Received: 24 July 2019 Revised: 16 January 2020 Accepted: 5 February 2020

DOI: 10.1002/sd.2049

RESEARCH ARTICLE

Sustainable development and corporate financial performance:

A study based on the Brazilian Corporate Sustainability
Index (ISE)

Ruy de Castro Sobrosa Neto1 | Carlos Rogério Montenegro de Lima1 |

1 1
Daniel Goulart Bazil | Manoela de Oliveira Veras |
José Baltazar Salgueirinho Osório de Andrade Guerra2

1
Centre for Sustainable Development
(GREENS), University of Southern Santa Abstract
Catarina (Unisul), Tubar~ao, Brazil There is a growing trend of seeking to move toward sustainable development and
2
Cambridge Centre for Environment, Energy
because of this, together with the increasingly watchful eye of society, companies
and Natural Resource Governance (C-EENRG),
Department of Land Economy, University of are increasingly taking note of this new niche in the stock market. Thus, fund man-
Cambridge, Cambridge, UK
agers and investors see a need to align profits with environmental, social and eco-
Correspondence nomic variables in business management as well as corporate governance. The
José Baltazar Salgueirinho Osório de Andrade
Brazilian Corporate Sustainability Index (Índice de Sustentabilidade Empresarial—ISE)
Guerra, Centre for Sustainable Development
(GREENS), University of Southern Santa was created in 2005 by the S~ao Paulo Stock Exchange, currently known as B3, which
Catarina (Unisul), Tubar~ao, Brazil; Cambridge
is the result of the merger between the BM&FBovespa and CETIP, and has this
Centre for Environment, Energy and Natural
Resource Governance (C-EENRG), Department ~ The ISE aims to
nomenclature in reference to the initial letters of Brasil, Bolsa, Balcao.
of Land Economy, University of Cambridge,
identify a company's commitment to sustainability and thereby guide the capital and
Cambridge, UK.
Email: baltazar.guerra@unisul.br credit market, highlighting companies that incorporate social and environmental risks
into the organization, seeking to positively influence the image of the companies
Funding information
Conselho Nacional de Desenvolvimento involved. The aim of this research was to verify the superior economic and financial
Científico e Tecnológico; Coordenaç~ao de
performance of the Brazilian companies that are included in the ISE portfolio in rela-
Aperfeiçoamento de Pessoal de Nível Superior;
Fundaç~ao de Amparo à Pesquisa e Inovaç~ao do tion to the other companies that constitute the Ibovespa, between the years of 2014
Estado de Santa Catarina
and 2018. As a result, a neutral relationship between financial performance and sus-
tainable development was identified, which is consistent with the results of previous
studies referenced and addressed in this research. The findings of this study provide
an important contribution to the existing research on sustainability in financial mar-
kets, since few scientific articles that investigate, using indicators and statistical treat-
ment, the Brazilian sustainability market, are available.

KEYWORDS

corporate social responsibility, environmental policy, financial performance, stakeholder

engagement, sustainability performance, sustainable development

1 | I N T RO DU CT I O N almost instantaneously. Investors seek to better estimate the various

impacts that can influence management through the use of sustainabil-
In the current global marketplace (Achim & Borlea, 2014; Tabrizian, ity indicators in organizations. With the need for actions aimed at the
2019) a high amount of information is produced and its flow occurs rational use of natural resources along with a society increasingly

