Sustainability in the Time of Uncertainty
Der Effekt des extremen Kurseinbruchs an der Börse im März auf die Performance der nachhaltig-klassifizierten Stocks
Projektteam Ola Mahmoud, Faculty of Business and Economics, University of Basel, and University of California, Berkeley; Julia Meyer, University of Zurich - Department of Banking and Finance, CSP
Abstract
Examining the shock of the COVID-19 pandemic to the global financial market, we present evidence that sustainably rated stocks have proven most resilient during the downturn. Based on a developed decomposition of sustainability scores into three explanatory components capturing uncertainty, investor sentiment, and an idiosyncratic sustainability factor, we show that all three mechanisms contribute to the resilience of sustainable stocks during the market crash. As the idiosyncratic sustainability factor arguably accounts for the most prominent part of the effect observed, we establish a link between resilience and investor trust in sustainability during times of heightened market uncertainty. Experimental evidence on investor preferences for sustainability during the crash supports the premise that sustainability is valued in times of uncertainty.