Measuring the immeasurable: a survey of substainability indices

Sustainability indices for countries provide a one-dimensional metric to valuate country-specific information on the three dimensions of sustainable development: economic, environmental, and social conditions. At the policy level, they suggest an unambiguous yardstick against which a country?s development can be measured and even a cross-country comparison can be performed. This paper reviews the explanatory power of various sustainability indices applied in policy practice. We show that these indices fail to fulfill fundamental scientific requirements making them rather useless if not misleading with respect to policy advice. --Sustainability Indices,Composite Indicators,Sustainability,Indices

The convergence between sustainability and conventional stock indices. Are we on the right track?

The growth of passive and socially responsible (SR) investment makes that sustainability indices play an important role in defining what constitutes a sustainable investment. In order to know the suitability of sustainability indices as benchmarks for SR investors, we used different linear regressions to compare the compositions of sustainability indices and their conventional counterparts and to compare the levels of corporate social responsibility (CSR) of both types of indices. We showed that the composition of sustainability indices gradually converged towards their conventional peers. Moreover, the difference between the CSR levels of both type of indices remained the same or even decreased over time. We concluded that a change in the weighting method of sustainability indices such as the equally weighted criterion would significantly increase the difference from their conventional counterparts. However, due to the relationship between CSR and size, this change would penalize the CSR level of the index. These results raise the question of whether SR passive investors will be able to meet their non-financial expectations as a consequence of the convergence. © 2021 by the authors. Licensee MDPI, Basel, Switzerland

Cluster analysis to validate the sustainability label of stock indices: An analysis of the inclusion and exclusion processes in terms of size and ESG ratings

Sustainability stock indices play an important role in guiding socially responsible funds to their constituents. Thus, to find out whether the term sustainability is more than just a label, we analyze the inclusion and exclusion criteria applied by sustainability indices, and we compare them with those applied by conventional indices. We analyze the level of sustainability and size of the companies included in and excluded from five sustainability indices compared to a control group of 11 conventional indices. Our results show that the level of sustainability influences the inclusion process and, to a lesser extent, the exclusion process of the five FTSE4Good indices. However, we find similar results for several conventional indices. In addition, the size criterion dominates the sustainability criterion in the inclusion and exclusion processes of sustainability indices like in conventional indices. Further, we use different cluster algorithms to determine that the inclusion and exclusion processes of four of the five sustainability indices are different from those of the conventional indices. Our results validate the use of the “sustainability” label for four of five sustainability indices but also show that further differentiation between sustainability and conventional indices is needed

Sustainable stock market indices: A comparative assessment of performance

The paper focuses on the sustainability stock market indices and investigates whether there is evidence of synchronization between the price return provided by sustainability indices calculated for various geographic regions. Due to data availability constraints, the analysis had been performed only for the Dow Jones Sustainability Indices family, which comprises six types of indices. It had been considered the daily price return time series recorded in the last 10 years (November 30, 2010 – July 26, 2019) by each of the six Dow Jones Sustainability Indices, and it had been applied to the Principal Components Analysis method. Our findings confirm the initial research assumption that sustainability indices build for certain geographical areas are more correlated and hence more synchronized than others. More specifically, sustainability indices which include companies from Europe, Japan, US, World developed countries and World best-in-class exhibit correlated price returns, and hence are synchronized while DJSI for emerging countries is far apart. Therefore, the first five categories of indices may act as a substitute for each other. A second conclusion is that both emerging markets' sustainability index and any of the five indices may be included in investors’ portfolios for purposes related to risk diversification and hedging

THE FINANCIAL CRISIS IMPACT ON ETHICAL FINANCIAL INSTITUTIONS

Into the broad context of the ethical behavior topic in economy, outlined mainly during the last two decades, the appearance of ethical banking was an event with a particular social, economic and competitive incidence. Banking ethics had become an imperatethical bank; sustainability indices; ethical financial products; financial crisis; data envelopment analysis

Measuring the Immeasurable : A Survey of Sustainability Indices

Sustainability indices for countries provide a one-dimensional metric to valuate country-specific information on the three dimensions of sustainable development: economic, environmental, and social conditions. At the policy level, they suggest an unambiguous yardstick against which a country’s development can be measured and even a cross-country comparison can be performed. This paper reviews the explanatory power of various sustainability indices applied in policy practice. We show that these indices fail to fulfill fundamental scientific requirements making them rather useless if not misleading with respect to policy advice

Sustainability Indices and ESG-ratings, the Impact on Corporate Sustainability

The sustainability indices and ratings have expanded over the past decade. Due to the growing perception of social responsibility and environmental issues, measurement of the non-financial performance of corporations has become essential and pressure from stakeholders has resulted in new business strategies. Several rating agencies have provided measurements instrument and the market seem to be a smorgasbord of alternatives. The question is, how do companies perceive this development, and do they share similar values? Processes used to assess corporations’ sustainability performance are not consistent (Delmas & Blass, 2010). Since there are no standardised processes, it entails numerous interpretations considering Corporate Sustainability, which has caused heterogeneity of Corporate Sustainability Assessment. This has in turn resulted in a vast and chaotic universe of services that qualify companies in terms of sustainability and ESG-factors (Diez-Canamero et al., 2020). This study provides an insight into what impact sustainability indices may have on Corporate Sustainability standards, and how companies adapt to the requirements. To accomplish a deeper understanding of this dilemma, a comparison between the indices and a chosen company is discussed. The study aims to contribute to the literature in the field of Corporate Sustainability, using the perspective of both sustainability indices and a fast-growing company. In order to fulfil the aim, the research was conducted by a qualitative method, in which empirical data was gathered by ethnography, in combination with a semi-structured interview. The data collection was carried out based on a theoretical framework including Standards, Corporate Sustainability, Created Shared Value (CSV), Corporate Sustainability Assessment (CSA), and the Stakeholder theory. The conclusions of this study suggest that the number of sustainability indices may cause an obstacle for sustainable development rather than improved sustainability. At present, the number of sustainability indices and ESG-ratings provides an overflow of measurements which tends to create a diminished commitment in the evaluated organisation

Reactivity to sustainability metrics: A configurational study of motivation and capacity

Previous research on reactivity – defined as changing organisational behaviour to better conform to the criteria of measurement in response to being measured – has found significant variation in company responses towards sustainability metrics. We propose that reactivity is driven by dialogue, motivation and capacity in a configurational way. Empirically, we use fuzzy set Qualitative Comparative Analysis (fsQCA) to analyse company responses to the sustainability index FTSE4Good. We find evidence of complimentary and substitute effects between motivation and capacity. Based on these effects we develop a typology of reactivity to sustainability metrics, which also theorises the use of metrics as tools for performance feedback and the building of calculative capacity. We show that when reactivity is studied configurationally, we can identify previously underacknowledged types of responses. We discuss the theoretical and practical implications for studying and using sustainability metrics as governance tools for responsible behaviour