On the Resilience of ESG Stocks during COVID-19: Global Evidence

CEPR, Covid Economics, Issue 83, July 2021.

Recent research on the U.S. stock market finds that the stocks of firms with high ESG (environmental, social, and corporate governance) ratings perform relatively well during crisis periods and thus serve as “rainy day assets” for investors. We assess this hypothesis in a global setting by assessing the relation between ESG and stock price performance during the COVID-19 crisis. In a sample of more than 6,000 stocks in 45 countries, we find little evidence that firms with higher ESG ratings had better stock market performance in the first quarter of 2020. The exception is North America, where stocks with higher ESG ratings have shown some degree of resilience during crises.

Our findings indicate that the ability of socially responsible firms to deliver superior risk-adjusted stock market performance is still debatable and, at best, geography dependent.