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

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  • Perote, Javier
  • Vicente-Lorente, José D.
  • Zuñiga-Vicente, Jose Angel

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.

Suggested Citation

  • 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).
    • Handle: RePEc:eee:finlet:v:53:y:2023:i:c:s1544612323000120
    DOI: 10.1016/j.frl.2023.103638
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    2. Lu, Xunfa & Huang, Nan & Mo, Jianlei & Ye, Zhitao, 2023. "Dynamics of the return and volatility connectedness among green finance markets during the COVID-19 pandemic," Energy Economics, Elsevier, vol. 125(C).

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    More about this item

    Keywords

    ESG indices; Green bonds; Sustainable investment; COVID-19 pandemic; Stringency index;
    All these keywords.

    JEL classification:

    • G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading
    • G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions
    • G01 - Financial Economics - - General - - - Financial Crises

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