Іmpact of the COVID-19 pandemic on the stock market: the ESG ETF case

Abstract

The article is devoted to the analysis of the impact of the financial shock caused by the COVID-19 pandemic. As interest in responsible investing has declined in recent years, and a recent survey found that 75% of respondents worldwide integrate ESG into their investment approach, the study focused on the shock response processes of thirty ETF ESG companies, which are among the most important investment tools. ESG can be deciphered as "environment, social policy and corporate governance". In a broad sense, it is a sustainable development of business, based on the following principles: responsible attitude to the environment (from English, E - environment), ie how active the company is in the field of environmental protection; high social responsibility (from English, S - social). Businesses must provide employees with decent working conditions and equal employment opportunities, as well as support public organizations; high quality of corporate governance (from English, G - governance). These are the standards that guide business management, including ethical business practices, gender diversity on the board of directors, appropriate pay, and general business transparency. Also in this article, an analysis of investment risk and risk-return during the shock period of the COVID-19 pandemic. Three-time intervals were used for the study, namely: before the shock (lasted from 01.07.2019 to 15.01.2020), shock (from 16.01.2020 to 31.03.2020) and after the shock (from 01.04.2020 to 31.10.2021) periods. Two indicators have been proposed for the study: the depth of the decline and the recovery rate of return on financial assets. Almost all of the studied indicators showed a fairly good recovery at selected intervals. Risk-to-return ratios in the pre-shock and post-shock periods are considered using two approaches: volatility and Value-at-Risk. In the post-shock period, both approaches show an increased risk, but their degree varies.