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Geopolitical risks to renewable energy stock returns? 

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Geopolitical risks significantly influence renewable energy stock returns, as evidenced by a body of research spanning various aspects of the energy sector and financial markets. Floros et al. have demonstrated that geopolitical tensions can have a measurable impact on green investments, indicating that geopolitical risk is a critical factor for renewable energy financing and development. This is corroborated by Agoraki et al., who found that geopolitical risks negatively affect stock returns, with a substantial decrease in returns following a one-unit standard deviation increase in geopolitical risks. Renewable energy markets, including sub-sectors, exhibit varying responses to geopolitical risk (GPR) and economic uncertainty indices (EUI), suggesting that renewable energies can serve as a hedge against these risks under certain conditions. However, the impact of geopolitical events on stock returns can differ based on the specific context, such as the North Korean regime's influence on inter-Korean economic cooperation-related firms. The transition to renewable energy, driven by competition for resources essential for renewable technologies, introduces new geo-economic dynamics that could destabilize economies dependent on fossil fuel exports. The Russo-Ukrainian Conflict highlighted the positive effect of rising oil prices on renewable energy stock returns in China, suggesting that geopolitical conflicts affecting oil prices could indirectly benefit the renewable sector. The COVID-19 pandemic's impact on clean energy stocks further illustrates how global crises, including geopolitical tensions, can influence renewable energy markets. The war in Ukraine in 2022 demonstrated renewable energy markets' resilience, with positive and significant cumulative abnormalities observed in the aftermath. Literature reviews on the geopolitics of renewable energy have identified both potential security benefits and risks associated with the transition to renewables, including concerns over critical materials and cybersecurity. However, Overland argues against overstating these risks, suggesting that the geopolitical implications of renewable energy's rise may be more nuanced and less dire than some forecasts imply. Collectively, these studies underscore the complex and multifaceted relationship between geopolitical risks and renewable energy stock returns, highlighting the need for nuanced understanding and strategic planning in the face of geopolitical uncertainties.

Answers from top 6 papers

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Papers (6)Insight
Open access•Journal Article•DOI
The Effect of War Risks on the Petroleum and Petrochemical and Renewable Energy Industries: Evidence from Chinese Stock Market
Yi-Chieh Sun
16 Feb 2023-Highlights in Business, Economics and Management
Geopolitical risks, like the Russo-Ukrainian Conflict, can positively impact renewable energy stock returns due to increased oil prices, potentially attracting more investors and fostering renewable energy development.
Journal Article•DOI
Geo-Economics Chapter 8: The Geopolitics of Renewable Energy
Joachim Klement
24 Feb 2021-Social Science Research Network
Geopolitical risks to renewable energy stock returns are discussed in Chapter 8, focusing on resource competition, economic effects on oil-dependent countries, and preparations for the rise of renewable energy.
Journal Article•DOI
Does Geopolitical Risk Matter? Evidence from South Korea
Dong-Jin Pyo
02 Jan 2021-Defence and Peace Economics
8 Citations
Not addressed in the paper.
Open access•Journal Article•DOI
Effect of geopolitical risk and economic uncertainty indices on renewable energy
Xin Zhao, Kamel Si Mohammed, Yao Wang, Paweł Stępień, Grzegorz Mentel 
01 Jun 2023-Geoscience frontiers
1 Citations
Geopolitical risk and economic uncertainty impact renewable energy stock returns, with renewable energy potentially serving as a hedge due to its safe-haven properties against such risks.
Open access•Journal Article•DOI
Geopolitical Risk as a Determinant of Renewable Energy Investments
Floros Flouros, Victoria Pistikou, Vasilios Plakandaras 
17 Feb 2022-Energies
21 Citations
Geopolitical risks have a significant impact on renewable energy investments, affecting stock returns due to their influence on the success of green energy projects.
Journal Article•DOI
Geopolitical risks, uncertainty, and stock market performance
Maria-Eleni K. Agoraki, Georgios P. Kouretas, Nikiforos T. Laopodis 
03 Jul 2022-Economic and Political Studies
6 Citations
Geopolitical risks have a negative and statistically significant impact on stock returns, potentially affecting renewable energy stocks similarly based on the findings of the research paper.

