ESG and Coronavirus Crisis: What can we learn?

By Svetlana Borovkova, Head of Quantitative Modelling

In my last column, I showed that investors do not have to sacrifice financial performance when investing in more sustainable firms, i.e., those scoring higher on Environmental, Social and Governance (ESG) metrics. So how did such firms perform during the recent period of coronavirus-related stock market turmoil?

A recent report by Morningstar claimed that higher scoring ESG firms have shown more resilience during the COVID-19 crisis. On the other hand, some academic studies (such as that by professor Philip Joos of Tilburg University) have refuted such claims. Coincidentally, Ying Wu – also at Probability & Partners – and I have investigated a large set (1.100) of US and EU stocks: the results turn out to be more subtle.