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ESG investing in good and bad times: An international study

Author

Listed:
  • Long, Huaigang
  • Chiah, Mardy
  • Cakici, Nusret
  • Zaremba, Adam
  • Bilgin, Mehmet Huseyin

Abstract

If the demand for socially responsible stocks depends on aggregate wealth, their returns may rise when the economy is booming and fall when it is struggling. Motivated by the consistent evidence from the United States, we revisit this effect internationally. Using data from 45 markets, we examine how the economic conditions affect environmental, social, and governance (ESG) strategies. We find that high-rated ESG firms fail to outperform their low-rated counterparts in good and bad times alike. The abnormal returns on ESG strategies do not reliably differ across economic states. Previous contrasting evidence does not generalize internationally and is likely sample- and period-specific.

Suggested Citation

  • Long, Huaigang & Chiah, Mardy & Cakici, Nusret & Zaremba, Adam & Bilgin, Mehmet Huseyin, 2024. "ESG investing in good and bad times: An international study," Journal of International Financial Markets, Institutions and Money, Elsevier, vol. 91(C).
    • Handle: RePEc:eee:intfin:v:91:y:2024:i:c:s1042443123001841
    DOI: 10.1016/j.intfin.2023.101916
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    Keywords

    Socially responsible investing; Environmental; social; and governance ratings; ESG strategies; International stock markets; Conditional returns; Economic states; Return predictability;
    All these keywords.

    JEL classification:

    • G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions
    • G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading
    • G15 - Financial Economics - - General Financial Markets - - - International Financial Markets
    • M14 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Business Administration - - - Corporate Culture; Diversity; Social Responsibility

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