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Performance Analysis of Sustainable Investments in the Brazilian Stock Market: A Study About the Corporate Sustainability Index (ISE)

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In this article, we studied the Corporate Sustainability Index (ISE) of the Brazilian Mercantile, Futures and Stock Exchange (BM&FBOVESPA), with the main objective of analyzing the performance of sustainable investments in the Brazilian stock market, during the period from December 2005 to December 2010. To achieve this aim, we characterized ISE portfolios and we compared its performance with the IBOVESPA (representing the market portfolio) and other BM&FBOVESPA sectoral indices. In the performance comparison, we used level of liquidity, return and risk indicators, as well as the following measures: Sharpe, Treynor, Sortino, and Omega. Our results show that although sustainable investments have presented some interesting characteristics, such as increasing liquidity and low diversifiable risk, they did not achieve satisfactory financial performance in the analysis period. This indicates that the constraints imposed by this type of investment in capital allocation in Brazil may be harming their return and risk attractiveness.

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  1. GVces is the largest foundation specializing in sustainability studies and the best business school in Brazil.

  2. The Deliberative Council is composed of the Brazilian Association of Pension Funds (ABRAPP); the Brazilian Financial and Capital Markets Association (ANBIMA); the Association of the Analysts and Investment Professionals of the Capital Market (APIMEC); the National Association of Investment Banks (ANBID); the Brazilian Mercantile, Futures and Stock Exchange (BM&FBOVESPA); the Brazilian Institute of Corporate Governance (IBGC); the International Finance Corporation (IFC); the Ethos Institute of Business and Social Responsibility; the Brazilian Ministry of the Environment (MMA); and the United Nations Environment Programme (UNEP).

  3. Thus, because TM uses the systematic risk as a unit of risk, it measures the success of a portfolio under the assumption that investors hold well-diversified portfolios.

  4. The downside risk is based on modern portfolio theory and may be defined as a way of calculating the risk of a portfolio, considering only its probability of incurring a return inferior to that acceptable by the investor (R min). Note that SoM is similar to TM and ShM, in the sense that it calculates the premium (R i  − R f ) per unit of risk. It differs from the other measures, however, in its choice of index risk. While ShM uses the risky asset’s standard deviation (σ i ), TM uses its beta (β i ), and SoM uses its downside risk (\( \sigma_{{{\text{DR}}_{i} }} \)).

  5. R min can also be defined as a loss threshold, and for any investor returns less than their specific loss threshold are considered losses and returns greater than the threshold as gains.

  6. Therefore, it is noticeable that the Omega measure is in compliance with modern portfolio theory, as well as Sortino’s measure.

  7. Diversifiable risk was calculated by dividing the variance of the regression errors in the analyzed index returns (σ ε²), based on the single index model, by its total risk (σ ²).



Brazilian Mercantile, Futures and Stock Exchange


Environmental, social, and corporate governance


BOVESPA Index (market portfolio)


Corporate Sustainability Index

R min :

Minimum expected return


Sustainable investment


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Correspondence to Felipe Arias Fogliano de Souza Cunha.

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Arias Fogliano de Souza Cunha, F., Samanez, C.P. Performance Analysis of Sustainable Investments in the Brazilian Stock Market: A Study About the Corporate Sustainability Index (ISE). J Bus Ethics 117, 19–36 (2013).

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