Spillover connectedness among climate risk, cleantech and green bonds: evidence from quantile and frequency-dependent approach

Abstract The study examines the dynamic and interlinked relations of climate risks (physical and transition) with clean technology sectors and green bonds. Employing daily data spanning 2017–2024, the study quantile vector autoregressions (QVAR) to capture the asymmetrical and time-varying interactions of eight clean technology sectors (solar, wind, biofuels, geothermal, smart transportation, green buildings, smart grids and water filtration), climate risks and green bonds. The analysis revealed that spillover effects are highly regime- and frequency-dependent, with stronger interconnectedness emerging under extreme bearish and bullish market conditions compared to normal periods. Importantly, climate risk indices (transition and physical risks) exhibit time-varying roles, acting as net receivers in the short run but evolving into dominant net transmitters over medium- and long-term horizons. This highlights their dual function as absorbers of immediate shocks and long-term drivers of volatility across clean technology markets. The clean technology sectors displayed heterogeneous behaviours: biofuels and geothermal consistently emerged as key net transmitters of shocks, while wind, solar and water filtration acted as reliable net receivers, suggesting that they absorb external disturbances rather than propagate them, which may indicate potential diversification benefits. In contrast, the green bond market consistently played the role of a stabiliser by absorbing risks, corroborating its reputation as a potential safe-haven asset, especially during periods of heightened volatility. The study provides diversification strategies to reduce the financial loss due to climate risk, particularly invested in CleanTech, and thus provide market-based evidence that can support more informed decision-making and the design of policies aimed at enhancing the resilience and efficiency of green financial systems.