Mapping sustainable investing: Exploring ambiguities and consistencies among sustainable indices

Sustainable investing is perceived as a confusing black-box by many researchers, practitioners, and investors. Terminology, metrics, approaches, disclosure standards are quickly evolving, while the empirical evidence provides a growing number of mixed results. In this paper, we examine the compositi...

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Bibliographic Details
Published in:Journal of environmental management 2024-09, Vol.367, p.122081, Article 122081
Main Authors: Bolognesi, Enrica, Dreassi, Alberto, Migliavacca, Milena, Paltrinieri, Andrea
Format: Article
Language:English
Subjects:
assets
climate
Climate investing
Conservation of Natural Resources
environmental management
ESG
Ethical investing
ethics
Faith-based investing
Indexing
industry
Investments
SRI
Sustainable Development
Sustainable investing
terminology
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Summary:Sustainable investing is perceived as a confusing black-box by many researchers, practitioners, and investors. Terminology, metrics, approaches, disclosure standards are quickly evolving, while the empirical evidence provides a growing number of mixed results. In this paper, we examine the composition, performance, and the risk-return profile of reference sustainable indices for the asset management industry, distinguishing between ethical and socially-responsible, faith-based, ESG and climate ones. Our findings reveal consistent investment trends across various sustainable indices, impacting their overall performance. Specifically, our analysis highlights a prevalent inclination towards large and growth-oriented companies, as well as a persistent focus on technology, financials, and commodity sectors. These results provide valuable insights for investors, asset managers, and index providers regarding the potential misalignment between an investment vehicle's labeling and its actual composition, and the implications this discrepancy might have on investors' expectations. •We analyze performance, risk profiles and composition of sustainable indices.•We distinguish SRI and ethical, faith-based, ESG and climate-oriented indices.•We find a tilt towards large, growth, technology, financial and materials exposures.•We underline how heterogeneity and divergence from the parent index drives results.
ISSN:0301-4797
1095-8630
1095-8630
DOI:10.1016/j.jenvman.2024.122081