Sustainability is a recurring theme in the investment community, and is gathering steam as regulators, companies and investors become more eco-conscious. Government regulations penalise companies that are not sustainable and reward those which are.
More and more companies are announcing plans to implement sustainable practises over coming years. In response, sustainability indices have been introduced in the market, the first of which was offered by Dow Jones in collaboration with RobecoSAM in 1999.
These indices track the stocks of companies that are economically, socially and environmentally sustainable. They serve as a benchmark for investors who are interested in including sustainability considerations in their portfolios.
Each sustainability index has slightly different assessment criteria, with emphasis placed on either environmental sustainability, social impact or regional factors.
Sustainability-indices.com claims that a company’s corporate sustainability performance is a strong indicator of future performance. In theory, this relationship can help investors make better-informed investment decisions and create long-term value.
Companies that are already featured in sustainability indices have to continuously improve their sustainability plans and implementation thereof, as the competition is growing fiercely.
Sustainability indices can be used to complement investment portfolios.
