Evaluating the safe haven potential of Chinese ESG stocks for international equity investors during the Russia-Ukraine conflict

Financial markets have experienced extreme fluctuations due to the global exacerbation of geopolitical tensions triggered by the Russia-Ukraine conflict. Therefore, the purpose of our study is to lessen the vulnerability of international equity investors by highlighting the safe-haven and hedging potential of Chinese environmental, social, and governance (ESG) stocks. The cross-quantilogram (CQ) based quantile-dependence structures and connectedness frameworks relevant to quantile vector autoregression (QVAR) and time-varying parameter vector autoregressive (TVP-VAR) are utilized to discover the safe haven properties of Chinese ESG stocks for developed, emerging and frontier stock markets during the Russia-Ukraine crisis. The results of our empirical analysis reveal that Chinese ESG stocks depict weak safe haven characteristics for all the international stock markets at the midterm investment horizon through the conflict between Russia and Ukraine. Similarly, Chinese ESG stocks offer portfolio diversification benefits by playing the net-receiver role against the market shocks transmitted from international stock markets over normal and extreme market conditions. Lastly, as per hedging analysis, Chinese ESG stocks provide themost economical hedging option for frontier stock markets. Moreover, our study provides valuable implications that investing in ESG stocks assists investors and regulators in mitigating financial risks during crisis periods and encourages sustainable activities.