The Energy Crisis as a Game Changer for Sustainable Investing?

This paper examines the financial outcomes of investments in stocks with varying degrees of ESG-rated sustainability before and after the energy crisis that began to unfold in 2021. It was analysed whether the energy crisis has caused improvements or deteriorations in the performance of more-sustainable compared to less-sustainable stock investments. The paper addresses an apparent gap in the existing literature, where interdependencies among the risk–return profiles of stocks and the ESG ratings of their issuers have so far garnered little attention in the context of the energy crisis. The results suggest that the energy crisis has triggered significant changes in the risk-return profile of securities issued by companies deemed sustainable versus those classified as less sustainable. Compared to previous crises with other economic backgrounds, more-sustainable stocks showed similar behavior relative to less-sustainable ones. The findings carry implications for asset managers and economic policymakers in terms of their decision-making with regard to the configuration of subsidies.