Hedging precious metals with impact investing

Abstract

Our study investigates the role of impact investing as a risk management tool for precious metals (i.e., palladium, platinum, gold, and silver) in calm and turbulent times. The findings show that impact investing and precious metals portfolios have higher hedging effectiveness. Furthermore, the results show that the hedging effectiveness for the portfolio of gold and impact investing increased during the COVID–19 crisis. Finally, we find that when factoring the transaction cost in portfolios of impact investing and precious metals, investors at various levels of risk aversion gain higher utility. These findings contribute to the literature and interest of investors, policymakers, fund managers, and regulators.

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