Global Standards and Ethical Stock Indexes: the case of the Dow Jones Sustainability Stoxx Index
AbstractThe increased scrutiny of investors regarding the non-financial aspects of corporate performance have placed portfolio managers in the position of having to weigh the benefits of “holding the market” against the cost of having positions in companies that are subsequently found to have questionable business practices. The availability of stock indexes based on sustainability screening makes increasingly viable for institutional investors the transition to a portfolio based on a Socially Responsible Investment (SRI) benchmark at relatively low cost. The increasing share of socially responsible investments may play a role in providing incentives towards a continuous upgrading of sustainability standards to the extent that their performance is not systematically inferior to that of the other funds. This paper examines whether these incentives have been so far detectable with particular reference to the Dow Jones Sustainability Stoxx Index (DJSSI) that focuses on the European corporations with the highest CSR scores among those included in the Dow Jones Stoxx 600 Index. The aim of the paper is twofold. First, we analyse the performance of the DJSSI over the period 2001-2006 compared to that of the Surrogate Complementary Index (SCI), a new benchmark that includes only the components of the DJ Stoxx 600 that do not belong to the ethical index in order to evaluate more correctly the size of possible divergent performances.Second, we perform an event study on the same data set to analyse whether the stock market evaluation reacts to the inclusion (deletion) in the DJSSI. In both cases the results suggest that the evaluation of the CSR performance of a firm is a significant criterion for asset allocation activities.
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Bibliographic InfoPaper provided by Department of Economic Policy, Finance and Development (DEPFID), University of Siena in its series Department of Economic Policy, Finance and Development (DEPFID) University of Siena with number 0208.
Date of creation: Jan 2008
Date of revision:
Dow Jones Sustainability Stock Index; Ethical stock indexes; SRI (Socially Responsible Investing); SRI funds.;
Other versions of this item:
- Costanza Consolandi & Ameeta Jaiswal-Dale & Elisa Poggiani & Alessandro Vercelli, 2009. "Global Standards and Ethical Stock Indexes: The Case of the Dow Jones Sustainability Stoxx Index," Journal of Business Ethics, Springer, vol. 87(1), pages 185-197, April.
- G30 - Financial Economics - - Corporate Finance and Governance - - - General
- M14 - Business Administration and Business Economics; Marketing; Accounting - - Business Administration - - - Corporate Culture; Diversity; Social Responsibility
- Q01 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - General - - - Sustainable Development
- Q56 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Environment and Development; Environment and Trade; Sustainability; Environmental Accounts and Accounting; Environmental Equity; Population Growth
This paper has been announced in the following NEP Reports:
- NEP-ALL-2008-05-17 (All new papers)
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