Are environmentally friendly firms more vulnerable to the Russia-Ukraine crisis?

This paper applies an event study approach to assess the effect of the Russia-Ukraine crisis on environmentally friendly firms. Using a sample of 1206 firms from the S&P Global 1200 index covered from 6 January 2021, to 8 March 2022, we find that, ceteris paribus, cumulative abnormal returns are significantly related to the environment score. While the environmental scores positively affect the pre-event window CARs, firms with higher environmental scores are more detrimentally affected during the Russia-Ukraine war. This can be attributed to the expected increase in post-war compliance costs for these firms, given the detrimental effects of the war on the environment. This study contributes to the literature by showing that firms with high environmental scores are not necessarily more resilient to war shock events than those with environmental concerns and by providing empirical evidence regarding firm-specific characteristics that drive event-induced returns, indicating that risks may be diversified based on firm and industry characteristics. This study has policy implications because, while it shows that a high environmental score does not necessarily make a firm more resilient, it sheds light on firm-specific characteristics that drive war event-induced returns.