Do ESG metrics reflect crisis resilience of equities during the COVID-19 pandemic?

Abstract

We examine the role of ESG metrics in explaining crisis resilience during the COVID-19 pandemic. ESG refers to Environmental, Social, and Governance aspects of companies, collectively known as ESG factors, and has gained popularity in investments. Our empirical tests cover a database of 971 company members of the MSCI World Index and examine the COVID Crisis period from February 2020 – May 2020. We performed linear regression and Owen-Shapley decomposition in our study, like the literature. Our results show that ESG is not an “equity vaccine” but is a statistically significant and economically important variable in explaining returns during the pandemic. Our findings highlight the increasing importance of sustainability aspects in finance and in investing.