The aggregate value assessment of green stocks in Borsa Istanbul

Abstract

The intersection of investment decisions and environmental, social, and governance (ESG) considerations is important in the finance literature. This paper explores the aggregate value assessment of green stocks listed on Borsa Istanbul Sustainability Index over brown stocks that are not listed, employing the total efficiency loss (TEL) model. Understanding the performance dynamics of ESG-sensitive portfolios becomes imperative as investors increasingly prioritize sustainability. The study covers the data of the BIST-SI and the BIST100 Index between 2015 and 2023. Our findings indicate a consistent outperformance of green portfolios over brown portfolios, except for the years 2016 and 2022, suggesting that during periods of economic and political instability, external factors may influence investor preferences. In particular, the deviation in these years highlights the sensitivity of ESG investments to both domestic and global shocks, highlighting the importance of considering contextual dynamics in portfolio management. This study contributes to the literature on sustainable finance by providing insights into the relative performance of green portfolios and emphasizing the positive association between ESG considerations and financial outcomes. Furthermore, this study offers practical implications for policymakers and institutional investors by showing how ESG integration can reduce risk exposure while enhancing long-term value creation.