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The role of ESG performance during times of financial crisis: Evidence from COVID-19 in China
Date Issued
2021
Journal
ISSN
1544-6131
1544-6123
Citation
Finance Research Letters, 2021, vol. 38, article no. 101716.
Type
Peer Reviewed Journal Article
Abstract
We examine the role of ESG performance during market-wide financial crisis, triggered in response to the COVID-19 global pandemic. The unique circumstances create an inimitable opportunity to question if investors interpret ESG performance as a signal of future stock performance and/or risk mitigation. Using a novel dataset covering China’s CSI300 constituents, we show (i) high-ESG portfolios generally outperform low-ESG portfolios (ii) ESG performance mitigates financial risk during financial crisis and (iii) the role of ESG performance is attenuated in ‘normal’ times, confirming its incremental importance during crisis. We phrase the results in the context of ESG investment practices.
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