Comovement between Bitcoin and ESG returns in emerging and developed regions: evidence from cross-wavelet transform and time-varying Granger causality

Purpose This study aims to investigate the dynamic and region-specific comovements between Bitcoin and environmental, social and governance (ESG) returns across emerging and developed markets, in response to recent economic and regulatory transformations in sustainable finance. Design/methodology/approach A dual econometric framework – combining the cross-wavelet transform and time-varying Granger causality (TVGC) tests within recursive expanding windows – is employed to capture both time–frequency comovements and evolving causal linkages between Bitcoin and ESG return. Findings The results reveal that Bitcoin's influence on ESG indices is both time-varying and region-dependent. Medium-term (6–12 months) comovements dominate in emerging markets such as Brazil and Mexico, driven by remittance flows and post-crisis recovery, whereas developed regions like the US and European Union display complex bidirectional linkages over longer horizons (1–2 years) shaped by financial maturity and policy transitions. The TVGC analysis further confirms significant causal interactions: Bitcoin exerts a stronger influence in emerging markets, while developed economies exhibit more balanced and policy-sensitive relationships. Practical implications The findings suggest that investors and policymakers should adapt Bitcoin–ESG strategies to regional contexts – promoting financial inclusion in emerging markets while reinforcing sustainability objectives in developed economies. Originality/value This study is among the first to integrate wavelet-based time–frequency analysis with rolling-window causality tests in exploring the crypto–ESG nexus. It provides novel evidence of the dynamic, region-dependent nature of these relationships and contributes to both academic literature and the design of sustainable investment and regulatory strategies.