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This research explores the spillovers and portfolio implications for green bonds and environmental, social and governance (ESG) assets in the context of the rapidly expanding trend in green finance investments and the need for a green recovery in the post-COVID-19 era.

This study utilizes Diebold and Yilmaz’s (2014) spillover method and portfolio strategies (hedge ratio, optimal weights and hedging effectiveness) for the data starting from February 29, 2012, to March 14, 2022.

The study’s findings reveal that the lower volatility spillover is evidenced between the green bonds and ESG stocks during tranquil and turbulent periods (e.g. COVID-19 and Russia-Ukraine War). Furthermore, hedging costs are lower both in normal times and during economic slumps. Investing the bulk of the funds in green bonds makes it possible to achieve maximum hedging effectiveness between the S&P green bond (GB) and the S&P 500 ESG.

Both investors and policymakers may use these findings to make wise investment and policy choices to achieve post-COVID environmental sustainability.

Unlike previous research, this is the first to explore the interconnectedness among the major global and country-specific green bonds and ESG assets. The major findings of this study about the lower volatility spillovers and hedging costs between green bonds and ESG assets during the tranquil and turbulent periods may contribute to the post-COVID investment portfolio for environmental sustainability.

This paper investigates whether sustainability performance (SP) protects financial performance (FP) for firms in both developed and emerging economies during the COVID-19-induced economic downturn.

Using a recent sample of firms in 34 countries between 2003 and 2021, the authors employ ordinary least squares regressions, moderations and the Heckman two-step method to test the hypotheses.

Firms with strong SP have higher FP in developed and emerging economies in the upcoming year. During the COVID-19 crisis in 2020–2021, the impact of sustainability on FP is pronounced in developed but not in emerging economies. Furthermore, cross-listings expose firms in emerging economies to high-standard institutional mechanisms in developed economies. Thus, sustainable firms in emerging economies cross-listed on European stock exchanges are more profitable.

For regulators and standard setters, the global-level comparative analysis helps them find solutions that may assist firms in improving SP globally (e.g. mandatory reporting) and enduring crises resiliently. For institutional investors, the study reveals the relatively different impact of sustainability risk for firms in developed and emerging economies. For practitioners and private sector firms, this study contributes to the dialogue on what makes firms more resilient in COVID-19. Although COVID-19 might be temporary, the lessons learned could protect firms from future crises.

The authors contribute to the contingency perspective between sustainability and financial performance by providing recent empirical evidence in a global setting during the COVID-19 pandemic. The authors demonstrate how different external institutional mechanisms (rule-based governance and relation-based governance) and cross-listing affect the SP-FP relationship during a crisis. The authors extend the knowledge in crisis management literature with a comparative study and fill the research gap on how SP affects FP for firms in emerging economies compared to developed economies.