The resilience of green firms in the twirl of COVID‐19: Evidence from S&P500 Carbon Efficiency Index with a Fourier approach

Abstract

This paper investigates the resilience of environmentally friendly companies in an overwhelming economic and social environment that has been generated after the outbreak of the novel coronavirus disease (COVID‐19) pandemic. To this respect, we have investigated the cointegration between the Standard & Poor's (S&P) 500 Carbon Efficiency Index (CEI) with COVID‐19 cases, supplemented with covariates such as government response stringency to the pandemic, economic policy uncertainty, oil prices and global markets fluctuations. We have used daily data from 2nd January to 5th October 2020 and have employed a robust estimator within a Fourier approach to accommodate both sharp and smooth breaks. Our results suggest that green companies have been positively affected by the outbreak of COVID‐19. Our paper provides practical implications for companies that wish to furnish themselves with resilience during rough times and stakeholders who wish to invest in safe, long‐lasting returns.

COVID‐19, ESG investing, and the resilience of more sustainable stocks: Evidence from European firms

“…On February 24, 2020—the first trading day after lockdown measures in Northern Italy—many stock exchanges have experienced their hardest times since the Great Financial Crisis of 2008–2009 (Ramelli & Wagner, 2020 ). In these circumstances, the pandemic has also highlighted more than ever the importance of the firm sustainability performance as one of the main drivers of the firm resilience to unexpected shocks (Albuquerque et al, 2020 ; Barro et al, 2020 ; Koçak et al, 2021 ; Ramelli & Wagner, 2020 ) by attracting the interest of consumers, investors, 1 asset managers, and policymakers as well as scholars (Amundi Asset Management, 2020 ; Cunha et al, 2021 ; Global Sustainable Investment Alliance, 2020 ). On the one hand, national and central governments spurred the sustainable transition by including environmental and social priorities into crisis management at the national level (JP Morgan, 2020 ; Wells Fargo, 2020 ).…”

“…However, in terms of econometric setup, they rely on weekly data and cover a period from the beginning of January through the end of May 2020. Notably, none of the prior studies examines the link between the firm sustainability performance and stock market performance during the whole year of 2020 (from January 2020 to December 2020) by using different constituent pillars of the ESG ratings (Koçak et al, 2021 ), different statistical strategies (Cunha et al, 2020 ), different economic agents (financial and non‐financial firms), and different geographic areas. For instance, most of them are either one‐country setting studies (Albuquerque et al, 2020 ; Aslam et al, 2021 ; Atif & Ali, 2021 ; Zhou et al, 2022 ) or sector‐specific (Bhandari et al, 2022 ).…”

Does it Make You Better Off? Initial Public Offerings (IPOs) and Corporate Sustainability Performance: Empirical Evidence

“…Based on these arguments, the relationship between firm sustainability and financial performance is not clear a priori. It remains an empirical question since scholars focused on specific constituent pillars of the firm's ESG performance (Koçak et al, 2022), different empirical strategies, agents and contexts of analysis, and sample periods. In the same regard, the COVID-19 pandemic severely affected financial markets and the real economy and brought a new emphasis on the debate about the role of sustainability in firm performance considerations.…”

The Dynamic Impact of COVID-19 Pandemic on U.S Stock Market Returns

“…However, the economy achieved a phenomenal rebound with figures such as 4,436.75 on August 10, 2021, smashing records. The pandemic significantly impacted financial markets as they were laid bare to substantial shocks [3]. The pandemic significantly increased risks and uncertainties in the U.S. stock market by the second week of March 2020.…”

“…The pandemic significantly increased risks and uncertainties in the U.S. stock market by the second week of March 2020. As a result of the dwindled rate, the S&P index started moving up about 7% daily and thus had to readjust by going down by 33.7% [4].…”