960 © 2020 John Wiley & Sons, Ltd and ERP Environment wileyonlinelibrary.com/journal/sd Sustainable Development. 2020;28:960–977.
DE CASTRO SOBROSA NETO ET AL.
focused on sustainable development, these aspects have become a dif-
ferential in the competitive market. In this regard, Singh, Murty, Gupta,
and Dikshit (2009) and Chofreh and Goni (2017) highlighted the roles
of different methodologies for evaluating aspects of sustainability at
the corporate level. Corporate governance can be understood by stake-
holder theory, which involves business management, so that partner-
ship approaches are adopted, aiming to reconcile different interests
(Freeman, 2010; Pucheta-Martínez, Bel-Oms, & Nekhili, 2019).
The concept of sustainable development is often understood as
ambiguous, since it has theories shaped by different worldviews of peo-
ple and organizations, which influences the strategies formulated and
actions proposed (Giddings, Hopwood, & O'Brien, 2002; Salas-Zapata &
Ortiz-Muñoz, 2019). According to Luke (2005), the introduction of
terms such as sustainable development involves the use of words in
sophisticated, cunning, and confusing ways to produce effects of power,
capable of becoming very profound due to the metaphysical connota-
tion. Mol and Law (1994), on the other hand, see sustainability as episte-
mological positions and Finkbeiner, Schau, Lehmann, and Traverso
(2010) considered that it is now accepted by the actors involved in orga-
nizational processes as a factor that helps to formulate public policies as
well as corporate strategies. Veeman and Politylo (2003) argued that
sustainable development can have many faces, making it a challenge to
identify a concept appropriate for everyday life. According to Bansal
(2002), sustainable development will not be achieved without corporate
support, since the private sector represents the main productive force
of the economy in the pursuit of sustainability, given its signs of conver-
gence. In addition, Van Marrewijk and Werre (2003) demonstrated that
cultural change is necessary for success in the implementation of sus-
tainable practices, while Lozano (2012) noted that, for organizations to
have long-term capabilities, a holistic approach is needed. Jacobs, Gard-
ner, and Munro (1987) suggested the use of the expression “sustainable
and equitable development.”
Charlo, Moya, and Muñoz (2015) highlighted the Global Pact of
the UN, the Organisation for Economic Co-operation and Develop-
ment (OECD) Guidelines and the Sustainability Reporting Guidelines
of the Global Reporting Initiative as examples of the global scale of
this campaign, and that the Green Papers of the European Union con-
verge with the campaign, since they aim to reconcile the business
objectives with the values and demands sought by that society.
Janeiro and Patel (2015) evaluated the sustainability of processes
associated with technology and recommended that a series of envi-
ronmental, economic, and social indicators should be taken into
account. Campbell (2007) indicated that practices of sustainability and
organizational performance are related and associated with the level
of competitiveness to which organizations are subjected. Apuuli,
Wright, Elias, and Burton (2000) emphasized the importance of sus-
tainable initiatives.
The business perspective of corporate sustainability means that if a
firm better pursues sustainability development goals it might increase its
value in the future. To see if this is true, the impact of corporate sustain-
ability performance (CSP) on corporate financial performance (CFP) is
usually examined. CSP captures the extent to which a firm embraces
economic, environmental, social, and governance factors in conducting
961
its operations, and the impact of these factors on firms and society. An
important issue is the proxies for CSP and CFP.
On analyzing the variables that are employed to measure the
financial performance of companies, we found that there are two
main groups of variables used to measure the same aspect using dif-
ferent sources of information. The economic aspect of the relation-
ship was measured both by market variables, such as Tobin's Q and
the price to book value ratios, and accountability variables, such as
ROA (return on assets), ROE (return on equity), ROS (return on sales),
and ROIC (return on invested capital).
Many authors (Aboud & Diab, 2018; Fernández-Guadaño & Sarria-
Pedroza, 2018; Garz, Volk, & Gilles, 2002; Santis, Albuquerque, &
Lizarelli, 2016) have compared companies included in sustainability/social
responsibility index portfolios to those which are not. These indexes
include the Dow Jones Sustainability Index (DJSI), Financial Times Stock
Exchange for Good (FTSE4Good) global index, Johannesburg Stock
Exchange Socially Responsible Investment Index (JSE SRI), and the Brazil-
ian Corporate Sustainability Index (Índice de Sustentabilidade
Empresarial—ISE). All of these sustainability indexes aim to guide the capi-
tal and credit market and highlight the companies that incorporate the
social and environmental risks into the organization, which positively
influences their image. The results of the studies are inconclusive.
According to Jung, Nam, Yang and Kim (2017), some authors con-
clude that a positive relationship exists between the social responsibil-
ity and economic performance of a firm (Dyer & Whetten, 2006;
Hull & Rothenberg, 2008; Waddock & Graves, 1997; Wagner, 2010),
while others find a negative or null correlation (Garcia-Castro, Ari, &
Canela, 2010, McWilliams & Siegel, 2000; Hassel, Nilsson, and
Nyquist (2005).
Prado, Piekarski, Luz, Souza, Salvador and Francisco (2020) con-
ducted a literature review in the Web of Science and Scopus data-
bases to identify studies that statistically analyzed the relationship
between sustainable development and economic performance. From
the 79 studies identify: 39 found a positive relationship, meaning that
sustainability had a positive influence when it comes to obtaining
financial outcomes; 21 did not find a significant relationship between
the same variables; 10 could not find enough evidence to determine
the existence of such a relationship; and 7 found negative relation-
ships between the variables.
The aim of the research reported herein was to evaluate whether
or not the economic-financial performance of the Brazilian companies
that are part of the ISE is superior in relation to the other companies
that constitute the Ibovespa. This article is structured as follows:
Section 2 presents the literature review of sustainable development
and performance indicators, and their relationships; Section 3
describes the methodological aspects; Section 4 reports the results;
and the conclusions of this study are given in Section 5.
2 | THEORETICAL FOUNDATION
Neumayer (2003) and Harangozo, Csutora, and Kocsis (2018) saw the
