Alternative Asset Diversification for ESG Investments: Evidence from G7 Countries Under Economic and Geopolitical Crises

In recent years, environmental, social, and governance (ESG)-oriented investments have emerged as a key pillar of sustainable finance. This study analyses the resilience of the ESG Leaders indices of G7 countries to global economic and geopolitical shocks, as well as their dynamic relationships with alternative assets such as Bitcoin, gold, the Japanese yen, and the Swiss franc. Covering the period from January 2019 to May 2025, the analysis incorporates major global developments, including the COVID-19 pandemic, the Russia–Ukraine war, the collapse of the Silicon Valley Bank, the Israel–Palestine conflict, and U.S. tariff policies targeting China. The empirical findings reveal that ESG indices are significantly affected by such shocks and emphasize the necessity for investors to adapt their portfolio diversification strategies to evolving market conditions. The results show that the Japanese yen (excluding Japan) consistently exhibits the lowest correlation with the G7 ESG indices and provides considerable cost efficiency. While gold and the Swiss franc also serve as effective diversifiers under high uncertainty, Bitcoin generally offers a cost-effective diversification option.