ESG and financial performance: Link intensity during the COVID-19 pandemic

This paper examines the relationship between ESG performance and financial performance during the COVID-19 pandemic, with particular attention to whether the strength of this relationship varies between crisis and non-crisis periods. Using a sample of 9,261 unique firms headquartered in 44 countries, representing 72,004 firm-year observations from 2010 to 2024, we find a stronger impact of ESG on financial performance during the pandemic. This positive and highly significant effect persists in the post-COVID period. Our results suggest that firms with stronger ESG performance exhibit greater resilience in times of crisis, with ESG engagement enhancing their ability to absorb both immediate shocks and longer-term adverse effects. ESG investments thus generate tangible benefits during the crisis period and contribute to sustained corporate resilience. These patterns may reflect heightened stakeholder solidarity and increased attention to ESG-related activities during the pandemic, effects that appear to extend beyond the crisis itself. We further estimate the marginal effects of ESG and its sub-dimensions on financial performance before, during, and after the COVID-19 pandemic. The results indicate that the environmental and governance pillars exert stronger positive impacts during the crisis. Finally, we find stronger effects of ESG on financial performance for international companies, companies headquartered in developed countries, and consumer-focused companies.