concept of sustainable development as being approached from an
962
economic point of view, where comparisons can be made between
current and future capacities to produce well-being. Pezzey and
Toman (2002) and Bithas (2019) argued for the involvement of sus-
tainability with equity intergenerationally, while Kates (2000)
highlighted differences in the science of sustainability, because it does
not begin with a current science agenda but with concerns about the
human condition, for which three issues are identified: (a) meeting the
needs of a larger population; (b) reducing hunger and poverty; and
(c) preserving human well-being. Smit and Pilifosova (2003) and
Gyawali, Tiwari, Bajracharya, and Skotte (2019) noted that activities
that enhance adaptive capacity can be considered equivalent to activi-
ties promoting sustainable development. According to Lozano and
Huisingh (2011), leadership should be viewed in a holistic way in order
to positively influence the sustainability dimensions of the company.
Escobar (1996) noted that changes in global communication as well as
in genetics have altered the relationship with the environment, and
some environmental economists argue that the natural stock of
resources needs to be given priority over all others (Pearce, 2013) and
strategies to support sustainability, such as triple R (reduce, reuse and
recycle), help to minimize impacts (Blowfield, 2013).
Kaplan (2000) stated that in historical relations in capitalism,
structured in an industrial model, a culture of sustainability is absent,
and Whiteman, Walker, and Perego (2013) noted that visions of cor-
porate sustainability are focused on industrial effects. The economic,
social, and environmental dimensions combined with a change in the
paradigm of the companies, originally only prioritizing profit, led to
the Triple Bottom Line (Barbosa, 2007). The basic concept of the Tri-
ple Bottom Line is that long-term business sustainability should not
only focus on traditional financial outcomes but should also include
social, ethical, and environmental responsibility (Norman & MacDon-
ald, 2004). Joyce and Paquin (2016) state that sustainable consump-
tion and production practices form the Triple Bottom Line along with
natural resource management and poverty eradication.
2.1 | Sustainability
The best-known definition of sustainable development is that one
must seek to meet the needs of the present generation without
compromising the ability of future generations to meet their needs.
Gray (2010) views sustainability from a systems perspective and
therefore it should be approached broadly, ranging from the planetary
level to a knowledge of its species. Ecologists who analyze this debate
more deeply, often reject the concept of sustainable development,
since they see in this concept the prioritization of human needs
(Giddings et al., 2002). Herremans and Reid (2002) noted that some
people may not agree that the conflicts discussed are actually con-
flicts and thus opinions differ on actions that must be taken to achieve
sustainability-related goals when discussing solutions to the issue.
Sustainability can play a strategic role since it involves several
aspects, such as economic, social, and environmental, that aim to
interact with different stakeholders, capable of integrating their
demands (Seuring & Gold, 2013). For Dyllick and Hockerts (2002), the
DE CASTRO SOBROSA NETO ET AL.
proposal of a relationship between sustainability and business is
aimed at meeting the needs of the direct and indirect stakeholders of
an organization. Luke (2005) observed a rhetoric of “sustainable
development” that operates as an ideological construct, minimizing its
credibility, since it suggests that this term has become a label for
unsustainable and undeveloped modes. Kollmuss and Agyeman
(2002) described the existence of a gap between sustainability rhe-
toric and sustainable behavior, which they define as a knowledge–
behavior gap. Holling (2001) viewed the monitoring of the present
and the past as static, except under conditions where managers are
able to connect actions that can be reflected in the future, and this
requires systemic planning, where the managers and actors involved
need to be dynamic and nonstatic. Goodland and Ledec (1987) argue
that governments that focus on long-term sustainability guidelines
should not seek to limit production growth as long as there is control
over the use of natural resources.
Initially, the concept of sustainability was used in the area of envi-
ronmental economics (Barbosa, 2007) and it was approached as an
equal distribution of well-being linked to natural resources (Masulo,
2004). However, the economy tends to be prioritized in policies, since
the environment is seen as being separate from humans (Giddings
et al., 2002). Tisdell (1988) addressed sustainability centered on its
political as well as social structures, and Owens (1994) pointed out
that sustainability can be incorporated into existing policies and plan-
ning. One side effect of this dissociated view lies in the fact that
diversity and difference are ignored, being limited to the investigation
of parts seen as dominant because diversity is an important part of
human sustainability (Jacobs, 1961) as well as that of the environ-
ment. The debate on sustainable development ignored the culturally-
specific definitions of what is sustainable in favor of the rather exclu-
sive knowledge system (Norgaard, 1988).
According to Luke (2005), dealing with sustainability, consoli-
dated the three movements of instrumental rationality: government,
population, and political economy. Holling (2001) noted that systemic
thinking can help in understanding the complexity of these systems.
In this context, sustainability can be seen from two approaches: stock-
holders and stakeholder's theory. The first is linked to managers who
seek to produce returns for shareholders, acting in an impersonal way,
producing greater efficiency and returns (Machado Filho &
Zylbersztajn, 2004). Garvare and Johansson (2010) stated that organi-
zations should seek to meet the needs and expectations of their
stakeholders without compromising the ability of other parties to
meet their needs, thereby serving all stakeholders.
The focus on sustainable development enables organizations to
reduce costs and increase both innovation rate and profitability, as
well as improving efficiency (Magadza, 2000). In turn, if certain assets
cannot be bought, rivals may try to imitate them by accumulating simi-
lar assets or may try to replace them with other assets (Dierickx &
Cool, 1989), and the reason for the sustainability of the privileged
position of company assets depends on how easily it can be repli-
cated. Thus, the generation of incremental returns would raise the
market value of the company, which would indirectly lead to social
