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New Frontiers in Sustainable Finance: Asymmetric Risk Connectedness of Green Bonds with Global Financial Markets

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  • Azhar HussainORCID iD verified by the author (show author details)

    Azhar Hussain

    Chaudhary Abdul Rehman Business School, Superior University, Lahore, Pakistan, Pakistan

    0000-0002-5629-0081

    Corresponding author

  • Mehwish Zafar (show author details)

    Mehwish Zafar

    Chaudhry Abdul Rehman Business School, Superior University Lahore, Pakistan. , Pakistan

  • Waqas KhanORCID iD verified by the author (show author details)

    Waqas Khan

    Chaudhary Abdul Rehman Business School, Superior University, Lahore, Pakistan, Pakistan

    0000-0003-4222-2384

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Hussain, A., Zafar, M., & Khan, W. (2026). New Frontiers in Sustainable Finance: Asymmetric Risk Connectedness of Green Bonds with Global Financial Markets. SEISENSE Journal of Management, 9(1), 133-158. https://doi.org/10.33215/md42v291

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Abstract

Purpose: This paper explores the asymmetric and state-dependent dependence relationship of the S&P Green Bond Index with six international markets and assesses whether such dependence patterns are correlated with the risk-reduction benefit associated with holding a green bond portfolio.
Design/Methodology: The analysis is based on 2,856 aligned daily log returns of the S&P Green Bond Index, S&P 500, DAX, Shanghai Composite, S&P GSCI, S&P Bitcoin Index, and S&P Global Clean Energy Index from 2 January 2014 to 30 April 2026. Quantile-on-Quantile Regression (QQR) is computed. An economic significance is measured using long-only two-asset minimum variance portfolios.
Findings: The findings show that there is significant asset and state-specific dependence. The minimum-variance portfolios invest relatively heavily in green bonds due to the significantly reduced unconditional volatility and yield significant in-sample variance reductions, but do not show universal hedging or safe-haven performance.
Practical Implications: Green bonds should be considered as a state contingent, low volatility diversifier and not a universally defensive or safe haven asset. Market-state stress testing, asset-specific dependence and currency exposure are to be taken into consideration by investors and portfolio managers as part of their allocation decision.
Originality: The present study is an incremental cross-market extension of the existing body of work, and then connecting asymmetric dependence estimates to formal portfolio evidence.

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Copyright (c) 2026 Azhar Hussain, Mehwish Zafar, Waqas Khan

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This work is licensed under a Creative Commons Attribution 4.0 International License.

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Vol. 9 No. 1 (2026): SEISENSE Journal of Management View Issue

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2025-112026-10

Article history

  1. ReceivedJune 14, 2026
  2. Published September 17, 2026

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