ESG investing in good and bad times: An international study

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.