, while wheat became a net receiver post-COVID-19, reflecting heterogeneous market dynamics. Other assets, including the WilderHill Clean Energy Index, green bonds, and cryptocurrencies, remained net recipients, with oats exhibiting low long-term connectivity, suggesting safe-haven potential for risk-averse investors. Short-term spillovers dominated, with rising hedging costs, particularly for soybeans against clean energy assets, signaling heightened volatility. Economic policy uncertainty strongly drove connectedness, highlighting policy’s pivotal role. These findings inform investors on portfolio diversification and crisis hedging strategies, guide policymakers in fostering resilient green finance and grain market stabilization, and advance sustainable finance by bridging financial economics with environmental goals amid global market integration.