Impact of Climate Risk on Correlation between Energy and Technology Industries

Key Points

• This research aims to evaluate how climate risk influences the correlation between the energy and technology industries.
• Utilized the DCC-MIDAS model for empirical analysis.
• Focused on ETFs representing the energy (XLE) and technology (XLK) sectors.
• Incorporated climate risk index and carbon dioxide concentration data.
• Analyzed data from January 2013 to December 2025.
• Physical and transition risks show a proportional long-term volatility relationship between the two industries.
• Carbon dioxide concentration negatively correlates with long-term volatility in the energy sector.
• Short-term impacts of carbon dioxide concentration and physical risk indicated positive and negative correlations, respectively.
• The findings underscore the robustness of carbon dioxide concentration effects on stock performance.

Abstract