welfare, the main cause for resources to be reinvested in the company
DE CASTRO SOBROSA NETO ET AL.
instead of being destined for other actions (e.g., environmental and
social). Therefore, consumers should be regarded as an attentive and
active target, connected to the global market, whose challenge is to
convince companies to embrace this market logic (Falk, 1999) while
respecting the planet's limits (Rockström et al., 2009), since vital pro-
cesses for humans are irreplaceable (Roseland, 1998).
On the other hand, in stakeholder theory, it is argued that the dis-
tribution of company resources must take into account the impacts
on all agents involved with the organization. Thus, the company has
multiple purposes for all involved, and not solely the maximization of
profits. Stakeholders can meet in diverse locations, in any part of the
world, making their demands through various means of communica-
tion (Savitz & Weber, 2007). In this context, the concern, mainly with
creating an environment for sustainable development, including
responsible measures, such as best practices of corporate governance
and social responsibility, has created a demand for products aimed at
this segment (Rezende & Santos, 2006). Baumgartner (2009) stated
that corporate activities aimed at sustainability need to form part of
the organizational culture in order to achieve success. In turn,
Linnenluecke, and e Griffiths, A. (2010) showed that organizations
with a sustainability-oriented culture are aligned toward achieving
results and that this culture is a factor directly responsible for how
corporate sustainability is addressed. Stavins, Wagner, and Wagner
(2003) had a vision of economics where sustainability is interpreted as
the ability to maintain human well-being over time and for genera-
tions. Reid (2013) debated whether it is possible to obtain an environ-
ment of international prosperity and well-being for people by
increasing trade, which in turn requires industrial production.
According to Wichaisri and Sopadang (2017), the future direction
of sustainable business concerns economic values, environmental pol-
icy and stakeholder engagement for business opportunities. There is
an imperative for change to business sustainability to be a business
leader in the future.
2.2 | Corporate Sustainability Index (ISE), Sa~o
Paulo Stock Exchange Index (IBOVESPA) and other
known indexes
The DJSI, the most widely recognized sustainability index in the
world, was the first index in its category, created jointly from the
S&P Dow Jones and RobecoSAM indices in 1999, and it identifies
the most sustainable companies in 60 sectors (Dow Jones Sustain-
ability Index, 2019). The Financial Times Stock Exchange for Good
(FTSE4Good) was created 2 years later in 2001 by the London Stock
Exchange and measures the performance of companies that demon-
strate strong environmental, social, and governance practices. It has
been used by a wide variety of market participants, being a bench-
mark to track the performance of sustainable investment portfolios.
The FTSE indexes are widely used worldwide for benchmarking,
performance measurement, investment analysis, asset allocation,
index tracking, and structured product portfolios (FTSE Index
Series, 2019).
963
In 2004, the Johannesburg Stock Exchange (JSE) created the first
sustainability index aimed at the emerging market and was the first
stock exchange to form a Socially Responsible Investment (SRI) index.
The JSE SRI index assesses issues related to sustainability, social, gov-
ernance, environmental and climate change issues (Cunha & Samanez,
2013; Johannesburg Stock Exchange, 2019).
In the Brazilian market, the Corporate Sustainability Index (ISE)
was created in 2005 by the S~
ao Paulo Stock Exchange, currently
~
known as B3 (in reference to the initial letters of Brasil, Bolsa, Balcao),
with the same purpose as the other indexes, that is, identifying sus-
tainable enterprises. B3 operates in the stock exchange and over the
counter and is one of the leading financial market infrastructure com-
panies in the world. It is a company that includes the Ibovespa, IBrX-
50, IBrX and Itag indexes, among others. Throughout its value chain,
the regulatory structure is divided into segments: BM&FBOVESPA
Segment, CETIP UTVM Segment, and CETIP UFIN Segment.
All of these sustainability indexes aim to guide the capital and credit
market and highlight the companies that incorporate social and environ-
mental risks into the organization, which positively influences their
image. For Mitchell (1996), measuring sustainable development is a pre-
requisite for the promotion of a sustainable society. There is consider-
able confusion regarding this theme, the different discourses of
sustainable development and the positive factors that can be found in
organizations that look for sustainable development (Wagner, 2010).
The main purpose of ISE B3 is to reflect the return of a portfolio of
companies that are committed to corporate sustainability measured by
the dimensions of economic efficiency, social justice, environmental bal-
ance, and corporate governance (B3, 2019). In this context, ISE B3 is the
main driver for investors seeking to compose a portfolio of companies
that incorporate good socio-environmental practices into financial
returns (Beato, de Souza, & dos Santos Parisotto, 2009). In addition,
with the transparent and participative process of the companies along
with the results provided, the selection and composition of the compa-
nies of the index (Marcondes & Bacarji, 2010) have become credible
and consistent. In February 2019, B3 launched ISE B3 2019/2020,
marking the beginning of the selection process for the index's 15th port-
folio in this new process, and starting with this portfolio, B3 began to
manage the ISE directly after 14 years (B3, 2019; ISEB3, 2019).
In summary, ISE B3 plays a key role in selecting companies that
are aligned with sustainable development objectives in conjunction
with strategic business planning. In addition, it is able to assist organi-
zations, through questionnaires, as an instrument for planning actions
that seek sustainability. As a result, the index has been fulfilling its
mission (B3, 2019; ISEB3, 2019) to “support investors in making
socially responsible investment decisions and induce companies to
adopt the best practices of corporate sustainability.”
The ISE questionnaire, available on the B3 website (latest cycle
2018/2019) is divided into the following categories: (a) Environmental
Dimension A, (b) Environmental Dimension B, (c) Environmental
Dimension C, (d) Environmental Dimension IF, (e) Economic-Financial
Dimension, (f) General Dimension, (g) Corporate Governance Dimen-
sion, (h) Climate Change Dimension, (i) Nature of Product Dimension,
and (j) Social Dimension.
964 DE CASTRO SOBROSA NETO ET AL.

