Spillovers and dependency between green finance and traditional energy markets under different market conditions

Green finance investments have greatly promoted the low-carbon transition of the traditional energy industry. This work investigates the spillovers and dependency between green finance (clean energy, ESG, green bond, green technology and carbon markets) and traditional energy (coal, crude oil and natural gas) markets under normal and extreme market conditions. To this end, we use the quantile-based connectedness measures and on this basis develop the quantile vector autoregression-minimum spanning tree (QVAR-MST) method. Our results show that: (i) clean energy and ESG markets are the main net transmitters and the natural gas market is a net receiver under different market conditions, while other markets act as either net transmitters or net receivers in the system depending on market conditions. (ii) Compared to normal market conditions, the spillovers between green finance and traditional energy markets are higher under extreme market conditions; (iii) the ESG market is the most central node at different quantiles around the Russia–Ukraine conflict; and (iv) the dependency between green finance and traditional energy markets is diminished, while the dependency between traditional energy markets is enhanced at different quantiles after the Russia–Ukraine conflict. These insights provide valuable implications for policymakers and investors.