From wars to waves: geopolitical risks and environmental investment behaviour

Figures & data

Table 1. Variable description and data sources.

Index		Description	Sources
Alternative Energy	AE	Includes developed and emerging market large, mid and small-cap companies that derive 50% or more of their revenue from products and services in Alternative energy. It was launched on January 20, 2009. On November 30, 2023, it was composed of 97 constituents from the utilities, information technology, industrials, energy and materials sectors.	Thomson Reuters Datastream
Energy Efficiency	EE	Includes developed and emerging market large, mid and small-cap companies that derive 50% or more of their revenue from products and services in Energy Efficiency. It was launched on January 20, 2009. On November 30, 2023, it was composed of 65 constituents from the consumer discretionary, industrials, information technology, real estate, materials and utilities sectors.	Thomson Reuters Datastream
Green Building	GB	Includes developed and emerging market large, mid and small-cap companies that derive 50% or more of their revenue from products and services in Green Building. It was launched on January 20, 2009. On November 30, 2023, it was composed of 99 constituents from the real estate and consumer discretionary sectors.	Thomson Reuters Datastream
Pollution Prevention	PP	Includes developed and emerging market large, mid and small-cap companies that derive 50% or more of their revenue from products and services in Pollution Prevention. It was launched on January 20, 2009. On November 30, 2023, it was composed of 9 constituents from the materials, consumer staples and industrial sectors.	Thomson Reuters Datastream
Sustainable Water	SW	Includes developed and emerging market large, mid and small-cap companies that derive 50% or more of their revenue from products and services in Sustainable Water. It was launched on January 20, 2009. On November 30, 2023, it was composed of 9 constituents from the industrials, utilities, information technology and materials sectors.	Thomson Reuters Datastream
Geopolitical Acts Index (GPRACT)	GPRA	The geopolitical acts index is based on a tally of newspaper articles related to three categories of geopolitical events in eleven leading newspapers for each month, which focuses on phrases related to the realisation or escalation of adverse events (beginning of a war, the escalation of a war, and terrorist acts).	Caldara and Iacoviello (2018)
Geopolitical Threats Index (GPR Threats)	GPRT	The geopolitical threats index is based on a tally of newspaper articles related to five categories of geopolitical tension in eleven leading newspapers for each month, which focuses on words related to military tensions or nuclear tensions (war threats, peace threats, military build-up, nuclear threats, terrorist threats).	Caldara and Iacoviello (2018)

Table 1 identifies each of the variable used, presents a brief description of each of them, and identify the data source.

Table 2. Descriptive statistics of return series.

	AE	EE	GB	PP	SW	GPRA	GPRT
Mean	−0.00006	0.00056	0.00021	0.00042	0.00032	91.264	115.624
Maximum	0.089	0.124	0.096	0.069	0.084	551.20	811.53
Minimum	−0.114	−0.126	−0.124	−0.155	−0.125	0.000	7.893
Std. Dev.	0.015	0.016	0.013	0.014	0.013	54.169	67.348
Skewness	−0.314	−0.299	−0.791	−0.591	−0.445	1.720	2.876
Kurtosis	7.208	9.983	16.602	8.909	11.661	9.384	20.311
JB (p-value)	(0.000)*	(0.0000)*	(0.000)*	(0.000)*	(0.000)*	(0.000)*	(0.000)*
ADF (p-value)	(0.000)*	(0.000)*	0.000	0.000	0.000	0.000	0.000
PP (p-value)	(0.000)*	(0.000)*	(0.000)*	(0.000)*	(0.000)*	(0.000)*	(0.000)*
ARCH (10) (p-value)	(0.020)**	(0.006)*	(0.005)*	(0.032)**	(0.001)*	(0.016)**	(0.009)*

i. This table reports descriptive statistics (mean, maximum, minimum, standard deviation, skewness, kurtosis and Jarque-Bera’s normality test) for returns of various variables; ii. The seven variables used are represented in the columns; iii. The variables used are AE, EE, GB, PP, SW, GPRA and GPRT, which mean Alternative Energy, Energy Efficiency, Green Building, Pollution Prevention, Sustainable Water, Geopolitical Acts Index and Geopolitical Threats Index, respectively; iv) ADF and PP are conducted with an intercept, to check the stationary property of the return series. v. ARCH (10) denotes the Engle (1982) test to check the presence of ARCH effects up to 10 lags. vi. *, and ** indicate significance at the 1% and 5% levels, respectively.

Table 3. Estimates of the cDCC-GARCH multivariate model.

