Sustainability preferences under stress

Sustainability preferences under stress

While academic research is increasingly focused on sustainable finance, little is known about the rationale for sustainable investing. Our study utilises the COVID-19 shock to study investor preferences during the first major economic crisis since the substantial rise in sustainable investing in recent years. We find that funds scoring high on ESG factors receive higher than average fund flows prior to the pandemic-induced market crash, while this relatively high inflow disappears after the onset of the crash. Our results suggest that investors perceive ESG as a luxury good that is no longer affordable under the financial stress induced by the COVID-19 shock. Download the full paper.