Abstract:-
Can ESG (Environmental, Social, and Governance) investments be both ethical and financially lucrative, especially for risk-averse investors? This question guides the study, which examines the performance and risk characteristics of ESG stocks across developed and emerging markets. While ESG investing is often linked to values and impact, its financial resilience remains an open debate. The analysis uses a range of models, including GSADF tests for bubbles, Markov regime-switching techniques, Copula analysis, time-frequency domain wavelet analysis and chaos detection tools. The results indicate that there is asymmetry in terms of stability, explosive behaviour and external factors’ impact over time across US, Europe and emerging markets. External risks such as financial stress and energy price shocks affect ESG stocks more than geopolitical events. Some markets also show signs of endogenous instability and chaotic dynamics, bringing challenges in long term forecasting. However, ESG assets still provide meaningful downside protection and improve hedging, especially during periods of high uncertainty. The findings suggest that ESG investing, under the right conditions, can pave the way for a responsible and rational strategy. It offers not just ethical alignment but also financial strength, if supported by solid fundamentals, market maturity, and policy clarity. For investors seeking long-term, lower-risk strategies, ESG may serve as more than a moral statement; it may be a prudent decision.