From Uncertainty to Resilience: How ESG Scores Moderated Market Capitalization Shocks amid the Russian Invasion of Ukraine

Geopolitical instability, such as the Russian invasion of Ukraine, has a significant impact on firms’ market capitalization. This study investigates how environmental, social, and governance (ESG) scores influence market capitalization during the invasion—a period marked by severe geopolitical disruption. This study employs a robust panel estimation approach using comprehensive firm-level data for 2,188 companies from the Refinitiv Eikon database, covering the period from 2012 to 2023. Results show that higher ESG scores—particularly in the environmental and social categories—offered meaningful protection against market capitalization losses, particularly during the conflict. Additional robustness tests using alternative indicators—emissions, labor turnover, and salary gaps—found that salary gap metrics outperformed traditional governance measures in explaining firm value during the crisis. While the economic impact is moderate, the statistical significance of ESG factors underscores their growing relevance in investment decisions under geopolitical stress. The findings point to the need for further research into the long-term valuation effects of ESG performance beyond short-term crises.