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Does Sustainability Investment Provide Adaptive Resilience to Ethical Investors? Evidence from Spain

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Abstract

Although sustainable and responsible investment (SRI) has quite recently become a hot research topic, scarcely any systematic research has been paid to the performance of this non-conventional approach to investment during the financial crisis that emerged in mid-2008 when the resilience of the financial markets was sorely tested. Such real-world resilience in practice is the subject of the current research which tests whether environmental, social and governance screens provides ethical investors with adaptive resilience in bull and bear market conditions by focussing on the SRI equity index of one of the most active markets in Europe in terms of ethical investment, the FTSE4Good-Ibex in Spain. Multivariate Generalized Autoregressive Conditional Heteroskedasticity (M-GARCH) analysis indicates that ethical investors in the equity market examined with evidence that greater resilience in severe business cycle shocks could be attributable to SRI by companies. Although limited to a single country study, the results have implications for investors seeking resilience in crisis: when individual values and beliefs towards sustainability tie with personal investment strategy, the end result is adaptive financial resilience, social well-being and environmental defence.

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Notes

  1. Further information about the screening criteria and the FTSE4Good-IBEX rules can be obtained at http://www.ftse.com/Indices/FTSE4Good_IBEX_Index/index.jsp.

  2. Information between these dates refers to all the market data available for the FTSE4Good-IBEX index.

  3. One-day Spanish Treasury bill repo rates have been used as a proxy of the return on the risk-free asset because it represents the most liquid risk-free asset in the Spanish market.

  4. These include models with constant and variable components (Fabozzi and Francis 1977), models defined by the market volatility (Schwert and Seguin 1990), stochastic volatility models (Yu 2002), Markov switching regression models (Huang 2000), conditional market models (Ferson and Harvey 1999) and state-space models estimated by the Kalman Filter (Mamaysky et al. 2007).

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Authors and Affiliations

  1. Accounting and Finance Department, Faculty of Business and Economics, University of Zaragoza, C\ Gran Vía, n°2, 50005, Zaragoza, Spain

    Eduardo Ortas & José M. Moneva

  2. Centre for Accounting, Governance and Sustainability, University of South Australia, GPO Box 2471, Adelaide, SA, 5001, Australia

    Roger Burritt & Joanne Tingey-Holyoak

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  1. Eduardo Ortas
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  2. José M. Moneva
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  3. Roger Burritt
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  4. Joanne Tingey-Holyoak
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Correspondence to Eduardo Ortas.

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Ortas, E., Moneva, J.M., Burritt, R. et al. Does Sustainability Investment Provide Adaptive Resilience to Ethical Investors? Evidence from Spain. J Bus Ethics 124, 297–309 (2014). https://doi.org/10.1007/s10551-013-1873-1

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