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How did banks' ESG conduct affect financial performance and lending during COVID-19?

Author

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  • Dursun-de Neef, Ozlem
  • Forchieri, Joaquin
  • Gehrig, Thomas
  • Schandlbauer, Alexander

Abstract

This paper examines the link between ESG conduct and banks' stock performance during the COVID-19 crisis using a large global sample of banks. We find that a one standard deviation increase in a bank's ESG score is associated on average with a 0.14 percentage point lower daily stock returns during the onset of the COVID-19 pandemic. Examining the potential drivers behind the negative impact of the ESG conduct, we show that banks with a higher fraction of retail investors are more affected. Last, we provide evidence for a negative association between banks' ESG performance and their lending in times of COVID-19, which is again relatively more pronounced for banks with a higher share of retail ownership.

Suggested Citation

  • Dursun-de Neef, Ozlem & Forchieri, Joaquin & Gehrig, Thomas & Schandlbauer, Alexander, 2023. "How did banks' ESG conduct affect financial performance and lending during COVID-19?," CEPR Discussion Papers 18108, C.E.P.R. Discussion Papers.
    • Handle: RePEc:cpr:ceprdp:18108
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    More about this item

    Keywords

    ESG; Sustainable banks; COVID-19; Bank lending;
    All these keywords.

    JEL classification:

    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • E51 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Money Supply; Credit; Money Multipliers

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