ESG ETFs and the COVID-19 stock market crash of 2020: Did clean funds fare better?

Pavlova, Ivelina; Boyrie, Maria E. de

doi:10.1016/j.frl.2021.102051

Cited by 84 publications

(57 citation statements)

References 5 publications

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“…The results regarding volatility and market shock after the pandemic announcement are in line with related literature regarding the lower risk level of ESG shares compared to other shares during the time of the pandemic [32]. ESG may also be considered a safe haven for ensuring stable investment in practical terms when any crisis with a high degree of uncertainty begins [33].…”

Section: Volatility Resultssupporting

confidence: 84%

“…Thus, their argument gave way to regional analysis, finding that ESG stocks did improve over conventional stocks in North America, and recommending further empirical studies concerning ESG stocks' heterogeneous responses to the pandemic. The same applied to the ESG Exchange-Traded Fund (ETF), which maintained higher returns than the market [33], meaning that investment in ESG could be an effective method of avoiding the high volatility in prices during the crisis [34]. This was confirmed from a risk hedging perspective, where investment decision-making based on ESG risk was perceived to be an effective strategy in the early phase of the COVID-19 crisis [35].…”

Section: Esg and Covid-19mentioning

confidence: 89%

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Are ESG Shares a Safe Haven during COVID-19? Evidence from the Arab Region

2021

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The world experienced significant changes in its social and economic lives in 2020–21. Major stock markets experienced an immediate decline. This paper attempts to examine the impact of COVID-19 on stock market performance as well as to identify the differences between the responses of ESG stocks and normal stocks to pandemic conditions in the Arab region. Daily time series for three years between March 2019 and March 2021 were collected for the S&P Pan Arab Composite index and S&P/Hawkamah ESG Pan Arab Index. We used a generalized autoregressive conditional heteroscedasticity (GARCH) model to measure market shocks and a non-linear autoregressive distributed lagged (NARDL) regression model to display the relationship between COVID-19 measurements and the performance of stock indexes. The findings suggest that the volatilities of ESG portfolios and conventional ones were equally affected in the pre-COVID period. However, in the post-COVID period, the magnitude of volatility in the ESG stock index was significantly less compared to that of the conventional stock index. The results also revealed that in the ESG market, shock tended to remain for a shorter period. Furthermore, the ESG index was not affected by the number of confirmed cases and deaths. However, evidence of asymmetric long-run cointegration existed between the S&P index and number of cases and deaths. Increases in the numbers of cases and deaths caused a decline in market index, whereas the reverse trends were observed in the retreat of the pandemic.

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Section: Volatility Resultssupporting

confidence: 84%

Section: Esg and Covid-19mentioning

confidence: 89%

Are ESG Shares a Safe Haven during COVID-19? Evidence from the Arab Region

2021

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“…These findings imply that green energy stock is a valuable asset with diversification potential. In addition, sustainable ETFs did not outperform the market during the pandemic, but the losses were not significant either (Pavlova and de Boyrie, 2022).…”

Section: Literature Reviewmentioning

confidence: 99%

The best-fitting model(s) of equal risk contribution: evidence from environmental-friendly portfolio

Nugroho

2022

IJMF

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PurposeThis research aims to select the best-fitting model(s) of equal risk contribution portfolios (ERC). ERC is a robust estimation in the absence of reasonable expectations about future returns.Design/methodology/approachThe portfolio consists of five environmental-friendly exchange-traded funds (ETFs). It applies equal risk optimization, beneficial when the assets are firmly linked, such as the ETFs. This paper operationalizes 20 covariance models in portfolio construction, and a portfolio with classic covariance is the benchmark to beat. To select the best-fitting model(s), the paper applies statistical inferences of the model confidence set. This research also constructs the newly-developed minimum connectedness optimization method and utilizes maximum drawdown as the primary evaluation tool.FindingsThe outbreak of COVID-19 hugely impacts the portfolio drawdown. The results also show that the classic covariance is hard to beat, partly explained by estimation error and model misspecification. This paper suggests that equal risk contribution can benefit from copula-based covariance. It consistently and significantly outperforms the other models in various robustness tests.Practical implicationsIn the absence of substantial predictions about future returns and the existence of strongly linked assets, selecting appropriate portfolio components by risk contribution is a sound choice.Originality/valueThis is the first paper to select the best-fitting model(s) of ERC portfolio during the COVID-19.

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“…Thus, we aim to shed light on this puzzling evidence, going in detail [22,28,29], via a deeper analysis of the different ESG pillar scores to find which factor (environmental, social, or governance) may have the largest influence. In addition, our paper belongs to the few cohorts that study the effect of ESG information and specific industries, such as clean technology [30] and environmental corporate policies and performance in specific industries [31].…”

Section: Introductionmentioning

confidence: 99%

Is ESG Relevant to Electricity Companies during Pandemics? A Case Study on European Firms during COVID-19

et al. 2022

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The electricity sector was negatively impacted by the coronavirus disease (COVID-19), with considerable declines in consumption in the initial phase. Investors were in turmoil, and stock prices for these companies plummeted. The aim of this paper is to demonstrate the significant negative influence of the pandemic on abnormal returns for the electricity sector, specifically for traditional and renewable companies and the influence of ESG scores, using the event study approach and multi-variate regressions. Our results show that the pandemic indeed had a negative impact on the electricity sector, with renewable electricity companies suffering a sharper decline than traditional ones. Moreover, we find that ESG pillar scores affected electricity companies differently and are sector-specific. For renewable electricity companies, the returns were positively influenced by the environmental ESG scores and negatively by governance ESG scores.

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ESG ETFs and the COVID-19 stock market crash of 2020: Did clean funds fare better?

Cited by 84 publications

References 5 publications

Are ESG Shares a Safe Haven during COVID-19? Evidence from the Arab Region

Are ESG Shares a Safe Haven during COVID-19? Evidence from the Arab Region

The best-fitting model(s) of equal risk contribution: evidence from environmental-friendly portfolio

Is ESG Relevant to Electricity Companies during Pandemics? A Case Study on European Firms during COVID-19

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