What does the Dow Jones Sustainability Group Index really tell Us?

Abstract

Quite often the Dow Jones Sustainability Group Index (DJSGI), which identifies and keeps tracks on the performance of the sustainable driven companies, is referred to as an evidence of that integration of economic, environmental and social considerations in company strategies and management gives increased shareholder values in return. For instance a search on the Internet for &#39Dow Jones Sustainability&#39 resulted in a good 1000 hits, e.g. on WBCSD, Deutche Telekom and US EPA. There are, however, no deeper studies carried out really determining the design of the sustainability index and how the devise affects the outcome. This paper has investigated the structure of the sustainability index and compered it with other sector indexes and funds i.e. &#39Dow Jones Global Indexes&#39. The study shows that the sustainability index, to a higher degree, is focusing on the technology community and somewhat lesser on the financial and industrial sectors then the general Dow Jones index does. Moreover, the largest difference of these two indexes is the asymmetric distribution of company size. The market capitalisation of the sustainable group is found to be 2.5 times larger then corresponding average for the general index. Other comparisons show that technology sector companies and large multinational companies have higher growth of stock value; consequently; legitimate questions arise. Are we comparing Apples and Oranges? What comes first the &#39Hen or the Egg&#39? This paper finally discusses if the DJSGI really steers companies towards sustainability and the problem of sectoralisation.