Responsible investment and stock market shocks: Short-term insurance and persistent outperformance post-crisis?

Jana Eisenkopf, Steffen Juranek and Uwe Walz

No 329, SAFE Working Paper Series from Leibniz Institute for Financial Research SAFE

Abstract: We investigate the differential effect of the COVID-19 shock to the stock market shock on the share prices of firms with different levels of ESG (Environmental, Social and Governance) scores. Thereby, we analyse whether and to what extent better ESG ratings provided insurance for investors in the stocks of those firms during this shock. We focus our analysis on the European market in which ESG investment plays a particularly important role. Using a broad sample of listed firms we provide mixed evidence. On the one hand, we show that immediately after the start of the shock firms with a higher ESG score outperformed their peers. On the other hand, this effect faded less than six weeks later. Given the quick recovery of the market our finding supports the idea that ESG stocks provide limited insurance in severe crises.

Keywords: Responsible investment; ESG; stock market crisis; persistence (search for similar items in EconPapers)
Date: 2021
New Economics Papers: this item is included in nep-cwa and nep-ias
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Persistent link: https://EconPapers.repec.org/RePEc:zbw:safewp:329

DOI: 10.2139/ssrn.3979761

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