Sustainability and Shock Resilience: A TVP-VAR Analysis of the Resilience of ESG Firms
DOI:
https://doi.org/10.63556/tisej.2026.1636Keywords:
Sustainability (ESG), Geopolitical Risk, Time-Varying Parameter VAR (TVP-VAR), Bayesian Structural Time Series (BSTS), Volatility SpilloverAbstract
This study investigates the impact of country-specific and global geopolitical risks, along with their subcomponents, on the Turkish stock market, and examines the resilience of firms that comply with Environmental, Social, and Governance (ESG) criteria in the face of such risks. Using monthly data for the period between January 2015 and June 2025, ESG-compliant firms are compared with non-ESG firms. The analysis also evaluates the resilience of Turkish firms to major geopolitical shocks, including the Covid-19 pandemic and the Russia–Ukraine war. In line with the research objectives, Time-Varying Parameter Vector Autoregression (TVP-VAR), Bayesian Structural Time Series (BSTS) analysis, and Quantile-on-Quantile Regression (QQR) methods are employed to assess interconnectedness and volatility spillovers. The findings reveal no significant evidence supporting the notion that ESG practices shield firms from geopolitical shocks. Particularly in the long run, ESG-compliant firms appear to act more as volatility receivers compared to non-ESG firms and are subject to higher levels of volatility. Another key finding shows that the impact of geopolitical risks on stock markets varies across different time horizons. Among the uncertainty indices considered, only the global geopolitical risk index acts as a volatility transmitter, while other geopolitical risk indices and both ESG and non-ESG stock indices serve as volatility receivers. The study offers important implications for policymakers and investors concerning the risk management dimension of ESG investments.
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