Which Factors Will Affect the ESG Index in the USA and Europe: Stock, Crude Oil, or Gold?

Tiantian Liu (), Tadahiro Nakajima and Shigeyuki Hamori
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Tiantian Liu: Kobe University

Chapter Chapter 4 in ESG Investment in the Global Economy, 2021, pp 53-70 from Springer

Abstract: Abstract This study analyzes the return and volatility spillover effects transmitted from stock, crude oil, and gold to the environmental, social, and corporate governance (ESG) index in the USA and Europe based on the Diebold and Yilmaz approach and the Barunik and Krehlik methodology. We find that the total spillover effects of the ESG index return in the USA are higher than those in Europe, while the volatility spillover effects of the European ESG index are higher than those of the USA ESG index. The stock market transmits the highest return and volatility spillover effects to the ESG index in both regions. In the frequency domain, the majority of the return spillover effects of the ESG index are concentrated in the short term, while the majority of volatility spillover effects appear in the long term. The time-varying volatility spillover effects of the ESG index change more rapidly and dramatically than the return spillover effects during the turmoil period in our sample. With the growing environmental pollution, climate change, ecological imbalances, environmental problems, and sustainable social development are of great concern. Investors have realized the significance of sustainability and shift toward sustainable investments in the last ten years. Sustainable investmentSustainable investment refers to a new type of investment that incorporates sustainability into capital markets, which incorporates environmental, social, and corporate governance (ESG)Environmental, social, and corporate governance (ESG) factors into investment activities.

Date: 2021
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Persistent link: https://EconPapers.repec.org/RePEc:spr:spbchp:978-981-16-2990-7_4

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DOI: 10.1007/978-981-16-2990-7_4

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