ESG Crypto-Assets and Environmental Signals in the Energy Transition: A Quantile-Frequency Perspective

Abstract

This study examines the dynamic interconnectedness between ESG-oriented crypto-assets, traditional cryptocurrencies, equity markets, and environmental attention related to digital assets, within the context of the global energy transition. Using a quantile-frequency connectedness framework, the analysis captures heterogeneous spillover effects across market regimes and investment horizons, focusing on systemic risk and sustainable portfolio design. The results indicate significant linkages between ESG crypto-assets and conventional cryptocurrencies, especially under extreme market conditions. ESG digital assets offer diversification and hedging benefits during bearish phases, while displaying predictive influence on equity markets in bullish states. Environmental attention on cryptocurrencies, considered as a behavioral proxy, reveals weak and unstable connectedness patterns, suggesting its limited systemic role. Spillovers are mainly concentrated at short-term frequencies, highlighting the long-term diversification potential of ESG crypto-assets. From a portfolio perspective, connectedness-minimizing strategies outperform traditional variance-based approaches under stable conditions, achieving better risk-adjusted outcomes. These findings provide practical insights for investors and policymakers by underlining the value of incorporating ESG-oriented digital assets into sustainable investment frameworks. The study contributes to the ongoing discussion on integrating climate-conscious instruments into financial systems while addressing systemic risk transmission in the digital asset space during the global energy transition.