Created in 1968, Ibovespa was consolidated as a benchmark for
investors in Brazil and abroad and became the main index of the Bra-
zilian stock market. The aim is for this to be an indicator of the aver-
age performance of the quotations of assets with greater negotiability
and representativeness of the Brazilian stock market. Only stocks of
companies listed on B3 that meet the requirements described in their
methodology form part of this index, which contains both stocks and
units (Ibovespa, 2019). Ibovespa follows the rules and procedures
contained in the index definitions and procedures manual of B3, and
can be explained further as the result of a theoretical portfolio of
assets. To compile the Ibovespa, it is necessary that certain criteria be
met cumulatively by companies, including: (a) belong to the eligible
assets that represent 85% of the total sum of these indicators, in the
period of validity of the three previous portfolios, in decreasing order
of the Negotiability Index, (b) also in the period of validity of the three
previous portfolios, have a 95% market presence, (c) in terms of finan-
cial volume, hold a market share of 0.1% or more in the spot market,
also in the three previous portfolios. In order for a company to no lon-
ger be included in Ibovespa, it is necessary that some exclusion
criteria be met, of which two are highlighted: (a) it fails to meet two of
the inclusion criteria and (b) it is among the assets that in descending
order of the Negotiability Index over 90% of the total, also in the
period of validity of the three previous portfolios (Metodologia do
Índice Bovespa, 2019).
Two illustrative tables are presented with the companies that
form part of the ISE and the Ibovespa, and it is important to highlight
that the ISE data (Table 1) are annual, while the Ibovespa data
(Table 2) are quarterly. A criterion adopted in this research was to
select firms from the two portfolios at the beginning of each year as
the indicators of the end of each year under analysis.
Companies in the financial sector were excluded according to the
restrictions also used by Pérez-Calderón, Milanés-Montero, and
Ortega-Rossell (2012) and Santis et al. (2016). In addition to these,
other companies were excluded from the analysis, such as
Anhanguera, which was no longer traded on B3 on July 4, 2014,
Souza Cruz, which closed its capital on December 1, 2015. It is also
important to note that Hypera was called Hypermarcas until
December 2017, Tractebel was renamed Engie in July 2016 and
América Latina Logística S/A (ALL) merged with Rumo Logística
in 2015.
2.3 | Financial performance
An indicator has the function of reducing a large amount of informa-
tion to simpler forms and demonstrates the performance of the capital
markets. An index is a type of indicator aimed at representing the
behavior of stock prices of a specific market within a range
(Malacrida & Yamamoto, 2006; Ott, 1978), presenting this in a simpli-
fied way where some information is lost in the process. Indicators are
designed to meet different objectives and may have subtle but
important differences (Cairns, McCormick, & Niederlehner, 1993).

