**5. Conclusions**

Investing in renewable-energy and low-carbon assets is a straightforward way for investors to align their portfolios with a low-carbon and more climate-resilient economy. However, the diversification benefits of holding positions in such firms closely depends on the way both kinds of assets co-move. Climate-friendly investors could take advantage of this information to build more adequate portfolio investment strategies. We therefore explored interdependence between prices of renewable-energy and low-carbon assets in the European and USA stock markets for the period 2010–2019. We use copula functions, which report information on dependence under different market circumstances, even though we have no information on the causality effects.

Our empirical evidence documents that European, but not USA, renewable-energy and low-carbon markets co-move and, likewise, we find evidence of symmetric tail dependence in Europe but tail independence in the USA. Consistently, we find that upside or downside movements in the prices of low-carbon assets impact on renewable-energy asset prices in Europe, while the reverse is also notable, although smaller in size. In contrast, for the USA market we find that the impact of upward or downward price oscillations in low-carbon asset prices on the price of renewable-energy stocks is not sizable as is the case with the reverse.

Our empirical findings have practical implications for investor decision-making and for policy-makers as follows. First, evidence of positive co-movement between renewable-energy and low-carbon asset prices in Europe indicates that, as both kind of assets move in the same direction under different market scenarios, long positions in low-carbon assets cannot be hedged using long positions in renewable-energy assets, and vice versa. In the USA market, in contrast, since renewable-energy and low-carbon stock prices move independently, investors in either market could use one set of assets to hedge financial positions in the other market. Second, in Europe, climate-friendly investors cannot use renewable-energy assets to manage downside risks for long positions in low-carbon assets, and vice versa, unlike investors in the USA. Third, our evidence on interdependence between renewable-energy and low-carbon asset prices is useful for the design of energy policies to support and fund renewable energy investments. Specifically, when renewable-energy and low-carbon asset prices co-move—as happens in the European markets—public funding of renewables impact on renewable-energy companies, and this impact leads to price externalities for low-carbon companies. Likewise, the withdrawal of support policies for renewable energies (such as subsides) will have negative effects on the price of renewable-energy stocks that will be transmitted to the price of low-carbon assets. As a result, policy decisions regarding energy transition to a decarbonized economy should take into account the effects on low-carbon companies, as also crucial in the transition to a climate-resilient economy. However, when low-carbon and renewable-energy markets move independently—as happens in the USA—such policy effects are irrelevant. Finally, in raising funds for the transition to a low-carbon economy, the dependence between climate-friendly assets such as renewable-energy and low-carbon stocks is such as to render them a similar asset class; therefore, funds for renewable energies face competition in the demand for funds for other low-carbon industries that may also be attractive to environmentally friendly investors—the case in Europe; in the USA, however, the independence of the asset classes may spur investment incentives in climate-friendly assets such as renewable-energy and low-carbon stocks.

**Author Contributions:** Conceptualization, J.C.R., A.U., Y.C.; Methodology, J.C.R., A.U.; Data collection, A.U., Y.C., Estimation, A.U., Y.C.; Writing—Original Draft Preparation, J.C.R.; Review & Editing, J.C.R., A.U., Y.C.; Funding Acquisition, J.C.R., A.U.

**Funding:** Financial support from the Agencia Estatal de Investigación (Ministerio de Ciencia, Innovación y Universidades) is acknowledged for research project RTI2018-100702-B-I00, co-funded by the European Regional Development Fund (ERDF/FEDER). Juan C. Reboredo acknowledges funding from the Xunta de Galicia for research project CONSOLIDACIÓN 2019 GRC GI-2060 Análise Económica dos Mercados e Institucións—AEMI (ED431C 2019/11). Andrea Ugolini acknowledges financial support from the Brazilian National Council for Scientific and Technological Development (CNPq).

**Conflicts of Interest:** The authors declare no conflict of interest.
