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Risk transmission and returns dependence between oil and socially responsible funds?

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  • Mobeen Ur Rehman
  • Neeraj Nautiyal
  • Rami Zeitun
  • Xuan Vinh Vo
  • Noha Alessa

Abstract

This study investigates the relationship between the international oil market and socially responsible investments (SRIs) from October 2016 to March 2022. For this end, we use copulas and a conditional value-at-risk framework to analyse average and asymmetric tail dependence and conditional risk spillover, respectively. This interrogation allows a more precise understanding of the transmission of systemic risk from oil market volatility to SRIs during downside risks and financial contagion. We find that global SRIs are exposed to increased systemic risk from the oil market, especially during market decline. Our analysis reveals a significant positive correlation between SCE and MSCI U.S.A. ESG ETFs and oil prices during market upswings, whereas FFRF, Low Carbon, and Gender Diversity funds indicate higher downside risk. The MSCI KLD 400 Social ETF exhibits asymmetric behaviour, responding more strongly to oil market downturns than upswings. Finally, we also identify an optimized 70–30% index weighting of SRI – oil proposition that can maximize risk-return benefits under stressed scenarios. Our results have valuable implications for practitioners, ESG stakeholders, investors, and policy practitioners.

Suggested Citation

  • Mobeen Ur Rehman & Neeraj Nautiyal & Rami Zeitun & Xuan Vinh Vo & Noha Alessa, 2026. "Risk transmission and returns dependence between oil and socially responsible funds?," Applied Economics, Taylor & Francis Journals, vol. 58(18), pages 3583-3602, April.
    • Handle: RePEc:taf:applec:v:58:y:2026:i:18:p:3583-3602
    DOI: 10.1080/00036846.2025.2504202
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