Time-varying bidirectional causality between climate policy uncertainty and renewable energy investments

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URI: https://hdl.handle.net/10641/7175
ISSN: 1059-0560
DOI: 10.1016/j.iref.2025.104727

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2025-12

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Abstract

Climate change poses a significant systemic risk in the twenty-first century, yet little attention has been paid to its interaction with renewable energy exchange traded funds (ETFs). This study employs the time-varying Granger causality approach to investigate the bidirectional causality between Climate Policy Uncertainty and Renewable ETFs, exploring how this relationship evolves over time. Monthly data spanning from January 2010 to June 2025 from the CPU index and the price of Renewable ETFs were used in this research. The results reveal a dynamic, time-varying, and asymmetric causal relationship between Climate Policy Uncertainty (CPU) and renewable energy ETFs. Strong causal effects are non-linear over time, with the influence of CPU on renewable ETFs intensifying after 2016, while the reverse causality from ETFs to CPU weakens after 2020. These findings emphasize the importance of exploring the relationship between CPU and renewable energy ETF prices. Understanding this interaction not only aids strategic decision-making and risk management for renewable energy investments but also fosters resilience against market fluctuations, driving the advancement of green finance initiatives. This study contributes to both climate change mitigation efforts and the development of sustainable finance strategies.

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Publisher Copyright: Copyright © 2025. Published by Elsevier Inc.

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Climate change, Granger-causality, Renewable energy exchange traded fund, Sustainable development goals, Sustainable finance, Time-varying granger causality, Finance, Economics and Econometrics, SDG 3 - Good Health and Well-being, SDG 7 - Affordable and Clean Energy, SDG 13 - Climate Action, Yes, yes

Citation

Gyamerah, S A, Blekor, K S & Gil-Alana, L A 2025, 'Time-varying bidirectional causality between climate policy uncertainty and renewable energy investments', International Review of Economics and Finance, vol. 104, 104727. https://doi.org/10.1016/j.iref.2025.104727

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FACULTAD DE DERECHO, EMPRESA Y GOBIERNO