Sustainable Investment - Exploring the Linkage between Alpha, ESG, and SDG's

We consider whether sustainable investment can deliver performance comparable to conventional investment in investors’ long-term retirement plans. On the capital markets, sustainable investment can be achieved through various instruments and strategies, one of them being investment in mutual funds that subscribe to ESG (environmental, social, and governance) principles. First, we compare the investment performance of ESG funds with matched conventional funds over the period 1994–2020, in Europe and the U.S. We find no significant evidence of differing performance (at 5% level) despite using a number of investment performance metrics. Second, we perform a historical backtest to model a UK personal retirement plan from 2000 till 2020, taking full account of investment management fees and transaction costs. We find that investing in an index-tracker fund overlaid with ESG screening delivers a pension which is 10.4% larger than is achieved if the index-tracker fund is used without screening. This is also 20.2% larger than is achieved by investing in a collection of actively managed funds with a sustainable purpose. We conclude that an ESG-screened long-term passive investment approach for retirement plans is likely to be successful in satisfying the twin objectives of a secure retirement income and of sustainability.

Download Full-text

The Impact of COVID-19 Lockdowns on Sustainable Indexes

Sustainability ◽

10.3390/su13041846 ◽

2021 ◽

Vol 13 (4) ◽

pp. 1846 ◽

Cited By ~ 1

Author(s):

Helen Chiappini ◽

Gianfranco Vento ◽

Leonardo De Palma

Keyword(s):

Abnormal Returns ◽

Nonparametric Tests ◽

Market Growth ◽

Bear Market ◽

Global Pandemic ◽

Screening Strategies ◽

The Usa ◽

Sustainable Investment ◽

Sustainable Investments ◽

The Impact

This paper analyzes the response of sustainable indexes to the pandemic lockdown orders in Europe and the USA, contributing to both the research on the effects of the global pandemic outbreak and the resiliency of sustainable investments under market distress. Our results demonstrate that sustainable indexes were negatively impacted by lockdown orders; however, they did not show statistically significant different abnormal returns compared to traditional indexes. Similarly, our empirical results confirm that sustainable screening strategies (negative, positive, best in class) did not have an influence during such announcements. These results are robust across several model specifications and robustness tests, including nonparametric tests, generalized autoregressive conditionally heteroskedastic (GARCH) estimation of abnormal returns, and alternative events. The findings suggest that investors do not have to pay the price for the investments in sustainable assets when a bear market occurs; consequently, ceteris paribus, these investments appear suitable for financial-first investors. Such results have relevant practical consequences in terms of sustainable investment attractiveness and market growth.

Download Full-text

Behavioral Issues for Sustainable Investment Decision-Making: A Literature Review

International Journal of Business and Management ◽

10.5539/ijbm.v12n1p1 ◽

2016 ◽

Vol 12 (1) ◽

pp. 1 ◽

Cited By ~ 2

Author(s):

Andrea Tomo ◽

Giovanni Landi

Keyword(s):

Decision Making ◽

Investment Decision ◽

Managerial Decision ◽

Behavioral Issues ◽

Responsible Behavior ◽

Thomson Reuters ◽

Investment Decision Making ◽

Decision Making Processes ◽

Sustainable Investment ◽

Corporate Social

The aim of this work is to understand the role of the Environmental, Social and Governance (ESG) paradigm in the corporate assessment by investors and the use of this paradigm as guide for managerial decision-making process by corporations. A review of the international literature is provided using five different couples of keywords on Thomson Reuters ISI Web of Knowledge research engine. The literature production increased only after the 2007 crisis and the median year of the results is 2011, thus highlighting just a recent attention to themes as ethics and corporate social responsibility. Main limitations are related to the classic limitations of literature reviews, as the choice of number and type of keywords and journals, the resulting selection of studies, the choice of relevant outcomes and the interpretation, generalization and application of results. The study provides both theoretical and practical implications: a complete review of contributions on the theme is provided; then, some insights in investors and corporations behaviors through the ESG lens, thus suggesting a more ethical and responsible behavior in investment decision-making processes.

Download Full-text

An Analysis on the NASDAQ’s Potential for Sustainable Investment Practices during the Financial Shock from COVID-19

Sustainability ◽

10.3390/su13073748 ◽

2021 ◽

Vol 13 (7) ◽

pp. 3748

Author(s):

Rachel Shields ◽

Samer Ajour El Zein ◽

Neus Vila Brunet

Keyword(s):

Business Practices ◽

Sustainable Business ◽

Global Crisis ◽

The Sustainable Development ◽

Sustainable Investment ◽

Development Goals ◽

Sustainable Investments ◽

Corporate Social ◽

The Garch Model ◽

Difficult Times

There is a growing demand for sustainable business practices and for sustainable and impact investment as has been signaled by the Sustainable Development Goals ratified by all the United Nations members. However, there is not that much evidence on how sustainable investments perform during crises compared to regular investments. This paper investigates if sustainable investments within the NASDAQ have a lower volatility rate when reacting to a significant global crisis such as the COVID-19 pandemic. It groups the shares of businesses with Corporate Social Responsibility (CSR) practices that are ranked 70% or higher given by CSRHub, Inc. and compares it to business shares with the lowest-ranked CSR business practices at 30% or lower. The top 30% and bottom 30% CSR stocks’ volatility will be predicted using variations of the GARCH model. The top 30% CSR stocks of the NASDAQ had a lower rate of volatility for a global crisis than the bottom 30% CSR stocks. Technology is the only sector whose top 30% showed higher volatility. However, the top 30% of companies in the Health Care and Utilities sectors show a higher increase in returns and a lower drop in returns. These results signal the higher uncertainty associated with some cutting-edge products and services offered by the top 30% of technology companies and the preference for more established companies that offer higher quality services when it comes to satisfying basic needs such as health and utilities in difficult times.

Download Full-text