Title: The impact of risk indicators on sustainability (ESG) and broad-based indices: an empirical analysis from Germany, France, Indonesia and Turkey

Authors: Hüseyin Öcal; Anton Abdulbasah Kamil

Addresses: Faculty of Economics, Administrative and Social Sciences, Istanbul Gelisim University, Istanbul, Turkey ' Faculty of Economics, Administrative and Social Sciences, Istanbul Gelisim University, Istanbul, Turkey

Abstract: This study aims to provide empirical insights into how sustainability (ESG) and broad-based indices are affected by risk indicators such as VIX, CDS, and FX volatility index. Germany ESG-X, CDAX, France ESG-X, CAC All, Indonesia SRI-KEHATI, IDX Composite, BIST (Borsa Istanbul) Sustainability, and BIST All price indices have been examined. The daily data between November 4, 2014, and December 5, 2019 are used. Vector autoregression (VAR), Granger causality and impulse response test are employed in the analysis. The results of the study revealed that companies which are included in the Germany ESG-X, France ESG-X, and SRI-KEHATI are affected by shocks less than the companies included in broad-based indices of each country. In contrast to this result, BIST Sustainability is affected more by the shocks than BIST All. Stocks with higher ESG exposure in terms of quantity, quality, and credibility tend to have a lower risk. Causality test results revealed that VIX causes broad-based and ESG indices more than any other risk indicators.

Keywords: mandatory sustainability reporting; risk management; VIX; CDS; currency option volatility index; ESG-X; portfolio investment; Germany; France; Indonesia; Turkey.

DOI: 10.1504/IJSE.2021.113319

International Journal of Sustainable Economy, 2021 Vol.13 No.1, pp.18 - 54

Received: 20 Jul 2020
Accepted: 16 Oct 2020
Published online: 26 Feb 2021 *

Full-text access for editors Full-text access for subscribers Purchase this article Comment on this article