Index construction for sustainable development investing

Alexander Bassen, Christian Fieberg, Othar Kordsachia, Kerstin Lopatta and Bastian Nendza

Journal of Sustainable Finance & Investment, 2023, vol. 13, issue 1, 702-722

Abstract: We implement the definition for Sustainable Development Investing (SDI) developed by the Global Investors for Sustainable Development (GISD) Alliance to construct an investable global SDI-aligned equity index. To this end, we create a proprietary methodology to rate companies’ SDI contribution using the Sustainable Development Goals (SDGs) as the appropriate unit of measurement. We find that the inclusion of SDI preferences in a multi-objective portfolio yields similar risk-return characteristics as a benchmark portfolio. This article informs institutional investors and index providers about practical approaches to implement the SDI definition with recently developed commercial data solutions. In this context, we review and provide an overview of data availability for the classification of companies’ alignment to the SDGs based on their products and services.

Date: 2023
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DOI: 10.1080/20430795.2022.2105790

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