Sustainability Research, Ratings, and Indexes

The fact that ratings of corporate sustainability performance exist and are marketed to investors has been one of the most public manifestations of action where sustainability issues meet capital markets. Obviously, there is an appetite for this research and for investment products that are based on it. Approximately three billion euros are invested based on the Dow Jones Sustainability Index.33 

There are, however, relatively few signs that this has moved from being a niche activity to being part of the mainstream world of investment. For example, only three of 35 SRI research organizations evaluated by SustainAbility in Values for Money are found to currently analyze the link between social/environmental issues and material impacts on investment value drivers (Beloe et al., 2004). These are SAM Research, Innovest, and CoreRatings. These have the greatest potential to cross over into more widespread use among mainstream investors. 

31See http //unepfi.net/stocks/oilandgas gsachs.pdf. 

33See http //www.sustainability-indexes.com/djsi pdf/news/PressReleases/DJSI PressRelease 040902 Review.pdf. Baruch Lev, Grey Matters CFO s Third Annual Knowledge Capital Scorecard, CFO Magazine, April 2001b. 

Mainstream investors face big challenges in trying to apply research about corporate sustainability into their existing investment process. They can use the indexes or the ratings themselves as a part of the quantitative investment approach, but most investors use more traditional methods of stock picking and it is not obvious how to apply sustainability research to that process. 

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