Research pick: Indian climate investment volatility during COVID-19

How has the COVID-19 pandemic affected investment in climate change initiatives in the developing world? New research in the International Journal of Green Economics, focuses on the impact of the disease on such investment in India.

Peeyush Bangur of the Women’s Institute for Studies in Development Oriented Management (WISDOM) in Rajasthan used the GARCH (1,1) model to examine India’s CARBONEX index and found that there was, as one might have anticipated, increased volatility in this investment realm during the pandemic. Indeed, there was an increase in variance of almost 150% according to Bangur’s analysis. The findings have important implications for investment returns as well as the response to climate change showing that confidence in climate investment fell during the height of the pandemic. The work may help guide the future investment response when we face another pandemic.

Anthropogenic carbon emissions are driving climate change. The effects in coming years will likely be devastating, particularly for those already living at the extremes. Unfortunately, the common societal model around the world involves economic growth and this comes at a price in terms of resources used and pollution generated. If we are to address the problems we face, we need to co-opt the paradigm of economic growth to help us reduce emissions, lower our reliance on unsustainable resources, and tackle climate change.

Carbon emissions trading, investment in sustainable technologies and renewables are at the forefront of this. The S&P BSE CARBONEX of India was the first carbon-based thematic index and was launched in November 2012 with phased support from the British High Commission in India. This index reflects investment in the green economy. Bangur suggests that “investors, company managers, regulators, academics, and government officials may benefit from the study’s findings.” He adds that green investment will return in the post-pandemic world “The implications of volatility may serve as a guide for launching the initial policy action in the event of subsequent instances of a similar nature,” he says.

Bangur, P. (2022) ‘Climate change investing and COVID-19: evidence from return volatility’, Int. J. Green Economics, Vol. 16, No. 3, pp.235–245.