Renewable infrastructure as a safe-haven for equity markets across regimes

Abstract

Purpose This study provides the first regime-switching analysis of private, unlisted renewable infrastructure. Unlike green bonds, green buildings, or listed renewable equities, private infrastructure exhibits distinct liquidity, risk, and valuation characteristics. The paper examines whether renewable energy infrastructure offers stability across market regimes and whether it functions as a hedge, diversifier, or safe haven relative to equities. Design/methodology/approach Using the infraGreen Index—a global benchmark for unlisted solar, wind, and hydro assets—we apply a Markov-switching regression framework to analyse the dynamic relationship between renewable-infrastructure returns and major financial variables (equities, government bonds, gold, volatility indices and exchange rates) as well as key macroeconomic indicators (inflation and unemployment) over 2010–2025. Findings The results reveal regime-dependent correlation patterns. In calm markets, renewable infrastructure shows a low positive correlation with equities. During periods of stress in Europe and globally, this relationship sharply declines and often approaches zero, indicating safe-haven behaviour. Practical implications Renewable infrastructure can enhance institutional portfolio resilience by mitigating equity-market shocks while supporting long-term investment objectives. For asset managers, the findings highlight its role as both a sustainable investment and a source of defensive stability. Originality/value The study provides novel empirical evidence on the financial behaviour of private renewable infrastructure and demonstrates its capacity to act as a safe haven in stressed markets, contributing to sustainable-finance research and informing asset-allocation decisions in the energy transition.