The Role of ESG Performance During Times of Financial Crisis: Evidence from COVID-19 in China
9 Pages Posted: 16 Jun 2020
Date Written: June 15, 2020
We examine the role of ESG performance during market-wide financial crisis, triggered in response to physical and economic lockdowns arising from the COVID-19 global pandemic. These unique circumstances create an inimitable opportunity to question if investors interpret ESG performance as a signal of future stock performance and/or risk mitigation. Using a novel dataset covering China’s CSI300 constituents, we illustrate that (i) high ESG portfolios tend to outperform low ESG portfolios (ii) that ESG performance mitigates financial risk during financial crisis and (iii) the role of ESG performance is attenuated in ‘normal’ times, confirming their incremental importance during crisis. We phrase the results in the context of ESG investment practices.
Keywords: COVID-19, Pandemic, China, Environmental, Social and Governance (ESG)
JEL Classification: G02; G12; G14
Suggested Citation: Suggested Citation