An Empirical Study on Green and Traditional Companies based on Market Performance

Abstract

 This study is focused on analyzing the market performance of the companies that are focused to minimize the risks of climate change vis-à-vis to the traditional companies listed in developing and developed countries. S&P BSE CARBONEX and S&P BSE 500 Indices of the Indian Stock market and NASDAQ OMX Green Economy and S & P 500 Indices of the United States of America are analyzed to understand the risks, returns and other performance parameters. This study is performed to examine if sustainable investing has been profitable to the investors when compared to the normal companies across developed and developing economies. This study also tries to understand if the plans for achieving climate action goals are relevant not only to the companies but also to the investors in India. Absolute Returns of the indices, risk measuring parameters like Sharpe Ratio, Treynor Ratio, Cost of Equity, Jensen’s Alpha have been used to gauge the performance of the indices. From the factual evidence obtained from the analysis, we concluded that investing in traditional companies offered better returns with minimal risk compared to that of green firms. Further, it was also observed that the market returns of the green firms of the developing nations are better compared to that of developed nations, however with a higher market risk involved in the developing nations. The findings of this study can act as a guideway for the investors who are not only concerned about building a profitable portfolio but are also concerned about the societal, environmental impacts of investing