Choice between Sustainable versus Conventional Investments—Relative Efficiency Analysis from Global and Regional Stock Markets

Mohd Ziaur Rehman (), Md Zulquar Nain, Mohammed Alhashim and Javed Ahmad Bhat
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Mohd Ziaur Rehman: Department of Finance, College of Business Administration, King Saud University, P.O. Box 71115, Riyadh 11587, Saudi Arabia
Md Zulquar Nain: Department of Economics, Aligarh Muslim University, Aligarh 202002, India
Mohammed Alhashim: Department of Finance, College of Business Administration, King Saud University, P.O. Box 71115, Riyadh 11587, Saudi Arabia
Javed Ahmad Bhat: Department of Economics and Public Policy, Indian Institute of Management Tiruchirappalli, Tiruchirappalli 620024, India

Sustainability, 2024, vol. 16, issue 13, 1-25

Abstract: We use the daily data from 1 October 2010 to 1 March 2021 on the stock prices of several global, regional, and country-specific ESG indices of the Dow Jones Sustainability Index family (DJSI) and MSCI family to analyse the relative performance of sustainable indices (ESG) and corresponding conventional benchmarks. In terms of classic risk and return characteristics and modern portfolio metrics, we report mixed evidence with some sustainability indices marginally outperforming the traditional benchmarks and others staying at parity. Regionally, the evidence is heterogeneous; the Pan Arab, the Middle East (including Israel), the United States, Emerging Markets, and Europe indices reported a slightly superior performance and those belonging to Asia Pacific, Emerging Africa, and Latin America marginally underperformed compared to their conventional counterparts. The findings of this study imply that sustainable investments appear to be an encouraging investment option, although their progress has not been substantial. For an appreciable outperformance of sustainable investments, a more conducive regulatory framework should be established, including robust incentivizing policies concerning tax rebates or low capital costs.

Keywords: socially responsible investments; sustainability indices; ESG indices; portfolio performance (search for similar items in EconPapers)
JEL-codes: O13 Q Q0 Q2 Q3 Q5 Q56 (search for similar items in EconPapers)
Date: 2024
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