Are ESG indexes a safe-haven or hedging asset? Evidence from the COVID-19 pandemic in China

Abstract

Purpose The aim of the paper is to investigate the risk-hedging and/or safe haven properties of environmental, social and governance (ESG) index during the COVID-19 in China. Design/methodology/approach This paper employs the DCC, VCC, CCC as well as Newey–West estimator regression. Findings The findings provide empirical evidence of the risk hedging properties of ESG indexes as well as of the environmental, social and governance thematic indexes during the outbreak of the COVID-19 crisis. The results also support the superior risk hedging properties of ESG indexes over cryptocurrency. However, the authors do not find any safe haven properties of ESG, Bitcoin, gold and West Texas Intermediate (WTI). Practical implications The paper offers therefore, practical policy implications for asset managers, central bankers and investors suggesting the pandemic risk-hedging opportunities of ESG investments. Originality/value The study represents one of the first empirical contributions examining safe-haven and hedging properties of ESG indexes compared to traditional and innovative safe haven assets, during the eruption of the COVID-19 crisis.