From uncertainty to opportunity: exploring the co-movement among green financial markets and renewable energy sector via wavelet coherence approach

This study aimed to explore the co-movement among green financial markets and renewable energy markets under uncertainties. The study employed wavelet coherence analysis to explore co-movement and the monthly data collected for empirical analysis from November 2015 to November 2023. The key findings demonstrate that the energy uncertainty index (EUI) has synchronized coherence with equities and energy markets under distinctive market conditions, but limited associations with bond markets. The result infers heterogeneous co-movement and implies sector-specific diversification and risk management strategies. Predominantly, the ESG uncertainty index shows strong co-movement with the world energy index, clean energy, and ESG equity markets, which implies the reflection of sensitivity to regulatory credibility and transition risk. These findings have significant implications for investors and fund managers to optimize their portfolio diversification and hedging strategies by incorporating ESG and energy uncertainty signals into asset allocation decisions. While for regulators and policymakers, empirical insights support the design of stable and credible sustainability policies that reduce uncertainty and strengthen the resilience and integration of green financial markets. This study provides novel insights into the dynamic co-movement between green financial and renewable energy markets by integrating the uncertainty indices within a wavelet coherence framework. It offers timely insights into how uncertainty linked to sustainability and regulatory credibility shapes cross-market connectedness, informing strategic asset allocation and policy design.