EcoModities™: Quantitative Modeling of Sustainability-Driven Regime Shifts in Futures Markets
DOI:
https://doi.org/10.51137/wrp.ijsbe.627Keywords:
EcoModities, ESG, Sustainability-Driven Regime Shifts, HMM, GARCH-XAbstract
This paper introduces EcoModities™, a quantitative framework designed to identify and model sustainability-driven regime shifts in global commodity futures markets. The approach integrates Hidden Markov Models (HMM) and GARCH-X specifications augmented with environmental, social, and governance (ESG) indicators to capture the evolving interaction between ecological pressures and market dynamics. Using a multi-commodity dataset spanning major agricultural and energy contracts, the analysis documents statistically significant regime transitions associated with sustainability shocks, with observable effects on volatility persistence, cross-asset correlations, and tail risk behavior. The proposed EcoModities Index (EMX) provides a synthetic measure of sustainability-linked market stress and improves the interpretability of regime classification across heterogeneous commodity groups. Overall, the findings support the view that sustainability factors have become an endogenous and measurable component of commodity market structure, with relevant implications for risk management, portfolio allocation, and policy monitoring in transition-sensitive markets.
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Copyright (c) 2026 Luca Enrico Mattei (Author)
This work is licensed under a Creative Commons Attribution 4.0 International License.
