Quantile time–frequency connectedness between green finance and shipping markets: The role of climate transition and physical risks

As the shipping industry faces increasing uncertainty due to climate change, and green finance assets are recognized as effective tools to mitigate climate risk, this paper investigates the potential collaboration between the two by measuring quantile time-frequency extreme risk spillovers and assessing the time-varying causality of climate risks on extreme spillovers. The empirical findings indicate that spillovers are highly responsive to current market conditions and significant events. Under normal market conditions, spillover effects gradually dissipate; however, under extreme conditions, the transmission of external shocks across markets escalates sharply and exhibits increased persistence. In extreme downside market scenarios, green finance markets take on a predominant role in risk transmission. In extreme upward market scenarios, the shipping market serves as an economic indicator, exerting a dominant spillover effect—with the bulk shipping market prevailing in the short term and the tanker shipping market exerting an even stronger influence over the long term. Climate-related physical and transition risks emerge as significant Granger-causal drivers of risk contagion: transition risk induces a long-term causal effect on extreme spillovers. In contrast, physical risk impacts spillovers from intermediate states over the long term. Furthermore, major events, particularly geopolitical conflicts, markedly alter the causal influence of climate transition risk on spillovers, whereas the impact of climate physical risk remains comparatively stable. Our findings guide shipping market participants in managing climate risks and optimizing investment strategies in alignment with evolving climate finance and sustainability trends. • Spillovers are highly responsive to current market conditions and significant events. • Extreme spillovers escalate sharply, and exhibit increased persistence. • Green finance markets take on a predominant role in extreme downside market scenarios. • The shipping market acts as an economic indicator in extreme upward market scenarios. • Climate-related physical and transition risks emerge as significant causal drivers of risk contagion.