ESG unpacked: Environmental, social, and governance pillars and the stock price reaction to the invasion of Ukraine

How do the individual pillars of environmental, social, and governance (ESG) factors perform in times of war? Focusing on euro area stocks around the Russian invasion of Ukraine in 2022, we investigate this question using an event study methodology. Our findings suggest that firms with higher governance scores experienced stronger abnormal positive stock returns, implying that investors particularly valued well-governed firms amidst the uncertainty and adversity. However, the importance of good governance was lower for countries with higher dependency on oil imports from Russia. In contrast, social and environmental considerations appeared to receive less attention from investors during this crisis period. Our study highlights the heterogeneous nature of ESG factors and underscores how their relevance can be context-dependent, especially in uncertain times marked by geopolitical conflicts.