The Impact of Dow Jones Sustainability Index, Exchange Rate and Consumer Sentiment Index on Carbon Emissions

Sofia Karagiannopoulou, Grigoris Giannarakis (), Emilios Galariotis, Constantin Zopounidis and Nikolaos Sariannidis
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Sofia Karagiannopoulou: Department of Accounting and Finance, University of Western Macedonia, 50100 Kozani, Greece
Grigoris Giannarakis: Department of Business Administration, University of Western Macedonia, 51100 Grevena, Greece
Emilios Galariotis: Institute of Finance, Audencia Business School, 44300 Nantes, France
Constantin Zopounidis: The Financial Engineering Laboratory, Technical University of Crete, 73100 Chania, Greece
Nikolaos Sariannidis: Department of Accounting and Finance, University of Western Macedonia, 50100 Kozani, Greece

Sustainability, 2022, vol. 14, issue 19, 1-19

Abstract: The objective of this study is to examine, over the last 20 years, the short-run and long-run effect on global carbon dioxide (CO 2 ) emissions of the stock returns, exchange rates and consumer confidence. Stock markets contribute to environmental degradation; as a result, we employed, for the first time, Dow Jones Sustainability World Index to use stock returns of socially responsible companies. The euro to US dollar exchange rate is used, as the forex market is the largest financial market and considers it as the largest major pair. The Consumer Sentiment Index is used as a proxy to consumer confidence, since consumer behavior is, also, considered as a major factor linked to environmental degradation. The basic testing procedures employed include the Augmented Dickey–Fuller stationarity test, cointegration analysis and Vector Error Correction Model (VECM). The results establish that stock returns of companies listed on the Dow Jones Sustainability World Index exert a significant negative (positive) impact on the global CO 2 emissions in the short (long) term. The inverse, i.e., a significant positive (negative) impact on the short (long) run holds for the both other variables, i.e., US consumers’ confidence and euro to US dollar exchange rates. From the outcomes obtained, policy initiatives that could assist companies to mitigate environmental degradation are recommended.

Keywords: stock returns; CO 2 emissions; Dow Jones Sustainability World Index; consumers’ confidence; ESG criteria; exchange rates (search for similar items in EconPapers)
JEL-codes: O13 Q Q0 Q2 Q3 Q5 Q56 (search for similar items in EconPapers)
Date: 2022
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (4)

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Persistent link: https://EconPapers.repec.org/RePEc:gam:jsusta:v:14:y:2022:i:19:p:12052-:d:923496

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