Sustainable Share Indices - Good Performance, Higher Risk

Investing in shares that are based on social, ethical, and environmental criteria does indeed keep up with investing in conventional return-orientated assets.

These are the findings of a study conducted by the Centre for European Economic Research (ZEW), Mannheim, on the 29 most widely-known sustainable share indices in the world - among them the Dow Jones Sustainability Indices, FTSE4Good Indices as well as many other indices such as the Naturaktienindex and the Domini 400 Social Index.

The study suggests that the average development of sustainable share indices based on social, ethical, and environmental criteria tends to outperform conventional indices, which serve as a benchmark in this context. This, however, goes hand in hand with an increased investment risk. In the event of a depreciation of one percent, conventional indices move further downwards than many sustainable indices. But even when approximating the risk levels of both indices groups, sustainable indices can keep up: Under these circumstances, their average performance usually does not differ from that of conventional share indices.

In comparison with studies examining sustainable investment funds, the analysis of indices leads to a more direct and precise way to measure the impact of sustainability on index movements. This is particularly due to the fact that the observation of the index neither has to take into account the funds' costs nor the skills of the fund management.

Contact

Dr. Michael Schröder, Phone: +49(0)621/1235-140, E-mail: schroeder@zew.de