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ESG ratings and financial performance of exchange-traded funds during the COVID-19 pandemic

Author

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  • Zachary Folger-Laronde
  • Sep Pashang
  • Leah Feor
  • Amr ElAlfy

Abstract

With the advent of the COVID-19 pandemic, the world has experienced economic and social fragility, which calls for alternative approaches to navigate towards sustainable outcomes. While recent studies show that responsible investments (RI) are resilient during the economic downturn caused by crises such as COVID-19, there has been little exploration into exchange-traded funds (ETFs). Using ANOVA and multivariate regression models, we analyze the differences and relationship between the financial returns of ETFs and their Eco-fund ratings during the COVID-19 pandemic-related financial market crash. Our results indicate that higher levels of the sustainability performance of ETFs do not safeguard investments from financial losses during a severe market downturn. These results contribute to the research by exposing weaknesses of current sustainability scores and rating methods to provide an initial analysis of RI during the COVID-19 pandemic

Suggested Citation

  • Zachary Folger-Laronde & Sep Pashang & Leah Feor & Amr ElAlfy, 2022. "ESG ratings and financial performance of exchange-traded funds during the COVID-19 pandemic," Journal of Sustainable Finance & Investment, Taylor & Francis Journals, vol. 12(2), pages 490-496, April.
    • Handle: RePEc:taf:jsustf:v:12:y:2022:i:2:p:490-496
    DOI: 10.1080/20430795.2020.1782814
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    Cited by:

    1. Perote, Javier & Vicente-Lorente, José D. & Zuñiga-Vicente, Jose Angel, 2023. "How reactive is investment in US green bonds and ESG-eligible stocks in times of crisis? Exploring the COVID-19 crisis," Finance Research Letters, Elsevier, vol. 53(C).
    2. Esparcia, Carlos & Diaz, Antonio & Alonso, Daniel, 2023. "How important is green awareness in energy investment decisions? An environmentally-based rebalancing portfolio study," Energy Economics, Elsevier, vol. 128(C).
    3. Wu Ning & Ummar Faruk Saeed & Angelina Kissiwaa Twum & Abednego Osei, 2024. "Can ESG disclosures promote firms going concern? Evidence from BRICS countries," Corporate Social Responsibility and Environmental Management, John Wiley & Sons, vol. 31(5), pages 3792-3803, September.
    4. Marszk, Adam & Lechman, Ewa, 2024. "What drives sustainable investing? Adoption determinants of sustainable investing exchange-traded funds in Europe," Structural Change and Economic Dynamics, Elsevier, vol. 69(C), pages 63-82.
    5. María Garrido‐Ruso & Luis Otero‐González & María‐Celia López‐Penabad & Pablo Durán Santomil, 2024. "Does ESG implementation influence performance and risk in SMEs?," Corporate Social Responsibility and Environmental Management, John Wiley & Sons, vol. 31(5), pages 4227-4247, September.
    6. Simona Cosma & Paolo Cucurachi & Vincenzo Gentile & Giuseppe Rimo, 2024. "Sustainable finance disclosure regulation insights: Unveiling socially responsible funds performance during COVID‐19 pandemic and Russia–Ukraine war," Business Strategy and the Environment, Wiley Blackwell, vol. 33(4), pages 3242-3257, May.
    7. Remo-Diez, Nieves & Mendaña-Cuervo, Cristina & Arenas-Parra, Mar, 2023. "Exploring the asymmetric impact of sustainability reporting on financial performance in the utilities sector: A longitudinal comparative analysis," Utilities Policy, Elsevier, vol. 84(C).
    8. Mandas, Marco & Lahmar, Oumaima & Piras, Luca & De Lisa, Riccardo, 2024. "ESG reputational risk and market valuation: Evidence from the European banking industry," Research in International Business and Finance, Elsevier, vol. 69(C).
    9. Hasan F. Baklaci & William I-Wei Cheng & Jianing Zhang, 2024. "Performance Attributes of Environmental, Social, and Governance Exchange-Traded Funds," Asia-Pacific Financial Markets, Springer;Japanese Association of Financial Economics and Engineering, vol. 31(2), pages 307-334, June.
    10. Rim El Khoury & Nohade Nasrallah & Khaled Hussainey, 2022. "Exploring the performance of responsible companies in G20 during the COVID-19 outbreak," Post-Print hal-03761427, HAL.
    11. Staněk Gyönyör, Lucie & Horváth, Matúš, 2024. "Does ESG affect stock market dependence? An empirical exploration of S&P 1200 companies shows the divergent nature of E–S–G pillars," Research in International Business and Finance, Elsevier, vol. 69(C).
    12. Pompei MITITEAN, 2023. "The Relationship Between Corporate Governance Mechanisms and Financial Institution Performance. A COVID-19 Perspective," CECCAR Business Review, Body of Expert and Licensed Accountants of Romania (CECCAR), vol. 3(12), pages 55-65, December .

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