The Impact of COVID-19 Lockdowns on Sustainable Indexes

Abstract

This paper analyzes the response of sustainable indexes to the pandemic lockdown orders in Europe and the USA, contributing to both the research on the effects of the global pandemic outbreak and the resiliency of sustainable investments under market distress. Our results demonstrate that sustainable indexes were negatively impacted by lockdown orders; however, they did not show statistically significant different abnormal returns compared to traditional indexes. Similarly, our empirical results confirm that sustainable screening strategies (negative, positive, best in class) did not have an influence during such announcements. These results are robust across several model specifications and robustness tests, including nonparametric tests, generalized autoregressive conditionally heteroskedastic (GARCH) estimation of abnormal returns, and alternative events. The findings suggest that investors do not have to pay the price for the investments in sustainable assets when a bear market occurs; consequently, ceteris paribus, these investments appear suitable for financial-first investors. Such results have relevant practical consequences in terms of sustainable investment attractiveness and market growth.

Sustainable Finance and COVID-19: The Reaction of ESG Funds to the 2020 Crisis

“…This result is in accordance with those of Nofsinger and Varma [12], Lins et al [13], Albuquerque et al [26], Mirza et al [29], and Xiong [27]. By contrast, these findings do not support the conclusions of Broadstock et al [14], Folger-Laronde et al [18], Hartzmark and Sussman [22], Demers et al [19], and Chiappini et al [20].…”

“…They could overcome the trade-offs but, as is well known, the results concerning their financial performance are mixed. On one hand, sustainable financial products have been shown to outperform the market during a crisis (e.g., [12,13], and more recently Broadstock et al [14] and Engelhardt et al [15]); by contrast, some results are negative or do not show any outperformance during a bear market (e.g., [16,17], and, with a specific focus on the last crisis, Folger-Laronde et al [18], Demers et al [19], and Chiappini et al [20]) or without considering any financial crisis period (e.g., [21,22]).…”

Persistence in ESG and Conventional Stock Market Indices

“…Jain et al (2019) argued that sustainable indices and conventional ones are substitutes. As for the effects of the COVID-19 pandemic, no statistically significant differences have been detected for the returns of ESG indices compared to traditional ones (Chiappini et al, 2021;Umar et al, 2020).…”

Is COVID-19 anticipating the future? Evidence from investors’ sustainable orientation

“…Recently, the COVID-19 pandemic has stimulated research on sustainable investments and market downturns; however, the conclusions of this research remain questionable (Chiappini et al, 2021 ). A distinctive aspect of the COVID-19 crisis, different from prior financial crises (e.g.…”