Does sustainability activities performance matter during financial crises? Investigating the case of COVID-19.
Energy Policy
; 155: 112330, 2021 Aug.
Article
in English
| MEDLINE | ID: covidwho-1265669
ABSTRACT
As a market for sustainability investing is growing rapidly, understanding the impact of environmental, social, and governance (ESG) activities on firms' financial performance is becoming increasingly important. In this study, we examine the effect of ESG performance on stock returns and volatility during the financial crisis resulting from the coronavirus (COVID-19) pandemic. To quantify the impact, we use company-level daily ESG score data and United Nations Global Compact (GC) score data. In our dataset, ESG scores indicate ESG performance that is deemed important to financial materiality, and the GC score indicates the firm reputation for following UN rules. Our results indicate that during the pandemic, an increase in the ESG score, especially the E score component, is related to higher returns and lower volatility. Conversely, increasing GC scores is correlated with lower stock returns and higher volatility. In addition, we find that firms in lower return groups benefit more than other firms. Focusing on energy sector impacts, we show that although the non-energy sector benefits more than the energy sector from increasing E scores, energy sector firms can still reduce their stock price volatility by increasing these scores. Our study offers significant implications for ESG investment strategies during financial crises.
Full text:
Available
Collection:
International databases
Database:
MEDLINE
Type of study:
Experimental Studies
/
Prognostic study
/
Randomized controlled trials
Language:
English
Journal:
Energy Policy
Year:
2021
Document Type:
Article
Affiliation country:
J.enpol.2021.112330
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