What does the performance of the Dow Jones Sustainability Group Index tell us?

Abstract

AbstractThe Dow Jones Sustainability Group Index (DJSGI) is really a family of indexes used to identify and track the performance of sustainably run companies. When the DJSGI was introduced in September 1999, it was claimed to outperform the more generalized Dow Jones Global Index (DJGI) with respect to market capitalization growth. Corporations, NGOs and governmental agencies often refer to the DJSGI for illustrating that integrating economic, environmental and social factors into the operations and management of a company increases shareholder value and business activity transparency. The DJSGI is also used by global corporations to legitimize the efforts they put into sustainability. However, there have been no studies carried out to date that illuminate the business activity transparency of the DJSGI. This study investigates the structure and transparency of the DJSGI compared with the DJGI. The results of this study show that the DJSGI focuses more on the technology sector than the general DJGI does. The average market capitalization value of companies listed in the DJSGI was found to be two‐and‐a‐half times the corresponding average for those listed in the DJGI. This raises some legitimate questions. Does the superior performance of the DJSGI reflect the greater efforts DJSGI companies put into sustainability, or a dependence on asymmetric distributions in company sectors, world regions or market capitalization? This paper therefore endeavours to illustrate the transparency of the DJSGI. Copyright © 2001 John Wiley & Sons, Ltd. and ERP Environment