TABLE 1 Portfolios of Brazilian Corporate Sustainability Index (ISE) in 2014–2018

Company/year 2014 2015 2016 2017 2018 Company/year 2014 2015 2016 2017 2018
AES TIETE X X X X X EVEN X X X
B2W DIGITAL X X X X FIBRIA X X X X X
BRASKEM X X X X X FLEURY X X X X X
BRF FOODS X X X X GERDAU X X
CCR AS X X X X X GERDAU MET X X
CELESC X X JSL X
CEMIG X X X X X KLABIN SA X X X X X
CESP X X LIGHT S/A X X X X X
COELCE X X LOJAS AMERICANAS X X X X
COPASA X LOJAS RENNER X X X X
COPEL X X X X X MRV X X X
CPFL ENERGIA X X X X X NATURA X X X X X
DURATEX X X X X X OI X
ECORODOVIAS X X X X X SABESP X X
EDP X SUZANO PAPEL X
ELETROBRAS X X X X TELEFONICA BRASIL X X X X X
ELETROPAULO X X X X X TIM PART S/A X X X X X
EMBRAER X X X X TRACTEBEL X X
ENERGIAS BR X X X X VALE X X
ENGIE BRASIL ENERGIA X X X WEG X X X X X

Source: Produced by the authors based on B3 data.

