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

Javier Perote; José D Vicente-Lorente; Jose Angel Zuñiga-Vicente

doi:10.1016/j.frl.2023.103638

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

Financ Res Lett. 2023 May:53:103638. doi: 10.1016/j.frl.2023.103638. Epub 2023 Jan 10.

Authors

Javier Perote¹, José D Vicente-Lorente², Jose Angel Zuñiga-Vicente³

Affiliations

¹ Department of Economics and IME, University of Salamanca, Campus Miguel de Unamuno, 37007, Salamanca, Spain.
² Department of Business Economics and Administration and IME, University of Salamanca, Campus Miguel de Unamuno, 37007, Salamanca, Spain.
³ Department of Business Administration (ADO), Applied Economics II and Foundations of Economic Analysis, Rey Juan Carlos University, Paseo de los Artilleros, 28032, Madrid, Spain.

Abstract

This study examines how green bonds and environmental, social and governance (ESG) stock market returns have reacted to the COVID-19 crisis in the US. Unlike the Standard and Poor's (S&P) 500 index, the response of green bonds and ESG markets to pandemic progress is nonlinear: A low (large) level of confirmed new cases of COVID-19 has a positive (negative) impact. Furthermore, the implemented containment policies (stringency measures and vaccination campaigns) are positively valued, but their simultaneous use is perceived by investors as a bad signal. Overall, our findings question the resilience of investments in green bonds and ESG markets.

Keywords: COVID-19 pandemic; ESG indices; Green bonds; Stringency index; Sustainable investment.