The impact of ESG tilting on the performance of stock portfolios in times of crisis

This paper investigates whether there exists a clear relationship between ESG indicators and financial performance with specific reference to the CoVid-19 crisis and to discover what are, if any, the key takeaways for issuers that emerge from such relationship. To assess this connection, we carried out an ESG scores based long-short portfolio analysis in the spirit of Fama and French (1992) on the European market in the period 2016-2021. The results indicate that there is robust evidence that the bottom decile portfolio provides negative alphas and some weak evidence that the long-short portfolio provides some positive abnormal returns compared to all three most prominent asset pricing models (CAPM, Fama-French three-factor model and Fama-French fivefactor model).