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

Abstract

Following the COVID‐19 outbreak, orientation toward sustainability is a critical factor in ensuring firm survival and growth. Using a large sample of 1,204 firms in Europe during the year 2020, this study investigates how more sustainable firms fare during the pandemic compared with other firms in terms of risk–return trade‐off and stock market liquidity. We also highlight the drivers of the resilience of more sustainable firms to the pandemic. Particularly, we document that higher levels of cash holdings and liquid assets in the pre‐COVID period help these firms to perform and absorb the COVID‐19 externalities better than other firms. Our results are robust to a host of econometric models, including GMM estimations and several measures of stock market performance. These findings contribute to the theoretical and empirical debate on the role of the sustainability as a source of corporate resilience to unexpected shocks.

The Credit Risk of Sustainable Firms during the Pandemic

“…Our study highlights another important attribute of firm sustainability, which is often considered an abstract concept (Homer & Gill, 2022). In fact, in line with other studies that support the idea that firm sustainability is an essential firm-specific factor to ensure firm resilience (Albuquerque et al, 2020; Cardillo et al, 2022), our study confirms that sustainability becomes a concrete strategic and operational business lever not only to maintain sustainability during bear market conditions, but also to increase firm elasticity (or sensitivity) to public policies. This is important for both shareholders and taxpayers.…”

How reactive is investment in US green bonds and ESG-eligible stocks in times of crisis? Exploring the COVID-19 crisis

“…The global crisis caused by COVID-19 has more than ever brought sustainability concerns into the limelight, and thus provides an excellent opportunity for examining the potential success of sustainable investment when facing adverse and unexpected shocks ( Albuquerque et al, 2020 ; Cardillo, Bendinelli, & Torluccio, 2022 ; Goldstein, Koijen, & Mueller, 2021 ; Ramelli & Wagner, 2020 ). According to experts, the coronavirus crisis has aroused even more interest in these financial instruments as helpful vehicles for the so-called “green recovery”.…”

Responsible Investment and Stock Market Shocks: Short‐Term Insurance without Persistence

“…This indicates that investors were less inclined to sell assets with strong ESG characteristics. Cardillo, Bendinelli and Torluccio (2022) is a complement to our study by analysing the performance of ESG stocks during the pandemic in 2020 rather than in the immediate crisis. They find that ESG stocks outperform in their reaction to national case numbers and deaths.…”