����ɫ��

U.S. companies with strong environmental and social policies performed significantly better during the stock market collapse caused by the COVID-19 pandemic, says a researcher.

“The policies almost act like an insurance policy against bad times,” says , who is a professor of finance at the .

The findings are part of a study called ": The Resiliency of Environmental and Social Stocks," which was co-authored by Koskinen and Haskayne PhD student . It will be published in Covid Economics, a new journal by the U.K.-based .

'New realities'�� �� �� �� �� �� �� �� �� �� ����

Examples of environmental and social (E and S) policies include to use renewable energy. Previous research by Koskinen has shown such policies boost customer loyalty and make companies more valuable, helping insulate them from the ups and downs of the market and decreasing the risk for investors.

Although it can take years for such research to be published, Covid Economics reviewed and approved��"Love in the Time of COVID-19" on Friday, April 24, only a day after the paper was submitted.

“It’s nice to see that in academia, we can manage to adapt so fast to these new realities,” says Koskinen. “If you have this kind of unprecedented economic collapse going on, you can’t just have a regular publishing cycle.”

The title of the study is derived from Love in the Time of Cholera, a novel by the late Colombian author Gabriel Garcia Marquez. The study examined the environmental and social performance of 2,171 U.S. firms as rated by and .

Stock prices plunged��

"Love in the Time of COVID-19" looked at how the stocks of such companies performed during the first three months of 2020 compared to other firms lacking such policies. The global economy plunged from the longest-ever bull market to what analysts expect could be one of the .

“What happens in normal times is that E and S policies have a dampening effect on the profits of corporations —��they don’t go down as much or up as much, so they have less volatility,” says Koskinen. “But this was the fastest economic collapse ever, and these stocks were still less volatile.”

Although the value of the stocks of all companies declined starting Feb. 20, those with high E and S ratings “did extraordinarily better” in terms of weathering the crisis, says Koskinen. The effect was similar to that of companies with high cash balances, he says.

“During a time of crisis such as the pandemic, when there is a lockdown and you get this shock to the economy, cash is king, so companies with high cash balances are going to be more valuable than others,” he says. “But the E and S policies were as valuable as cash, which is a very astonishing result.”

The one exception was the energy industry —��perhaps because “E and S policies don’t matter for the energy industry, or because the collapse also involved this oil price war between Saudi Arabia and Russia, so it was kind of this double crisis for energy stocks,” says Koskinen.

Policies aren't a fad

Such evidence makes it harder for investors to remain skeptical about such policies, he says. “There is now so much evidence that U.S. companies with E and S policies are performing better that it is clear this is not a fad and it’s not going away,” he says.

Koskinen hopes to study whether such effects are also true for the smaller Canadian market. “It seems that E and S policies may have a better payoff in the U.S. than in Canada, but right now, this is really just speculation,” he says.

Besides Koskinen and Yang, the other co-authors of "Love in the Time of COVID-19" include , a professor and Haub Family Faculty Fellow at the Carroll School of Management at Boston College in the U.S; and , a professor and director of research at the University of Exeter Business School in the U.K.

��

UCalgary resources on COVID-19

For the most up-to-date information about the ����ɫ��'s response to the spread of COVID-19, visit the��