Geopolitical, Economic, and Climate Risks in the Water-Energy-Food Nexus: A Quantile Connectedness Perspective

The relationship between water, energy and food (WEF) has been recognized as an essential component that may affect the objectives of sustainable development. This research examines the price risk transfers within the energy, water, and agriculture sectors in an effort to further our economic comprehension of the World Economic Forum nexus. We also examine the important effects of transition and physical risks related to climate change on transmission patterns. We present an investigation using a quantile connectedness strategy in the timeframe-frequency domain, which takes into consideration both extreme and regular market situations, as well as long and short time periods. It is shown that under regular market conditions, the water, energy and food security nexus is rather small, but under extreme market conditions, it increases significantly. When comparing the short-term and long-term horizons, the nexus is more obvious in the shorter term. The WEF nexus has usually been increased by the United State climate policy and uncertain economic policies, while it has been reduced by geopolitical risk and the United States term spread among the components examined. After conducting a thorough analysis of the effects of climate risks, we conclude that, under normal market conditions, investors are more concerned with transition climate risks than they are with physical climate risks in the short term. The timefrequency quantile connectedness of geopolitical, economic, and climate risks in the waterenergyfood nexus. Investors consider transitional and physical risks together over the long run, but only in very specific market conditions. Our investigation of the economic consequences adds validity to the concept that when building investment portfolios, consumers are more concerned with transition climate risks than physical risks.