Elsevier

Finance Research Letters

Volume 42, October 2021, 101914
Finance Research Letters

Does responsible investing pay during economic downturns: Evidence from the COVID-19 pandemic

https://doi.org/10.1016/j.frl.2020.101914Get rights and content

Highlights

  • Responsible investments outperform conventional investments more during COVID-19

  • Responsible investment factors affect returns more during pandemic periods

  • Responsible investment is more resilient during pandemics

Abstract

We investigate the performance of SRI/ESG investments against conventional investments during the COVID-19 pandemic. Although previous studies have examined the performance of SRI during financial crises, little is known about their performance during the COVID-19 crisis. Applying asset-pricing models, we analyze returns, abnormal returns, and the Sharpe ratio of the ESG ETFs in the US and the MSCI SRI indices for the world, the US, Japan, and Europe before and during the pandemic period vis-à-vis conventional investments. Our results confirm the greater outperformance of SRI indices during the pandemic. These findings have academic and practical implications.

Keywords

COVID-19
ESG
SRI
MSCI
ETF
Financial crisis

JEL classifications

G01
G11
G14
G15

Cited by (0)

Acknowledgements: The ETF data required sorting and cleaning, and we would like to thank fellow academics and the industry professionals who provided valuable suggestions, especially Dr John Hua Fan, Dr Alexandr Akimov, and Mr. Kenichi Kanegae. This research was partially funded by the competitive research funding schemes of Fukui Prefectural University and Griffith University.

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