Socially Responsible Investment During the COVID-19 Pandemic: Evidence from Morocco, Egypt and Turkey

Abstract

Socially responsible investing (SRI) seeks to combine financial returns with social and environmental performance. In the context of the Covid-19 pandemic, SRI is seen as an alternative way to maintain sustainable returns. This article attempts to assess the impact of COVID-19 on the performance of socially responsible stocks. In other words, we test the resilience of ESG (Environmental, Social and Governance) oriented companies’ stock prices to the global crisis, and compare it with the performance of selected non-ESG stocks. To do so, we focus on companies listed on the Moroccan, the Egyptian and the Turkish stock exchanges. We use the event study methodology, which relies mainly on calculating the daily abnormal returns of each company and aggregating them over an event window to test their statistical significance. The results reveal that all the companies listed on these three stock exchanges suffered from the COVID-19 crisis, posting negative abnormal returns. However, the ESG oriented companies listed on the Turkish stock exchange were more resilient compared to non-ESG companies. Sustainable investing underperformed non-ESG investing in Morocco and Egypt, as ESG oriented companies posted more pronounced negative abnormal returns, compare to non-ESG companies. So, unlike Turkey, ESG oriented companies were less portfolio protective alternative during the crisis in Morocco and Egypt.

Investimentos ESG na pandemia da Covid-19

“…A crise cria a oportunidade para aprofundar as evidências sobre a relação entre ESG, desempenho e valor das entidades (Albuquerque et al, 2020) Com isso, a literatura nesta temática obteve resultados mistos (vide Tabela 1), alguns estudos mostraram que as ações ESG tiveram melhor desempenho durante a pandemia, e ainda, menor volatilidade, além de melhores margens de lucro (Albuquerque et al, 2020;Yoo et al, 2021). Embora os resultados para retorno acionário não sejam consistentes em mercados emergentes (Harabida et al 2022)…”

“…Os mercados norte-americano, britânico, chinês e demais emergentes sofreram severas quedas logo nos primeiros meses da crise, com o potencial de repetir a crise financeira global de 2008 (Shehzad et al, 2020;Yoo et al, 2021). Para se proteger da queda do mercado acionário e de sua volatilidade, muitos investidores enxergaram as empresas socialmente responsáveis como alternativa para buscar retornos sustentáveis, aproveitando-se do crescimento de investimentos ESG (Harabida et al, 2022). Ainda, há evidências de que empresas que investem em ESG seriam menos expostas a riscos e, por consequência, mais resilientes em períodos de crises (Beloskar & Rao, 2023;Broadstock et al, 2021;Kanamura, 2021).…”

Comparative Study of Sustainability Indices and Traditional Indices Performance during Covid-19 Period

“…Further research found that ESG indices have a greater influence on private firms than on state-owned enterprises, and that ESG indices boost secondary industry stock market performance significantly more than tertiary industry stock market performance (Deng & Cheng, 2019). Companies listed on the Moroccan, Egyptian, and Turkish stock exchanges all experienced negative abnormal returns as a result of the COVID-19 crisis; however, ESG oriented companies listed on the Turkish Stock Exchange fared better than non-ESG based companies, while sustainability-oriented companies underperformed on the Moroccan and Egyptian stock exchanges (Harabida et al, 2022).…”

ESG investments in the Covid-19 pandemic

“…As a result, the literature on this topic has obtained mixed results (see Table 1), with some studies showing that ESG stocks have performed better during the pandemic, and also had lower volatility, as well as better profit margins (Albuquerque et al, 2020;Yoo et al, 2021). Although the results for stock returns are not consistent in emerging markets (Harabida et al 2022), the exogenous shock provided by the Covid-19 pandemic represents an opportunity to compare ESG stocks and other portfolios, in terms of stock performance and financial indicators. Based on the assumption that ESG investments result in a competitive advantage for companies, it is hoped to find results that can show the positive effects of these investments, either in terms of improving company performance or stock returns.…”

“…The North American, British, Chinese and other emerging markets suffered severe falls in the first months of the crisis, with the potential to repeat the 2008 global financial crisis (Shehzad et al, 2020;Yoo et al, 2021). To protect themselves from the fall in the stock market and its volatility, many investors saw socially responsible companies as an alternative for seeking sustainable returns, taking advantage of the growth in ESG investments (Harabida et al, 2022). In addition, there is evidence that companies that invest in ESG are less exposed to risks and, consequently, more resilient in times of crisis (Beloskar & Rao, 2023;Broadstock et al, 2021;Kanamura, 2021).…”