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

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.

Automated summary

This study investigates the response of green bonds and ESG stock markets to the COVID-19 crisis in the US. Unlike the S&P 500 index, the impact of pandemic progress on green bonds and ESG markets is nonlinear: a low (large) level of confirmed new cases of COVID-19 has a positive (negative) effect. Additionally, the implementation of containment policies, such as stringency measures and vaccination campaigns, is viewed positively, but their simultaneous usage is perceived negatively by investors. Overall, this research raises questions about the resilience of investments in green bonds and ESG markets.