Related Questions

Do geopolitical risks and oil prices affect green energy stocks?4 answersGeopolitical risks and oil prices significantly influence green energy stocks, as evidenced by various studies. The COVID-19 pandemic, for instance, has shown that clean and alternative energy stocks are crucial for diversification, though they are negatively impacted by volatility indices induced by infectious diseases, highlighting the importance of considering geopolitical risks in renewable energy markets. Similarly, geopolitical tensions have been identified as a determinant affecting the success of green investments, with empirical evidence suggesting that geopolitical risk measurably affects green investments in both the short and long term. The Russo-Ukrainian Conflict specifically illustrates how war risks can lead to spikes in oil prices, positively affecting stock returns for renewables due to increased oil prices, thereby potentially incentivizing investment in the renewable sector. Moreover, global geopolitical risks have been found to asymmetrically affect the correlation network of global stock markets, including those related to green energy, indicating the interconnectedness of geopolitical risks and financial markets. Geopolitical events also influence oil price volatility, which in turn affects stock market volatility, including stocks related to green energy. An increase in geopolitical risk is associated with negative stock returns, suggesting that geopolitical events can disrupt supply and impact green energy investments. Oil price shocks and policy uncertainty further impact the stock returns of clean energy companies, with oil supply shocks having a positive effect, while policy uncertainty shocks have a negative effect. Interestingly, while oil price fluctuations are traditionally linked to energy stock returns, renewable energy stocks show a disconnection from oil market shocks, suggesting a shift towards renewable sources might reduce exposure to oil price volatility. However, geopolitical risks and uncertainties can have heterogeneous effects on financial markets across different regions, affecting investor behavior and stock market indices in developing Asian countries, indicating the complex relationship between geopolitical risks, oil prices, and green energy stocks. The interconnectedness between geopolitical risk and renewable energy volatility further underscores the influence of geopolitical events on green energy sectors, with the COVID-19 pandemic and Ukraine-Russia conflicts serving as examples of how such risks can affect renewable energy dynamics. Lastly, the strategic importance of critical minerals for green energy transition, especially in the electric vehicle industry, highlights how geopolitical risks can intensify due to resource dependency on countries with significant control over these minerals, affecting the green transition's geopolitical risk landscape.
Geopolitical risks to renewable energy in Indonesia?8 answersGeopolitical risks significantly influence the renewable energy sector in Indonesia, affecting both domestic and international investment and development strategies. The research by Floros Flouros, Victoria Pistikou, and Vasilios Plakandaras highlights the measurable effect of geopolitical tensions on green investments globally, suggesting that these tensions also impact renewable energy investments in Indonesia. Aidy Halimanjaya's study further elaborates on the fiscal policy gaps within Indonesia's renewable energy sector, indicating that geopolitical uncertainties, such as changing feed-in-tariff policies, contribute to an uncertain policy environment, deterring potential investments. Moreover, the political economy surrounding biodiesel, a significant component of Indonesia's renewable energy strategy, faces barriers including international disputes over sustainability and dumping issues with the EU and the US, which are directly tied to geopolitical tensions. Sean F. Kennedy's dissertation underscores the influence of private finance in renewable energy, suggesting that geopolitical risks might skew investment towards larger projects, potentially sidelining smaller, more sustainable initiatives. Annisa Sekaringtias, Brunilde Verrier, and Jennifer Cronin's findings on the socio-political challenges in Indonesia's energy transition, including conflicting interests and inconsistent regulation, can be exacerbated by geopolitical risks, affecting the transition's success. Hariyadi Hariyadi's critical review points out the necessity of global and national political will, hinting at how geopolitical shifts, such as changes in US administration policies, could influence Indonesia's renewable energy landscape. The strategic potential of marine renewable energy in Indonesia, as discussed by Agung Iswadi et al., also faces challenges from geopolitical risks, particularly in terms of international maritime disputes that could affect the deployment of marine energy infrastructure. Jarot Mulyo Semedi et al.'s analysis of geothermal energy development highlights how geopolitical risks, including land use and local community