Political Cycles and ESG ETF Volatility: Evidence from U.S. Presidential Elections

Date of Award

Spring 5-2026

Degree Name

Bachelor of Science (BS)

Advisor(s)

Iris Schneider

Abstract

This study investigates the intersection between U.S. presidential election cycles and the volatility of ESG-focused exchange-traded funds (ETFs). In recent years, ESG-related topics have become increasingly politicized and subject to regulatory changes, especially surrounding environmental policy. This paper explores whether political uncertainty related to elections leads to significant changes in ESG ETF volatility during the same time period. Using daily Bloomberg data from 2016 to 2026, the study constructs 21-day rolling volatility measures for broad ESG ETFs, renewable energy sector ETFs, and benchmark ETFs, and uses indicator variables to capture the 90-day windows pre and post-election. Regression models relate ETF volatility to these indicators while controlling for market uncertainty via the VIX. The results show that market-wide uncertainty, measured by VIX, is the most significant driver of ESG ETF volatility. After controlling for VIX, volatility for broad-market ESG ETFs tends to modestly decline during the 90 days prior to elections and decline more significantly following the election. For renewable energy sector ETFs, volatility falls more significantly pre-election, then picks back up in the 90 days post-election. These findings suggest that presidential elections do not necessarily increase volatility in ESG ETFs beyond broader market uncertainty. These results add to existing literature on the politicization of markets.

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