Spillover Dynamics of Sustainability Uncertainty: A Time-Varying Parameter Vector Autoregression Extended Joint Connectedness Analysis of BRIC Economies and the United States

Environmental, Social, and Governance (ESG) factors are increasingly shaping policies, investments, and risk assessments. The paper examines the cross-country spillovers and dynamic interlinkages of sustainability uncertainty between the BRIC economies (Brazil, Russia, India, and China) and the United States (U.S.) using the newly developed ESG-based Sustainability Uncertainty Index (ESGUI). To achieve this, we apply the Time-Varying Parameter Vector Autoregression (TVP-VAR) Extended Joint Connectedness Approach to a dataset spanning from November 2002 to September 2024.Our analysis reveals a moderate level of total connectedness (TCI) over the full sample period, indicating moderate cross-country spillovers. India emerges as the dominant transmitter of sustainability uncertainty, while Russia is the primary recipient of shocks. However, during the COVID and post-COVID period, the TCI increases significantly, reflecting heightened interconnectedness. Notably, India transitions from a major transmitter to a net receiver, while Brazil and Russia take on stronger roles in transmitting shocks. This study contributes novel insights into the time-varying and asymmetric nature of sustainability uncertainty transmission between the BRIC economies and the U.S. The results offer valuable implications for financial regulators, policymakers, and investors, highlighting the need for adaptive risk mitigation strategies and coordinated policy responses to manage systemic sustainability-related risks.