		AE	EE	GB	PP	SW	GPRA	GPRT
Panel A	$\mathit{\omega }$	0.0003	0.0006	0.0004	0.0007	0.0005	83.765	99.896
		(0.162)	(0.000)*	(0.002)*	(0.001)*	(0.012)**	(0.000)*	(0.000)*
	${\alpha }_0$	0.0880	0.0890	0.1172	0.0609	0.0919	0.1748	0.2072
		(0.000)*	(0.000)*	(0.000)*	(0.000)*	(0.000)*	(0.000)*	(0.000)*
	$\mathit{\beta }$	0.906	0.907	0.876	0.932	0.884	0.701	0.684
		(0.000)*	(0.000)*	(0.000)*	(0.000)*	(0.000)*	(0.000)*	(0.020)**
	${\theta }_1$	0.012
		(0.000)*
	${\theta }_2$	0.985
		(0.000)*
	${\theta }_1+{\theta }_2$	0.998
Panel B	LB (10)	28.563
		(0.280)
	LB^2 (10)	22.198
		(0.482)
	ARCH (10)	9.917
		(0.538)

i. This table reports the estimation results of the multivariate model and corresponding residual diagnosis. ii. Panel A reports the estimation results of coefficients, where ω corresponds to the GARCH constant parameter, α_0 corresponds to the GARCH error parameter and β corresponds to the GARCH lag parameter of the conditional volatility. iii. Values in brackets (.) are p-values. iv. Panel B reports the results of the residuals’ diagnosis. Raw residuals are used for residuals diagnostic check. v. LB(k) and LB²(k) (with k = 10) are the Ljung – Box Q statistics of k-th order autocorrelation for residuals and their squares, respectively. vi. ARCH (10) denotes the Engle (1982) test to check the presence of ARCH effects up to 10 lags. vii. *, and ** indicate significance at the 1% and 5% levels, respectively. viii. AE, EE, GB, PP, SW, GPRA and GPRT mean Alternative Energy, Energy Efficiency, Green Building, Pollution Prevention, Sustainable Water, Geopolitical Acts Index and Geopolitical Threats Index, respectively.

Figure 1. Dynamic conditional correlations.

AE, EE, GB, PP, SW, GPRA and GPRT mean Alternative Energy, Energy Efficiency, Green Building, Pollution Prevention, Sustainable Water, Geopolitical Acts Index and Geopolitical Threats Index, respectively.

Table 4. Spillover matrix.

	AE	EE	GB	PP	SW	GPRA	GPRT	Contr. from others
AE	38.82	15.72	16.39	15.37	13.68	0.02	0.01	61.18
EE	17.10	42.05	13.28	13.79	13.76	0.00	0.02	57.95
GB	15.81	12.03	37.25	17.55	17.32	0.03	0.02	62.75
PP	14.83	12.26	17.47	37.14	18.19	0.06	0.05	62.86
SW	13.46	12.48	17.48	18.44	38.13	0.01	0.01	61.87
GPRA	0.06	0.08	0.03	0.04	0.05	92.55	7.19	7.45
GPRT	0.01	0.04	0.05	0.07	0.09	5.17	94.59	5.41
Contr. to others	61b.26	52.61	64.70	65.25	63.09	5.29	7.29	319.48
Contr. including own	100.08	94.66	101.95	102.39	101.21	97.84	101.87	SI = 45.64
Net Contribution	0.08	−5.34	1.95	2.39	1.21	−2.16	1.87

i. Table 3 depicts spillover connectedness among the analysed variables; ii. AE, EE, GB, PP, SW, GPRA and GPRT are the variables used and mean Alternative Energy, Energy Efficiency, Green Building, Pollution Prevention, Sustainable Water, Geopolitical Acts Index and Geopolitical Threats Index, respectively; iii. ‘Contr. from others’ represent the spillover effect that a variable receives from all the other variables and is equal to the sum of values in row i, excluding the diagonal values (which corresponds to the spillover effect that a variable receives from itself); iv. ‘Contr. to others’ represents the spillover effects transmitted from one variable to other variables and is equal to the sum of the values in column j, excluding the diagonal values (which corresponds to the spillover effect transmitted from a variable to itself); v. ‘Net Contribution’ corresponds to the difference between the ‘Contr. to others’ value and the ‘Contr. from others’ value of a variable; vi) ‘Contr. including own’ corresponds to the sum of the contribution of all the variables in lines to each of the other variables in columns, including its own contribution (eg. considering the column AE the value 100.08 corresponds to the sums of the contribution of the AE, EE, GB, PP, SW, GPRT and GPRA to the variable AE.

Figure 2. Dynamic connectivity.

AE, EE, GB, PP, SW, GPRA and GPRT mean Alternative Energy, Energy Efficiency, Green Building, Pollution Prevention, Sustainable Water, Geopolitical Acts Index and Geopolitical Threats Index, respectively.

Caldara, D., & Iacoviello, M. (2018). Measuring Geopolitical Risk, vol. 1222, FRB International Finance,

 Google Scholar

Engle, R. (1982). Autoregressive conditional heteroscedasticity with estimates of the variance of United Kingdom inflation. Econometrica, 50(4), 987–1007.

 Web of Science ®Google Scholar

Data availability statement

The data that support the findings of this study are available from the corresponding author, [P.F.], upon reasonable request.