An Analysis of the Relationship and Causality Between the BIST Sustainability Index and Other Financial Indices

The financial system serves as a cornerstone of economic growth and development, providing the foundation upon which modern economies are built. At the same time, the concept of sustainability plays a critical role in ensuring the long-term resilience and social utility of this system. Sustainability, encompassing environmental, social, and governance (ESG) criteria, aims to secure the future viability of financial markets and investments by integrating these broader considerations into economic decision-making. The objective of this study is to comprehensively examine the short- and long-term relationships between the BIST Sustainability Index and a selection of other key financial indices, including the BIST100 Index (XU100), S&P500 Index (SPX), Dow Jones Sustainability Index (DJSI), S&P Green Bond Index (SPUSGRN), and the Consumer Price Index (CPI). Utilizing 111 monthly data spanning the period from November 2014 to January 2024, this analysis employs the ARDL Bound Test approach to investigate these relationships. The results indicate a positive long-term relationship between the BIST100 Index and the BIST Sustainability Index, while a significant negative relationship is observed between the BIST100 Index and the S&P Green Bond Index. In the short term, the findings reveal statistically significant relationships between the BIST Sustainability Index, the BIST100 Index, and the S&P Green Bond Index. Additionally, the Toda-Yamamoto causality analysis identifies unidirectional causality from the XUSRD index to the DJSI and SPUSGRN indices, as well as bidirectional causality between the DJSI index and both the SPUSGRN and SPX indices. These findings underscore the interconnectedness of sustainability-focused financial instruments across different markets, highlighting the increasing influence of sustainability factors on financial decision-making processes in both Turkey and the global context.