Investing in Sustainable Stocks - An Empirical Evaluation of Large Public Companies in Sweden

Abstract: This thesis investigates if investing in a sustainable index yields higher risk-adjusted returns than investing in an ordinary index. Return data from the Swedish stock index OMXS30 was collected, spanning the period 2006-2017. Based on the OMXS30, a sustainability index called ESGS10 was constructed manually and then used to compare risk-adjusted returns with OMXS30. The Sharpe Ratio, Sortino Ratio, Reward-to-VaR and Reward-to-CVaR are used as risk-adjusted return measures in order to include both standard risk and tail risk. The return distributions of the indices are shown to be non-normal and leptokurtic as well as exhibiting positive skewness. We find evidence that investing in ESGS10 produces higher risk-adjusted returns than the investing in the OMXS30, although the differences between the indices are not significant on a 5% level.