Climate risk and the nexus of clean energy and technology stocks

We examine the impact of climate risks on the nexus of clean energy and technology stocks using a time-varying correlation model. We find that physical and transition climate risks are positively associated with the long-term correlation between clean energy and technology stock indices, whereas the effect of transition risk is more robust to different sample periods and alternative stock indices. On the contrary, the short-term correlation tends to decrease after shocks to physical risk, since clean energy stocks react more strongly to physical risk shocks than technology stocks.

Automated summary

This study examines the impact of climate risks on the relationship between clean energy and technology stocks. It finds that physical and transition climate risks are positively associated with the long-term correlation between these stocks, while the effect of transition risk is more consistent across different time periods and stock indices. However, shocks to physical risk tend to decrease the short-term correlation, as clean energy stocks react more strongly to these shocks compared to technology stocks.