0000000000429428
AUTHOR
María Dolores Espinós-vañó
Do irresponsible corporate activities prevent membership in sustainable stock indices? The case of the Dow Jones Sustainability Index world
Abstract The study analyses the real-life results from the DJSI World selection process and investigates whether companies are treated differently because of sectoral or geographical diversification needs of the index; furthermore, the question whether its methodology penalises ESG-related irresponsible corporate activities is investigated. The last is an important issue, as it is not unusual to find constituents of sustainable indices implicated in corporate scandals. This is a striking fact, contradicting the ethical and sustainable imperative such companies are supposed to comply with. The authors scrutinise data from a data panel containing 2872 firms between 2011 and 2016 and estimate …
The difficulty of applying exclusion criteria in ethical portfolios
A main problem for socially responsible investors is deciding which companies should be included in their investment portfolio. Small investors may decide not to invest in companies they know are not behaving responsibly. Therefore, discredited companies will not be included in their portfolios, as they will understand those companies cannot be defined as ethical. To implement this procedure properly and apply it to big portfolios is a complex exercise which requires big amounts of information and the problems faced by investors applying such exclusion criteria to select their portfolio.
The Inclusion of Socially Irresponsible Companies in Sustainable Stock Indices
Social rating agencies implement complex filters to identify the companies with the best sustainable and social performance and help investors select the companies for their sustainable portfolios. This study analysed whether companies that are defined as ethical, sustainable and socially responsible by those agencies actually deserve this label. More specifically, the inclusion in the prestigious Dow Jones Sustainability Index (DJSI) World of companies that have been involved in controversies according to the Thomson Reuters Eikon database was studied. The results show that the inclusion of irresponsible companies in the DJSI Index is a fact. This outcome is in line with previous studies t…