Higher-Order Moment Spillovers Among Global ESG Stock Markets: The Impacts of Geopolitical Risks, Sustainability Uncertainty and Climate Policy Uncertainty

Abstract

This paper investigates higher-order moment risk spillovers across global ESG stock markets and examines their driving factors, with important implications for risk management and regulatory design. By integrating the Autoregressive Conditional Density (ARCD) model with a Time-Varying Parameter Vector Autoregression (TVP-VAR) extended joint spillover method, we document a clear risk spillover transmission hierarchy with progressively decreasing connectedness from volatility (65.53%) to skewness (46.17%) to kurtosis (43.08%). Our findings reveal distinctive regional patterns: while developed ESG markets dominate volatility transmission, European emerging ESG markets emerge as influential transmitters of higher-moment risks. Time-varying analysis demonstrates differentiated responses to major crises across risk dimensions. Through the time-varying parameter structural vector auto-regression with stochastic volatility (TVP-SV-VAR) approach, we show that geopolitical risks (GPR), sustainability uncertainty (ESGUI), and climate policy uncertainty (CPU) impact ESG moment-based spillovers with varying intensity across different crisis contexts. These findings suggest that investors should adopt multi-moment risk assessment frameworks beyond traditional volatility measures, while policymakers need differentiated regulatory approaches that account for regional variations in ESG risk dynamics and incorporate higher-moment spillovers into financial stability monitoring.