Are Green Investment Funds More Resilient During Crises? : A Quantile Analysis of Performance Amidst COVID-19

Abstract

This study investigates the performance and resilience of green investment funds during the COVID-19 crisis, focusing on the integration of Environmental, Social, and Governance (ESG) criteria into investment strategies. Green investment funds aim to reconcile financial performance with sustainability goals by allocating resources to sectors such as renewable energy, green technology and ESG-compliant companies. The rise of green funds reflects a growing awareness among investors of environmental and social challenges, and a real appetite for responsible financial strategies. Unlike green bonds that finance specific projects, green funds provide a more comprehensive representation of sustainability trends across diverse sectors. The COVID-19 pandemic posed significant economic disruptions, characterized by extreme market volatility, heightened uncertainty, and shifts in investor behavior. Evidence from past crises, such as the 2008 financial collapse, shows that socially responsible investment (SRI) funds demonstrated resilience due to their governance and risk management practices. During the pandemic, ESG funds similarly showed robust performance compared to traditional funds. Empirical analyses revealed that these funds benefited from their exposure to sectors like technology, healthcare, and renewable energy, which were less affected by the economic downturn. However, not all green funds performed uniformly. High-yield ESG funds with investments in mature and innovative sectors exhibited superior resilience, whereas funds targeting riskier or transitioning sectors faced challenges. A key determinant of fund performance was government support policies. At the same time, international initiatives such as the Paris Agreement and the United Nations' Sustainable Development Goals have strengthened investor appeal for funds aligned with long-term environmental and social objectives. For instance, in Europe, the Green Deal and post-pandemic recovery plans bolstered green funds’ performance by directly supporting energy transition sectors. The document adopts a methodological framework incorporating econometric models and panel data analyses to evaluate weekly fund returns. External factors, such as market volatility (measured by the VIX), oil prices, COVID-19 deaths, and unemployment claims, are included to explain variability in returns. Results from the panel regressions highlight that global stock market trends, proxied by the MSCI World Index, had the most significant positive impact on fund returns, whereas indicators like COVID-19 deaths and jobless claims showed limited statistical significance.