Xiang Lin, Södertörn University, presents the study "Performance of Negatively Screened Sustainable Investments during the COVID-19", jointly written with Ranjula Bali, also at Södertörn. The study empirically evaluate ESG investment portfolios' performance during the Covid-19 pandemic.

Negative screening is an important strategy for building up an environmental, social, and governance (ESG) portfolio by excluding low-ESG-scored assets from a conventional portfolio. This paper aims at evaluating the performance of the ESG-negative-screened index in comparison with the corresponding parent index under different market conditions. Based on the standard capital-asset pricing model (CAPM) framework, Markov Regime Switching Autoregressive model is employed to identify the different regimes in modelling market conditions.

The finding shows that the pandemic caused a high volatility regime in the equity market. The study analyzes 24 negatively screened ESG indices from the S&P, DJSI and MSCI across various regions, sizes of underlying firms, and criteria of screening. The sample covers the period 2017-2021, including the COVID-19 pandemic crisis period. Key findings suggest that the performances of negatively-screened ESG and the corresponding parent indices were similar in the high volatile regime. This indicates resilient ESG indices during the COVID-19 pandemic, as theoretical models of heterogeneity and loyalty of investors predict that ESG portfolios should underperform. We further conclude that most ESG indices have either lower or the same relative systematic risks, implying either less or the same co-movements with their parent indices when switched into high volatility regime.