Evaluating the Resilience of <scp>ESG</scp> Investments in European Markets During Turmoil Periods

ABSTRACT This study investigates the resilience of Environmental, Social, and Governance (ESG) investments during periods of financial instability, comparing them with traditional equity indices of the three largest economies in the European Union by gross domestic product: Germany, France, and Italy. Using daily returns from January 2018 to December 2024, the analysis explores the effects of key global disruptions such as the COVID‐19 pandemic and the Russia‐Ukraine conflict on market performance. A mixture of two generalised normal distributions (MGND) and EGARCH‐in‐mean models is used to identify periods of market turmoil and assess volatility dynamics. The findings suggest that during crises, ESG investments exhibit lower volatility in Germany, while their volatility remains comparable to that of traditional indices in Italy and France. Thus, the volatility of the ESG indices shows country‐specific variations in the European context. These results underscore the importance of integrating ESG factors into long‐term investment strategies, particularly in the face of unpredictable financial turmoil.