Impact of Sustainability Uncertainty on Sustainable Assets : A Focus on Clean Energy and Hydrogen Assets

Abstract

Clean energy and hydrogen exchange-traded funds (ETFs) have become important investable asset classes as the world shifts toward a low-carbon economy. But no previous study has looked at the risk dynamics of these sustainable assets derived from the risk of sustainability uncertainty. This thesis examines the relationship between the ESG based Sustainability Uncertainty Index (ESGUI) and realized volatility of the iShares Global Clean Energy ETF (ICLN) and the Global X Hydrogen ETF (HYDR) over the period January 2022 to December 2025. The study uses the Autoregressive Distributed Lag Mixed Data Sampling (ADL-MIDAS) regression with a Beta weight function, which accounts for the mismatch of frequency between daily financial data (prices for ETFs) and monthly ESG data (ESGUI). The study shows that sustainability uncertainty has a statistically significant negative influence on the total realized variance of both ETFs. The ESGUI effect for HYDR is roughly twice that for ICLN, as hydrogen is also more policy dependent and is in a more nascent stage of development. In the case of HYDR, the good and bad volatility decomposition shows that sustainability uncertainty has a significant effect on increasing good volatility (+19.0x10, p < 0.001) and decreasing bad volatility (14.2x10, p < 0.01), creating an options-like risk profile with the added element of policy resolution optionality. Results are stable across the volatility estimator of Rogers and Satchell (1991) and conditional variance specification of EGARCH. The results have important implications for green investors, portfolio managers, and policy makers in the uncertain sustainability policy environment of the 2020s.