Green bond market stability and Russia Ukraine conflict: The role of green inclusive finance

The military conflict between Russia and Ukraine in 2022 generated a profound influence on the global financial community. This paper takes the Russia Ukraine conflict as a geopolitical conflict example to explore the divergent responses of standard green bonds and green inclusive bonds to conflict-related risks. In order to construct the VAR model, a novel Russia Ukraine conflict risk (RUCR) index has been developed by employing the data from the China Green Bond Index (GB) as well as the Green Inclusive Finance Theme Finance Bond Select Index (GIB). Our findings indicate that the Russia Ukraine conflict jeopardized both bond markets, while the green inclusive bond market exhibits stronger resilience in resisting the shocks compared with the conventional green bond market. Specifically, green inclusive bonds suffer a negative effect on returns in a low level manner, exhibiting lower volatility in response to identical geopolitical risk shocks. On this basis, salient research implications for policymakers and investors can be extracted from our study.