Did socially responsible stocks perform better during the COVID-19 crisis?

Recent financial media articles and research suggest that the stocks of firms with a stronger environmental, social and governance (ESG) rating might perform better during crises. An extensive analysis of 6,000 stocks in 45 countries during the COVID-19 crisis and a longer-term analysis over 2003-2020 cast doubts on this view. There is little evidence that strong ESG stocks perform better or worse than other stocks, neither during crises nor in crisis-free periods. North America is the exception. There, socially responsible stocks appear to be more resilient during crises.


Key Takeaways for the Industry

  • Strong ESG stocks may not have served as “rainy day assets” during crises. That said, they also did not underperform during crisis or over longer periods.
  • ESG ratings are less reliable than financial creditworthiness ratings. New research is needed to understand differences between ratings and their relation with stock returns.

Netspar, Network for Studies on Pensions, Aging and Retirement, is a thinktank and knowledge network. Netspar is dedicated to promoting a wider understanding of the economic and social implications of pensions, aging and retirement in the Netherlands and Europe.


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