Multi-Moment and Multilayer Analysis of Connectedness among Clean, Brown, and Technology ETFs: The Role of Climate Risk

This study adopts a multilayer network approach to investigate the connectedness among clean, brown, and technology ETFs across four moments: returns, volatility, skewness, and kurtosis. Motivated by the non-normality of return distributions and energy transition under intensified climate risk, we demonstrate the importance of incorporating both lower- and higher-order moments to fully capture risk transmission dynamics. Within-layer, cross-layer, and total connectedness analysis reveals generally high interdependence, with notable exceptions during late 2024 (across all layers) and the 2008-2009 period (particularly for skewness and kurtosis). These episodes suggest that investor responses to extreme events differ across statistical moments, stressing the need for a multilayer framework in assessing market behaviour. While the return and volatility layers effectively capture major market shocks, skewness and kurtosis exhibit weaker spillovers, especially prior to the 2008 global financial crisis. Technology ETF plays a central role, exhibiting the highest overlap in both inflows and outflows during crisis periods, particularly between 2008 and 2014, and during COVID-19. Conversely, clean ETF shows limited vulnerability to systemic shocks, suggesting resiliency. Climate risks impact the spillovers across the within- and cross-layers. These findings are particularly relevant to investors, portfolio managers, and policymakers tasked with risk mitigation amid climate change concerns.