Does a High ESG Score Pay Off During the Pandemic Outbreak?

Jędrzej Białkowski and Anna Sławik

Chapter 17 in Financial Transformations Beyond the COVID-19 Health Crisis, 2022, pp 501-533 from World Scientific Publishing Co. Pte. Ltd.

Abstract: A key aspect of creating financially effective business strategies is the development of efficient management methods at the meeting point between the competing interests of an organization’s diverse stakeholders, making it possible to generate added value for some of them. Stakeholder management, together with its underlying concepts such as corporate social responsibility (CSR), contributes to increasing the viability of an organization’s system as well as the system of its environment, including the financial market. This is of crucial importance in times of crisis, when a system’s viability is particularly put to the test. In this chapter, we tackle this actual problem under the unprecedented circumstances of the COVID-19 pandemic outbreak. In our research, we assume there is a positive relation between social responsibility, the stakeholder approach to corporate governance and a company’s financial performance, and we take as a proxy for the latter the stock returns of publicly listed companies. We examine US and European companies with high and low environmental, social, and governance (ESG) scores in 18 countries and 11 industries in the period January–June 2020. Their ESG profile is determined using the SAM Corporate Sustainability Assessment (CSA) and Sustainalytics’s ESG Risk Ratings. We find evidence that, under pandemic circumstances, delivering value to a broader spectrum of stakeholders (reflected by a high ESG score) does not necessarily immediately (in the short run) protect or enhance the value for shareholders (measured by annualized stock returns) but does not deteriorate the value either.

Keywords: COVID19; Pandemic; Pandemic Outbreak; Health Crisis; Economics; Macroeconomics; Finance; Sustainable Finance; Financial Crisis; Financial Integration; Economic Integration; Global Financial Crisis; Financial Institutions; Corporate Finance; Corporate Governance; Board of Directors; ESG; Corporate Social Responsibility; Sustainable Finance; Stock Markets; Financial Markets; Stock Market Behaviour; Firm Liquidity; Emerging Markets; China; Financial Institutions; Money; Banks; Banking System; Banking Sector; Business Groups; Resilience; Safe Heaven; Gold; Oil; Peer-to-Peer Lending Market; Foreign Trading; Stock Market Volatility; Extreme Events (search for similar items in EconPapers)
JEL-codes: F4 F62 G15 G17 G3 O16 (search for similar items in EconPapers)
Date: 2022
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