Corporate sustainability performance and idiosyncratic risk : a global perspective

Darren D. Lee; Faff W. Robert

doi:10.1111/j.1540-6288.2009.00216.x

Corporate sustainability performance and idiosyncratic risk : a global perspective

Darren D. Lee, Faff W. Robert

Research output: Contribution to journal › Article › peer-review

362 Citations (Scopus)

Abstract

Does investing in sustainability leaders affect portfolio performance? Analyzing two mutually exclusive leading and lagging global corporate sustainability portfolios (Dow Jones) finds that (1) leading sustainability firms do not underperform the market portfolio, and (2)their lagging counterparts outperform the market portfolio and the leading portfolio. Notably, we find leading (lagging) corporate social performance (CSP) firms exhibit significantly lower (higher) idiosyncratic risk and that idiosyncratic risk might be priced by the broader global equity market. We develop an idiosyncratic risk factor and find that its inclusion significantly reduces the apparent difference in performance between leading and lagging CSP portfolios.

Original language	English
Pages (from-to)	213-237
Number of pages	25
Journal	Financial Review
Volume	44
Issue number	2
DOIs	https://doi.org/10.1111/j.1540-6288.2009.00216.x
Publication status	Published - 2009

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10.1111/j.1540-6288.2009.00216.x

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abstract = "Does investing in sustainability leaders affect portfolio performance? Analyzing two mutually exclusive leading and lagging global corporate sustainability portfolios (Dow Jones) finds that (1) leading sustainability firms do not underperform the market portfolio, and (2)their lagging counterparts outperform the market portfolio and the leading portfolio. Notably, we find leading (lagging) corporate social performance (CSP) firms exhibit significantly lower (higher) idiosyncratic risk and that idiosyncratic risk might be priced by the broader global equity market. We develop an idiosyncratic risk factor and find that its inclusion significantly reduces the apparent difference in performance between leading and lagging CSP portfolios.",

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Corporate sustainability performance and idiosyncratic risk : a global perspective

Abstract

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