Does Companies' ESG Performance Make a Difference for New Zealand's Stock Market Investors during the COVID-19 Pandemic?

This paper aims to investigate whether the environmental, social, and corporate governance (ESG) score of New Zealand-listed companies is associated with their stock performance during the COVID-19 pandemic. The idea of socially responsible investing is commonly accepted in New Zealand, and past academic literature has argued for the positive (though often weak) relationship between companies' stock returns and their ESG profile. The methodology of the research is threefold. First, the average daily return for 11 New Zealand Exchange (NZX) market sectors and the S&P/NZX50 index during the COVID-19 panic and rebound periods are compared. Then, the impact of the COVID-19 outbreak on the average daily return of 11 broad NZX sectors in relation to the average ESG score for a given sector is checked. Finally, the relationship between the daily average performance of 56 NZX-listed companies and their ESG scores proxied by Refinitiv's ESG Combined Score is determined. The analysis reveals no support for the idea that the returns of firms with higher ESG scores are greater than those with a low ESG ranking during the COVID-19 pandemic. The results show a negative, though statistically insignificant, correlation between the ESG score and annualized stock return both on the sector and individual company levels. Even though our reported findings do not confirm the believed positive correlation of the analyzed measures (based on previous studies), they clearly show that high ESG performance does not harm financial performance even in the context of crises.