The impact of ESG during COVID-19- A quantitative study targeting ESG and stock returns on the Swedish stock market during COVID-19 Adem

Abstract

In this thesis, we study whether ESG has a positive effect on stock performance during COVID- 19, based on a sample of 153 listed firms in the Swedish stock market. We follow a Best-in- Class ESG screening strategy and compare the performance differences between the top and bottom ESG portfolios during 2019-2020. We do not find any statistically significant difference in raw returns and risk-adjusted returns between the top and bottom portfolios in the crash window. However, we find a significant negative difference in raw returns between the top and bottom portfolios in the pre-crash and recovery period. Moreover, we shed light on the impact of ESG and its pillars in explaining industry returns, by adding an ESG factor to the Fama- French three-factor model. We find that ESG impact tends to vary between sub-periods and across industries. Additionally, the Environmental and Governance pillars can be seen as the two primary pillars to affect the industry returns but in opposite directions.