DE CASTRO SOBROSA NETO ET AL. 965

TABLE 2 Portfolios of S~ao Paulo Stock Exchange (Ibovespa) in 2014–2018

Company/year 2014 2015 2016 2017 2018 Company/year 2014 2015 2016 2017 2018
ALL AMER LAT X X JBS X X X X X
AMBEV X X X X X KLABIN X X X X X
BR MALLS PAR X X X X X KROTON X X X X X
BR PROPERT X X LIGHT X X
BRADESPAR X X X X X LLX LOG X
BRASKEM X X X X X LOCALIZA X X X X X
BRF FOODS/BRF SA X X X X X LOJAS AMERIC X X X X X
BROOKFIELD X LOJAS RENNER X X X X X
CCR RODOVIAS/CCR SA X X X X X MARCOPOLO X
CEMIG X X X X X MARFRIG X X X X X
CESP X X X MRV X X X X X
CIA HERING X X X MULTIPLAN X X X X
COPEL X X X X X NATURA X X X X X
COSAN X X X X X OI X X X
CPFL ENERGIA X X X X X P.ACUCAR-CBD X X X X X
CYRELA REALT X X X X X PDG REALT X X
DASA X PETROBRAS X X X X X
DURATEX X X QUALICORP X X X X X
ECORODOVIAS X X X X X RAIADROGASIL X X X
ELETROBRAS X X X X ROSSI RESID X
ELETROPAULO X RUMO LOG/RUMO SA X X X
EMBRAER X X X X X SABESP X X X X X
ENERGIAS BR X X X X X SID NACIONAL X X X X X
ENGIE BRASIL X X SMILES X X X
EQUATORIAL X X X SOUZA CRUZ X X
ESTACIO PART X X X X X SUZANO PAPEL X X X X X
EVEN X X TAESA X
FIBRIA X X X X X TELEF BRASIL X X X X X
FLEURY X TIM PART S/A X X X X X
GAFISA X X TRACTEBEL X X X
GERDAU X X X X X ULTRAPAR X X X X X
GERDAU MET X X X X X USIMINAS X X X X X
GOL X X VALE R DOCE X X X X X
HYPERMARCAS X X X X X VIAVAREJO X
IGUATEMI X WEG X X X

Source: Produced by the authors based on B3 data.

