Abstract
This study integrated spillover dynamics, time-varying connectedness, and network topology to analyse the interaction between sustainable and non-sustainable financial assets. The dataset comprises multiple asset classes, namely bonds, equities, commodities, exchange-traded funds, and cryptocurrencies. The sample period, chosen to capture high-volatility and crisis dynamics, was from 21/07/2021 to 12/05/2025, with daily intervals, covering multiple periods of geopolitical tension. The aim was to evaluate risk and volatility spillovers, identify systemically important assets, and assess how geopolitical risk influences total connectedness within the financial system. Furthermore, a network topology was constructed to uncover influential assets in the system, and these insights were used in portfolio optimisation. The total connectedness index was estimated using the time-varying parameter vector autoregression framework, and the causality-in-quantile approach was used to test the effect of the geopolitical risk index on market connectivity. The results show that non-sustainable bonds and equities, along with sustainable equities and exchange-traded funds, act as key transmitters and receivers of volatility, highlighting their dual systemic role. Sustainable cryptocurrencies, though still peripheral, display increasing integration and potential as complementary hedging assets. The influence of geopolitical risk on systemic risk is significant in low to moderately high quantiles, reflecting its nonlinear effect on market connectedness. Network topology results reveal that non-sustainable bonds act as critical bridges linking sustainable and traditional markets, while clustering patterns show growing integration between sustainable and non-sustainable asset groups. Centrality measures further indicate that highly connected assets, such as equities, exchange-traded funds, and non-sustainable bonds, amplify contagion risk, whereas peripheral assets, such as sustainable bonds and cryptocurrencies, enhance diversification. The findings provide valuable insights for policymakers, regulators, asset managers and investors, by emphasising the importance of environmental, social, and governance risk integration, geopolitical monitoring, and network-based portfolio strategies to strengthen financial stability during the sustainability transition.