Financial Performance of Stocks of Companies Participating in the Carbon Efficient Index (ICO2)

Abstract

We compare the financial stock performance of companies that participate in the Carbon Efficient Index (ICO2) and those that participate only in market-wide indices of the BM&FBovespa (the IBOV, IBrX50, and IBrX100). The data includes the daily quotations of the shares from these four indices for September 2010 to December 2014. We exclude companies from market-wide indices that also participated in the ICO2. We use the stock market and average volume liquidity indices in order to analyze liquidity. We employ financial indicators to analyze the performance of the indices. Returns of companies participating in the ICO2 exceed those of all other companies except those participating in the IBrX50. The returns of all indices are statistically similar. There is a proven long-term equilibrium relationship between the indices’ returns. The ICO2 does not present obvious superiority in terms of the Sharpe and Jensen indices, although the results surpass those of the market-wide indices. Although the financial performance of sustainable companies does not surpass that of other companies, the economic benefits are similar. Thus, even though the financial result presents no significant difference, it is crucial to acknowledge that investing in sustainable stocks does not result in financial loss; rather, it has a positive environmental impact. The literature connecting the performance of the shares of the ICO2 and broad indices is scarce. Our study improves understanding of how company stocks can generate economic benefits to both society and companies.

Citation

de Carvalho, P.L. and Callado, A.L.C. (2017), "Financial Performance of Stocks of Companies Participating in the Carbon Efficient Index (ICO2)", Advances in Environmental Accounting & Management: Social and Environmental Accounting in Brazil (Advances in Environmental Accounting & Management, Vol. 6), Emerald Publishing Limited, Leeds, pp. 105-132. https://doi.org/10.1108/S1479-359820160000006003