Sustainable Investing in Times of Crisis: Evidence from Bond Holdings and the COVID-19 Pandemic

Using data on institutional investor holdings, we investigate the resilience of green bonds to the COVID-19 shock in a difference-in-differences framework. We find that, during the pandemic outbreak, green bonds experienced lower sales, on average, than equivalent conventional bonds, while no significant differences emerge in normal times. The results hold across different investor classes, including mutual funds exposed to large outflows. Furthermore, we find that sustainability-oriented funds sold less of green bonds than their peers without sustainability concerns, suggesting that sustainable investing may help to stabilize financial markets during turmoil periods. We also document that the ownership of green fixed income securities is more concentrated than that of comparable conventional bonds, and that concentration has increased in the first quarter of 2020.