The efect of ESG factors on returns during COVID-19

Abstract

Environmental, Social, and Governance (ESG) factors and aspects are becoming more and more relevant to investment practices, used due to societal pressures and as material information to investment. In this research paper, I show how the European stock market changed in com position and in quality of ESG performance between January 2018 and January 2022, with a particular focus on data after January 2020 to account for the effects of the SARS-Cov-2 virus (COVID-19) in this market. Showing that the number of public companies in Europe decreased signifcantly, that the proportion of companies publishing ESG information also decreased and that average ESG quality dropped in the European market because of the virus. Furthermore,I analyze the performance of European companies fulflling varied restrictions relative to ESG information during this period and how the performance of these companies accompanied the evolution of COVID-19. Through a series of regressions I complement these results and show how ESG scores were not reliable predictors of returns during this period despite the fact that groupings of companies with higher than median ESG performance showed reduced negative tail risk and reduced returns.

Date of Award	23 Jan 2023
Original language	English
Awarding Institution	Universidade Católica Portuguesa
Supervisor	Eva Schliephake (Supervisor)