The Convergence between Sustainability and Conventional Stock Indices. Are We on the Right Track?

The growth of passive and socially responsible (SR) investment makes that sustainability indices play an important role in defining what constitutes a sustainable investment. In order to know the suitability of sustainability indices as benchmarks for SR investors, we used different linear regressions to compare the compositions of sustainability indices and their conventional counterparts and to compare the levels of corporate social responsibility (CSR) of both types of indices. We showed that the composition of sustainability indices gradually converged towards their conventional peers. Moreover, the difference between the CSR levels of both type of indices remained the same or even decreased over time. We concluded that a change in the weighting method of sustainability indices such as the equally weighted criterion would significantly increase the difference from their conventional counterparts. However, due to the relationship between CSR and size, this change would penalize the CSR level of the index. These results raise the question of whether SR passive investors will be able to meet their non-financial expectations as a consequence of the convergence