Kazi Sohag: Growth in the oil market contributes to the increase in the price of green stocks and bonds

16:55, July 14, 2023

Economists have found safe-haven assets in the energy market

Additional investments (hedging) in the green energy market will be the most reliable way to reduce risks with major investments in the oil industry, Ural Federal University economists believe. The analysis showed that such a distribution of investments contributes to the growth of profits from both types of energy carriers. The results of the study, funded by the Priority 2030 program, are published in Energy Economics.

For every investor, there is a risk that the stocks, bonds or currencies he has purchased may fall in price. One of the ways to insure against financial losses is called hedging. The essence of this protective mechanism is the distribution of investments between two opposite products. At the same time, one is the main one, with the highest expected income, and the other is secondary, more stable, in order to compensate for possible losses if the value of the main assets falls, the experts explained. In Russia, hedging is especially often used in relation to assets in the energy market, since 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, that is, obtained without harming the environment using renewable energy sources (RES), experts explain.

“According to our study of the assets of various companies from 2014 to 2021, it turned out that the growth of the oil stock market contributes to a moderate increase in the price of green stocks and bonds. At the same time, the fall in oil prices will not lead to a depreciation of investments in enterprises of alternative energy sources,” Kazi Sohag, Associate Professor of the Department of Economics at Ural Federal University, explained to RIA News.

At the same time, the benefits from investing in the green energy sector cannot be called particularly profitable, because the main financial resource is rarely invested in it. But the dynamics of this market in relation to oil 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 offset each other: when prices rise in one market, they fall in the other. However, such a correlation has never been observed in reality. And green assets can play the role of safe-haven assets,” Kazi emphasized.

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

It should be noted that the study was conducted by Ural Federal University specialists with colleagues from the Department of Economics and Finance of the University of New Orleans (USA).