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We investigate the association between Environmental, Social, and Governance (ESG) ratings and stock performance during the COVID-19 crisis. Although there is mixed evidence in the literature whether ESG is valuable in times of crisis, we find high ESG-rated European firms to be associated with higher abnormal returns and lower stock volatility. After decomposing ESG into its separate components, we find the social score to be the predominant driver of our results. Further, we argue that ESG is value-enhancing in low-trust countries, and in countries with poorer security regulations and where lower disclosure standards prevail.

We explore if the corona-crash 2020 was driven by news attention or rational expectations about the pandemic’s economic impact. Using a sample of 64 national stock markets covering 94% of the world’s GDP, we find the stock markets’ decline to be mainly associated with higher news attention and less with rational expectation. We estimate the economic cost from the news hype to amount to USD 3.5 trillion for the US and USD 200 billion on average for the rest of the G8 countries.

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