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Sustainability Efforts, Index Recognition, and Stock Performance

In: Risks Related to Environmental, Social and Governmental Issues (ESG)

Author

Listed:
  • Moonsoo Kang

    (Brooklyn College of the City University of New York)

  • K. G. Viswanathan

    (Hofstra University)

  • Nancy A. White

    (Hofstra University)

  • Edward J. Zychowicz

    (Hofstra University)

Abstract

We examine the long-term performance of stocks appearing in the Dow Jones Sustainability Index North America. We find that sustainability stocks exhibit abnormal returns for 12–30 months after the index listing, while those stocks generate no excess returns before the index listing. Moreover, sustainability stocks experience an increase in institutional ownership after the index listing. However, we find no evidence that short sellers increase their position to exploit a possible overpricing for sustainability stocks. Overall, our analysis suggests that sustainability efforts translate into a permanent increase in demand for stocks, leading to the superior performance.

Suggested Citation

  • Moonsoo Kang & K. G. Viswanathan & Nancy A. White & Edward J. Zychowicz, 2022. "Sustainability Efforts, Index Recognition, and Stock Performance," Springer Books, in: Marielle de Jong & Dan diBartolomeo (ed.), Risks Related to Environmental, Social and Governmental Issues (ESG), pages 45-57, Springer.
    • Handle: RePEc:spr:sprchp:978-3-031-18227-3_5
    DOI: 10.1007/978-3-031-18227-3_5
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    2. S. Divyashree & Christy Jackson Joshua & Abdul Quadir Md & Senthilkumar Mohan & A. Sheik Abdullah & Ummul Hanan Mohamad & Nisreen Innab & Ali Ahmadian, 2024. "Enabling business sustainability for stock market data using machine learning and deep learning approaches," Annals of Operations Research, Springer, vol. 342(1), pages 287-322, November.
    3. Jonas Zink, 2024. "Which investors support the transition toward a low-carbon economy? Exit and Voice in mutual funds," Journal of Asset Management, Palgrave Macmillan, vol. 25(2), pages 147-161, March.
    4. Pyemo N. Afego & Ernest N. Biktimirov, 2025. "Market reactions of African and non-African firms to changes in the S&P Africa 40 index," Journal of Asset Management, Palgrave Macmillan, vol. 26(4), pages 355-376, July.
    5. Barontini, Roberto & Gioja, Luigi, 2025. "The market power of ESG index providers: The effects of rebalancing ESG-themed indices," Research in International Business and Finance, Elsevier, vol. 77(PA).
    6. Rudkin, Wanling & Cai, Charlie X., 2023. "Information content of sustainability index recomposition: A synthetic portfolio approach," International Review of Financial Analysis, Elsevier, vol. 88(C).

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