The Role of ESG Performance During Times of Financial Crisis: Evidence from COVID-19 in China

9 Pages Posted: 16 Jun 2020

See all articles by David C. Broadstock

David C. Broadstock

Hong Kong Polytechnic University - Faculty of Business

Kalok Chan

CUHK Business School

Louis T. W. Cheng

Hong Kong Polytechnic University - School of Accounting and Finance

Xiao Wei Wang

Xiaowei Wang

Date Written: June 15, 2020

Abstract

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

Broadstock, David and Chan, Kalok and Cheng, Louis T. W. and Wang, Xiao Wei, The Role of ESG Performance During Times of Financial Crisis: Evidence from COVID-19 in China (June 15, 2020). Available at SSRN: https://ssrn.com/abstract=3627439 or http://dx.doi.org/10.2139/ssrn.3627439

David Broadstock

Hong Kong Polytechnic University - Faculty of Business ( email )

9/F, Li Ka Shing Tower
The Hong Kong Polytechnic University
Hong Kong, Hung Hom, Kowloon M923
China

Kalok Chan

CUHK Business School ( email )

Hong Kong
852 3943 9988 (Phone)

Louis T. W. Cheng (Contact Author)

Hong Kong Polytechnic University - School of Accounting and Finance ( email )

M715, Li Ka Shing Tower
Hung Hom, Kowloon, Kowloon
Hong Kong

Xiao Wei Wang

Xiaowei Wang ( email )

Shatin, N.T.
Hong Kong
Hong Kong

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