Are Environmental Social Governance Equity Indices a Better Choice for Investors? An Asian Perspective

20 Pages Posted: 8 Sep 2016

See all articles by Ramiz Ur Rehman

Ramiz Ur Rehman

Xi'an Jiaotong University (XJTU) - School of Management

Junrui Zhang

Xi'an Jiaotong University (XJTU)

Jamshed Y. Uppal

Catholic University of America

Charles P. Cullinan

Bryant University

Muhammad Akram Naseem

University of Lahore - Business School

Date Written: October 2016

Abstract

This article examines the risk and return profiles of stock indices composed of companies meeting environmental, social and governance (ESG) screening criteria [such as the Dow Jones Sustainability Indices (DJSI)] and conventional composite indices of eight Asian countries from 2002 to 2014. The results indicate that there are no significant differences in the returns or risk‐adjusted returns between the ESG indices and the composite indices within countries. The results do reveal that the market volatility of the ESG indices is higher than the market volatility of the conventional indices. Market betas of DJSI and ESG equity indices are significantly lower than betas of the composite equity indices. The overall results indicate that the performance of ESG equity indices of many Asian countries is similar to the performance of conventional indices, suggesting that investors can pursue socially responsible investing objectives without a material difference in portfolio performance from conventional investing.

Suggested Citation

Ur Rehman, Ramiz and Zhang, Junrui and Uppal, Jamshed Y. and Cullinan, Charles P. and Naseem, Muhammad Akram, Are Environmental Social Governance Equity Indices a Better Choice for Investors? An Asian Perspective (October 2016). Business Ethics: A European Review, Vol. 25, Issue 4, pp. 440-459, 2016, Available at SSRN: https://ssrn.com/abstract=2836234 or http://dx.doi.org/10.1111/beer.12127

Ramiz Ur Rehman (Contact Author)

Xi'an Jiaotong University (XJTU) - School of Management

28,Xianning West Road
Xi'an, Shaanxi 710049
China

Junrui Zhang

Xi'an Jiaotong University (XJTU) ( email )

26 Xianning W Rd.
Xi'an Jiao Tong University
Xi'an, Shaanxi 710049
China

Jamshed Y. Uppal

Catholic University of America ( email )

116 McMahon Hall
Washington, DC 20064
United States

Charles P. Cullinan

Bryant University ( email )

1150 Douglas Pike
College of Business
Smithfield, RI 02917-1284
United States
401-232-6421 (Phone)
401-232-6319 (Fax)

Muhammad Akram Naseem

University of Lahore - Business School ( email )

1-KM Bopatian Chowk, Defence Road
Lahore, Punjab 54000
Pakistan

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