LAUSR

We analyse the time-varying risks associated with ESG equity investments in developed, emerging and BRIC equity markets in the wake of the COVID-19 pandemic which has once again underscored the vulnerability of the financial space to shocks. For this purpose, the nonlinear Markov regime switching model is used to analyse the time-varying beta and idiosyncratic volatility of the World ESG Leaders, Emerging Markets ESG Leaders and BRIC ESG Leaders equity portfolios provided by Morgan Stanley Capital International (MSCI). To further complement the evidence, we also refer to the global ACWI ESG Leaders index which represents both developed markets and emerging markets. The evidence suggests that the risk dynamics of the ESG equity portfolios representing the developed markets, emerging markets, BRIC markets and the global markets are distinct during the crisis and calm period. ESG equity investments have higher systematic risk exposure in emerging markets and BRIC markets during the crisis period as well as calm periods. On the other hand, ESG equity investments have higher systematic risk exposure during the crisis period only in case of developed markets. The results of the study provide insights on the time -varying risk dynamics of ESG investing and thus, facilitate informed investment decisions.