Kazi Sohag: Rising Oil Market Boosts the Price of Green Stocks and Bonds

12:00, July 20, 2023

In the energy market, economists have found safe assets

Additional investments (hedging) in the green energy market will be the most reliable way to reduce the risks of large investments in the oil market, the economists of the Ural Federal University believe. The analysis has shown that such distribution of investments will contribute to the growth of profits from both types of energy sources. The results of the study, which was carried out with the financial support of the Priority 2030 program, have been published in Energy Economics.

Every investor faces the risk that the stocks, bonds, or currencies they buy will lose value. One of the ways to protect against financial losses is called hedging. The essence of this protection mechanism is to split investments between two opposite products. In this case, one is primary, with the highest expected income, and the other is secondary, more stable, to compensate for possible losses if the value of the main asset falls, experts explain. In Russia, hedging is most often applied to assets in the energy market, as the energy industry is one of the most profitable in the country. At the same time, investors do not have a clear understanding of the relationship between oil markets and green energy. In other words, it is obtained without harming the environment through renewable energy sources (RES), the experts explained.

"Based on the results of our study of the assets of various companies from 2014 to 2021, it turns out that the growth of the oil stock market contributes to a moderate increase in the price of green bonds and equities. At the same time, falling oil prices will not devalue investments in alternative energy enterprises," Kazi Sohag, Associate Professor at the UrFU Department of Economics, explained to RIA Novosti.

At the same time, the benefits of investing in the green energy sector cannot be called particularly profitable, since the main financial resources are rarely invested in it. However, the dynamics of this market in relation to the oil market shows that green investments are much more reliable, the researcher continued.

"Many of our colleagues believed that the volatility of the oil and green fuel markets would cancel each other out: when prices go up in one market, they go down in the other. In reality, however, this correlation has never been observed. Meanwhile, green assets can play the role of a safe haven," Kazi emphasized.

The scientist believes that the discovered patterns can be applied not only to domestic markets, but also to foreign ones. According to the university specialists, they used modern and universal methods of economic data analysis, which will be effective for monitoring global trends.

The study was conducted by specialists of the Ural Federal University together with colleagues from the Department of Economics and Finance of the University of New Orleans (USA).

The news article was translated by UrFU International Marketing Office. 
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