Oil futures and ESG performance: Analyzing the balance between sustainability and asymmetry

We examine the comovement between ESG stocks and international oil market returns for 13 developed and emerging countries. Our analysis spans daily returns from October 1, 2007, to August 5, 2022, and is segregated across different investment periods. The results of our work indicate the presence of significant short- to medium-term diversification benefits for ESG investments with oil futures in a portfolio, regardless of market conditions. During the long-run holding period (128–256 days), we report diversification benefits across the tail distribution along with a positive high dependence across the median returns’ distribution. The Russian ESG market exhibits minimal returns comovement across timescales and distributions; however, Sweden highlights this pattern across the lowest (2-4 days) and highest scales (128–256 days). Our results carry implications for socially responsible investors, policy makers and regulators for sustainable investments.