Green Shields: The Role of ESG in Uncertain Times

Fatih Kansoy; Dominykas Stasiulaitis

Working Paper · Jun 2025

Green Shields

with Dominykas Stasiulaitis · University of Oxford Department of Economics Discussion Papers

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Summary

Does ESG protect firms in bad times, or make them more exposed to rate news? This paper finds a two-sided answer: high-ESG firms are relatively protected from contractionary target surprises, yet they become more sensitive to forward-guidance shocks because sustainability-oriented cash flows behave like longer-duration assets.

The striking result is that this relationship flips around the Paris Agreement. What looks like a stable ESG premium is actually regime-dependent monetary transmission, shaped by investor preferences and the depth of sustainable-finance markets rather than by a fixed green-firm technology.

Figure showing environmental score evolution and the Paris Agreement break. — Headline exhibit: the Paris-era break matters because the paper's ESG mechanism is explicitly regime-dependent rather than constant over time.

At a Glance

Research question: Does ESG create a monetary-policy shield, a duration vulnerability, or both?
Core finding: High-ESG firms gain protection on target shocks but lose it on forward-guidance shocks, with a major post-2015 reversal.
Method: High-frequency identification around 160 Federal Reserve announcements from 2005 to 2025.
Theme: Monetary non-neutrality through sustainable-finance demand and duration structure.

Citation

Kansoy, Fatih, and Dominykas Stasiulaitis. 2025. “Green Shields: The Role of ESG in Uncertain Times.” University of Oxford Department of Economics Discussion Papers.

@article{kansoy2025green,
  title   = {Green Shields: The Role of ESG in Uncertain Times},
  author  = {Kansoy, Fatih and Stasiulaitis, Dominykas},
  journal = {University of Oxford Department of Economics Discussion Papers},
  year    = {2025}
}