Potential of environmental, social, and governance investment as a hedge in Indonesia during COVID-19 pandemic

• Published in: Cogent social sciences 2025-12, Vol.11 (1)
• Main Authors: Robiyanto, Robiyanto, Agustina, Frieska Dwi, Utami, Intiyas, Frensidy, Budi, Huruta, Andrian Dolfriandra
• Format: Article
• Language: English
• Subjects: covid-19; G11; hedge; Indonesia stock exchange; Jakarta composite index; safe haven
• ISSN: 2331-1886; 2331-1886
• DOI: 10.1080/23311886.2024.2447909

This study scrutinizes the potential of Environmental, Social and Governance (ESG) investment as hedge and safe haven instruments during the COVID-19 pandemic in the Indonesia Stock Exchange (IDX). This research was conducted using the daily return data of ESG indices and conventional indices collected for three years before the Covid-19 pandemic (11 March 2017–28 February 2020) and between the first reporting of Covid-19 in Indonesia (March 02, 2020) and the revocation of COVID-19 pandemic status in Indonesia (21 June 2023). The ESG indices used were the ESG Leader index and the SRI-KEHATI index, and the conventional indices used were the Composite Stock Price Index (JCI), which were compared against overall market return and the LQ45 index containing 45 stocks actively traded in Indonesia. Using Generalized Autoregressive Conditional Heteroskedasticity (GARCH) and Quantile Regression (QREG) techniques, the study found that ESG investments cannot act as hedge or safe haven in IDX. Investors in IDX who wish to diversify their assets should consider other asset classes, such as precious metals, cryptocurrencies, currencies, commodities, and fixed income instruments, such as sovereign or corporate bonds.