ESG and sustainable development: Evidence from DCC-GARCH R2 decomposed connectedness measures

This research investigates the time-varying connectedness between ESG, global environment, green economy, clean energy and energy innovation. Employing the novel DCC-GARCH R2 decomposed connectedness technique, findings show that dynamic total connectedness varies over time. The green economy and energy innovation are identified as the primary transmitters of volatility shocks, while ESG and clean energy act as net receivers. Notably, the global environment index shifts from being a net transmitter to a net receiver of shocks in 2020. The results have important implications for policymakers, investors and risk managers.