opposition, can impede progress. R. T. Pardasani's exploration of Indonesia's post-pandemic recovery outlook emphasizes the country's commitment to renewable energy amidst geopolitical uncertainties affecting project timelines. Lastly, Naif Alsagr and Stefan van Hemmen's assessment reveals that geopolitical risks can paradoxically have a positive effect on renewable energy consumption by prompting countries to seek energy independence through renewables. In summary, geopolitical risks in Indonesia manifest through policy uncertainties, international disputes, investment biases towards larger projects, and challenges in deploying specific renewable energy technologies, all of which could either hinder or inadvertently promote the country's transition to renewable energy.
What grand theory is used to analyze the influence of geopolitical risk on renewable energy stock returns?10 answersThe grand theory utilized to analyze the influence of geopolitical risk on renewable energy stock returns integrates insights from financial market reactions to geopolitical events, the interplay between geopolitical risks and economic policy uncertainties, and the specific dynamics within the renewable energy sector. This multifaceted approach draws upon empirical evidence and theoretical frameworks that highlight the sensitivity of renewable energy investments to geopolitical tensions and uncertainties. Firstly, the relationship between geopolitical risk (GPR) and economic uncertainty indices (EUI) with renewable energy markets underscores the sector's responsiveness to geopolitical dynamics, suggesting that renewable energy can serve as a hedge against economic uncertainty and geopolitical risks due to its safe-haven properties. This is further corroborated by the observation that renewable energy markets exhibited positive and significant cumulative abnormalities during geopolitical events such as the war in Ukraine, contrasting with the traditional energy markets which were heavily affected. Moreover, the theoretical significance of understanding the impact of geopolitical risks on the implementation of renewable energy innovations is highlighted, emphasizing the dual pressures from public expectations for cleaner energy and the deterrent effect of geopolitical risks on investor willingness. Empirical evidence from a large panel of economies indicates that geopolitical risk significantly affects green investments, both in the short and long term, suggesting a direct link between geopolitical tensions and renewable energy financing. Additionally, the specific context of the Russo-Ukrainian Conflict illustrates how war risks can lead to spikes in oil prices, indirectly benefiting the renewable energy sector by making it more attractive to investors due to positive stock returns, thereby promoting the development of renewables. This is supported by the interconnectedness between the geopolitical risk index and renewable energy volatility index, which reveals a complex relationship influenced by global events like the COVID-19 pandemic and geopolitical conflicts. The broader impact of geopolitical risks on stock returns, as evidenced in various countries, further underscores the negative correlation between geopolitical uncertainties and market performance, which indirectly influences the renewable energy sector by affecting overall investor sentiment and market stability. Lastly, the role of geopolitical events in shaping the risk premium demanded by investors, particularly in the energy sector, highlights the systemic nature of geopolitical risk and its implications for renewable energy investments. In summary, the grand theory that emerges from these contexts is one that views the influence of geopolitical risk on renewable energy stock returns through the lens of market sensitivity to geopolitical and economic uncertainties, the attractiveness of renewable energy as a hedge against such risks, and the systemic impact of geopolitical events on investor behavior and policy-making.
How does geopolitical risk affect commodity prices?4 answersGeopolitical risk has a significant impact on commodity prices. It increases the price volatility of coal, iron ore, and crude oil futures, while decreasing the price volatility of gold futures. Geopolitical risk also affects the prices of selected agricultural and food commodities, such as rapeseed, sugar, sunflower oil, and wheat, with evidence of asymmetric impact. Political uncertainty surrounding US presidential elections negatively affects commodity prices worldwide, particularly gold, while political uncertainty in commodity producing countries with little demand pushes commodity prices up. During a geopolitical event, the returns of gold and oil commodities increase, but the equities of commodity producing firms may realize negative returns. Overall, geopolitical risk plays a crucial role in shaping commodity prices, with varying effects depending on the specific commodity and geopolitical event.
Will renewable energy stocks go up?6 answers
Will renewable energy stocks recover?7 answers

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