ESG Performance and COVID-19 Pandemic: An Empirical Analysis of European Listed Firms

Abstract

This paper aims to investigate the linkage between ESG performance and the impact of the COVID-19 pandemic on the stock performance of listed firms in Europe. We base on the Eurostoxx 600 index to select firms with available MSCI ESG Rating data and Sustainalytics ESG Ranking data, collected from the Bloomberg terminal. The final sample of 344 firms is then divided into two sub-samples with high and low ESG performance. We then conduct two analyses which are stock performance comparison and panel data regressions to analyze the impact of various factors in 2019 and 2020. Empirical results show that firms with high ESG performance have a lower volatility than those with low ESG performance in both periods. However, there is no evidence that the stock performance is higher for firms with high ESG performance. On the other hand, the different results obtained with panel data regressions when using the MSCI ESG Rating and Sustainalytics ESG Risk Rating implies that it is important to carefully investigate the methodology defined by each ESG rating agency. Furthermore, we find a signicant impact of COVID-19 factors on stock performance such as the number of cases, deaths, lockdown, and quantitative easing announcements. The sector and country effects are significant during the COVID-19 pandemic.

Keywords: ESG performance; ESG Rating Agencies; COVID-19 pandemic; Stock performance; Panel data

JEL Classification: G3