Does carbon market add investment value in multi‐asset portfolios? Evidence from hedge, safe haven, and portfolio performance

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Analysis reveals the carbon market enhances portfolio performance and diversification, suggesting strategic implications for risk management.

The carbon market demonstrates a significant ability to enhance portfolio diversification and reduce risk, particularly in turbulent market conditions.
Portfolio analysis showed that including the carbon market contributes positively to returns in various asset allocations during extreme market downturns.
Utilizing DCC-GARCH and regression models, the study confirms the carbon market's role as both a hedge and a safe haven over the past decade.
Comparative analysis indicates the carbon market's risk-reducing capacity is lower than that of green bonds, highlighting varying investment strategies.

Wang et al. (2025) studied this question.

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Analysis reveals the carbon market enhances portfolio performance and diversification, suggesting strategic implications for risk management.