The notable expansion of the green equity market has opened up new avenues for investment for market participants. This study looks at return connectedness, and the implications for portfolio management of green sector equities, and compares the performance of green and traditional investments. To achieve the research objectives, this study uses the TVP-VAR model along with portfolio strategies such as minimum variance portfolio (MVP), minimum correlation portfolio (MCP), and minimum connectedness portfolio (MCoP). Results demonstrate that the energy efficiency sector leads all others in information spillover while the bio/clean fuels sector is the largest net information absorber. Overall, energy efficiency, water, recycling and green building are found to be closely connected sectors, whereas bio/clean fuels, healthy living, natural resources and advanced materials are the least integrated industries in the system. However, a dynamic analysis demonstrates that inter-sector connectedness is time-varying and event-dependent. The MVP approach excels in the full and pre-COVID-19 sample, whilst the MCoP outperforms other methods in the post-COVID-19 scenario. In general, the portfolio exercise shows that green portfolios outperformed commodities but underperformed conventional equity and cryptocurrency portfolios. In contrast, following the COVID-19 pandemic, green portfolios have shown a greater return performance than all other conventional portfolios. The findings not only provide valuable insights to investors and policymakers in the effective management of investments and the green equity market, but also aid the achievement of objectives of environmental policies such as SDGs and the Paris Agreement.

Interest in green investments has been rising, particularly in stocks from various eco-friendly sectors aimed at addressing climate change and environmental issues. However, the relationships among these sectors under different market conditions have been seldom explored. Thus, this study examines the interconnectedness of green sector equities in both stable and extreme market conditions, employing the quantile VAR methodology. The daily data, covering the period from October 15, 2010, to September 30, 2023, include several periods of economic downturn. The results indicate that under normal and bullish market conditions, the energy efficiency, water, and recycling sectors serve as the main channels for net risk transmission. Conversely, during bearish market conditions, energy efficiency, green transportation, and lighting sectors assume this role. Across all market conditions, the bio/clean fuels, natural resources, and healthy living sectors act as the primary net shock absorbers. Furthermore, total connectedness is significantly higher during extreme market conditions than in stable environments. The dynamic quantile analysis further confirms the time-varying nature of connectedness among green equities, which intensifies in response to crisis events, such as the COVID-19 pandemic. These findings provide valuable insights for investors and policymakers, aiding in portfolio management and supporting effective regulation and stability within the green equity market across diverse market conditions.