Dynamic connectedness between AI, green finance, and energy assets: Risk transmission and portfolio implications during net-zero transition period

The integration of artificial intelligence with green finance is rapidly increasing. It gains more importance against the backdrop of achieving a low-carbon future in the fast-changing global economy. In this context, this paper exploits daily prices between January 2018 and August 2024 to assess the opportunities associated with AI-augmented assets and green finance, and how AI assets can change the portfolio diversification and risk-management strategies. Through a market spillover framework, during crisis episodes, the findings indicate that AI and green-energy indices are transmitters of return spillovers. Green bonds and dirty energy indices, on the other hand, are net absorbers of the shock, which indicates their passive behavior. Besides, portfolio analysis shows that AI-based and clean-energy investments are beneficial to manage portfolios and provide significant hedging performance. Other assets like green bonds and equity securities demonstrate negative hedging effectiveness, which indicates a high exposure to risk. These findings highlight the invaluable nature of AI and clean-energy assets in driving market connections and providing robust risk management. The conclusions made in this study provide policymakers and investors with a key insight that is vital to adjust their investments amid fast-changing landscape of AI and green finance. • The Research Highlights • This study examines return spillover in AI, green finance, and energy assets system. • AI, stocks, clean energy transmit, while green cryptocurrencies and dirty energy absorb shocks. • Spillover intensified during crisis periods. • Implements bivariate and multivariate portfolio strategies. • AI and green finance offer diversification and hedging benefits.