Charting a "Green Path" for Recovery from COVID-19

Area of Science:

• Environmental Economics
• Financial Markets
• Corporate Sustainability

Background:

• The COVID-19 pandemic presents an opportunity to reshape economic recovery strategies.
• The necessity and feasibility of a 'green recovery' remain debated topics.
• Understanding industry performance during the crisis is crucial for future policy.

Purpose of the Study:

• To evaluate the financial performance of industries with varying carbon intensities during the COVID-19 crisis.
• To assess the viability of a green economic recovery post-pandemic.
• To inform policy decisions regarding economic revitalization and investment.

Main Methods:

• Analysis of daily stock returns for firms within the STOXX Europe 600 index.
• Correlation analysis between firm carbon intensity and stock performance during the pandemic.
• Review of arguments for and against a green economic recovery.

Main Results:

• Firms with higher carbon intensities experienced significant stock value declines.
• Specific high-impact sectors included crude petroleum extraction, air transport, and refined petroleum.
• Official ESG 'climate change policies' did not demonstrably improve firm performance during the pandemic.

Conclusions:

• Economic recovery efforts should avoid subsidizing 'stranded assets' (e.g., fossil fuel industries).
• Investment should be directed towards identifying and supporting 'industries of the future'.
• New, more informative indices may be needed to accurately reflect sustainable firm performance.