Ahmed H. Elsayed, Mohammad Enamul Hoque, Rabeh Khalfaoui, Masnun Al Mahi
We explore the safe-haven and hedging properties of ESG futures against dirty energy futures by employing novel cross-quantilogram, wavelet quantile correlation, quantile-on-quantile and portfolio optimization approaches. The cross-quantilogram analysis reveals that three ESG futures exhibit strong safe-haven properties against downside risks in certain energy futures, particularly at shorter-term frequencies. Moreover, ESG futures demonstrate hedging characteristics against energy futures over the long run. The wavelet quantile correlation analysis further evidence that ESG futures serve as a hedge during average conditions and as a safe haven during extreme downswings in energy futures. Additionally, the quantile-on-quantile regression further confirms the existence of quantile-dependent causal relationships between ESG futures and energy futures, as well as the hedging capabilities and safe-haven characteristics of ESG futures. The portfolio analysis further shows that ESG futures contribute most effectively within minimum-variance portfolio strategies, while their benefits vary across market conditions and optimization frameworks. Hence, the findings highlight the role of ESG futures as effective risk-management and portfolio diversification instruments for investors seeking to mitigate exposure to energy market downturns. © 2026 The Authors
Department of Economics and Finance, United Arab Emirates University, Al Ain, United Arab Emirates; BRAC Business School, BRAC University, Dhaka, 1212, Bangladesh; Faculty of Economics and Business, Universitas Negeri Padang, Padang, 25131, Indonesia; ICN Business School, CEREFIGE, Université de Lorraine, Nancy, F-5400, France
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