According to Mitchell (1996), sustainable development indicators can
be divided into two groups: the aggregate single index where only
one variable is reported and the set of indicators where many vari-
ables are reported.
Fundamental analysis involves various tools, such as sectorial
analysis, micro and macroeconomic sets, and the evaluation of finan-
cial statements. The latter is important for the collection of data that
are used in the assessment of market multiples. Financial analysis
tools can be useful in assessing a company's performance and trends
in that performance. In essence, an analyst converts data from a
company's statements into financial metrics that assist in decision
making. Multiples can be understood as accounting and/or financial
measures, which allow the analysis of companies of different sizes
and even of different sectors. Multiples are widely used by analysts to
compare if the stock is being correctly priced, relating the multiples of
companies acting in the same industry (Pinheiro, 2007). For the com-
parison of assets, some form of standardization is required, as
described by Damodaran (2006, p. 98), in which “they can be stan-
dardized in relation to the profits they generate, their book value,
their replacement cost, or the revenues they generate. All of these
966
approaches are widely used and have strong adherents.” In this way,
the information contained in the financial statements of the compa-
nies is important for the calculation of the various profitability indica-
tors (Lopez, Garcia, & Rodriguez, 2007; McGuire, Sundgren, &
Schneeweis, 1988; Preston & O'bannon, 1997; Ruf, Muralidhar,
Brown, Janney, & Paul, 2001).
2.4 | Background studies on business sustainability
and financial performance
With the growing trend toward the search for sustainable develop-
ment and the attentive scrutiny of society, companies are preparing
for this new market niche, in which fund managers and investors seek
to align profits with environmental, social, and economic variables in
business management. A series of studies sought to verify the rela-
tionship between performance and sustainability. Pletsch, Silva, and
Hein (2014) analyzed the relationship between social responsibility
and the economic and financial performance of ISE-listed companies.
They found that economic and financial performance influences both
internal and external social benefits and that the higher the economic
and financial performance of larger companies the greater the invest-
ments destined to the internal social benefits of the organizations
will be.
According to Ortas, Burritt, and Moneva (2013), the socio-
environmental screening process does not represent an additional
burden in terms of the performance of SRI indexes and investors can
support companies engaged in the growth of their environmental per-
formance through improvements in their production processes. Dias,
Ferreira, Tadeo, and Souza (2013) concluded that the companies par-
ticipating in ISE and Ibovespa are favored by profitability variables. In
this regard, Maehara and Kassai (2013) affirmed that investments
aimed at sustainability improve the image of the company, thus gener-
ating economic benefits. Pearce, Markandya, and Barbier (1989) argue
that because sustainable development seems to be a highly beneficial
goal, the many actors are in agreement despite having their own inter-
pretation in this regard. Marti, Rovira Val, and Drescher (2015)
pointed out that investment in research and development influences
the return on assets and that companies that focus on sustainable
development achieve better CSP.
Pérez-Calderón et al. (2012) observed that in the groups listed as
sensitive to environmental issues there is a clear influence on the gen-
eration of economic and financial value when analyzing the efficiency
of resource consumption performance, compared to companies that
do not appear to be concerned about these issues. Al Abri, Bi, Mul-
lally, and Hodges (2017) investigated the sources of heterogeneity in
the impacts of corporate sustainability (CS), using panel data from
463 U.S. companies and found that, on average, the continuous adop-
tion of CS did not significantly improve financial performance, particu-
larly for small and medium-sized enterprises. Carini, Comincioli, Poddi,
and Vergalli (2017) noted that a growing number of OECD countries
are gaining “socially responsible” certification and note that the mar-
ket value added of a sample of 417 companies increased as the
DE CASTRO SOBROSA NETO ET AL.
corporate social responsibility (CSR) decreased. Alejandro and Garcia
(2017) evaluated the sustainable portfolios of 1,078 companies from
15 OECD countries with a multicriteria approach under uncertainty.
The results showed similar financial performance for sustainable and
unsustainable portfolios, although considering uncertainty, the perfor-
mance of sustainable companies was better than that of
nonsustainable companies. Also, as a social implication, countries with
higher financial performance in sustainable portfolios are efficient in
their environmental regulations. Jung, Nam, Yang, and Kim (2017) ver-
ified that a company's corporate sustainability performance is posi-
tively associated with its financial performance, especially in the
information and communication technology industry.
Fernández-Guadaño and Sarria-Pedroza (2018) stated that CSR
means that managers must go beyond shareholder satisfaction and
establish balanced relationships with all of their stakeholders. The
authors compared socially responsible companies included in the sus-
tainability index FTSE4Good Ibex with companies listed in the other
indexes of the Ibex family. On the one hand, the data show that sus-
tainability reports are well established in large companies in Spain, but
they still need to be introduced more effectively in small and medium-
sized companies. The results also show that investments in CSR have
a positive and significant influence on the distribution of value in favor
of the State, a negative influence for the employees and no influence
for the other stakeholders. According to Garg (2016), CSR has proven
to be beneficial in raising business profiles and corporate reputations
at the local, national, and international level. A continuing commit-
ment of companies to behave ethically and contribute to economic
development was noted, bringing benefits to stakeholders, as well as
society in general. The author further clarifies that contrasting results
were also found and that this may be due to economic conditions,
time periods, and different sample sizes. Lastly, the CSR performance
in public sector companies is better than in the private sector, and
there is a difference in the results according to the sector analyzed.
Other authors also concluded that there is a positive relationship
between these two variables (Allouche & Laroche, 2005; McGuire
et al., 1988; Simpson & Kohers, 2002). Plantinga and Scholtens (2001)
analyzed investment funds from Belgium, France, and the Netherlands
and concluded that socially responsible investment funds perform
better than traditional funds. In the same context, Garz et al. (2002)
show that the DJSI performs well above the Dow Jones STOXX Index
(DJTOXX). Skare and Golja (2012) analyzed the financial performance
of 45 corporations listed in the Dow Jones Sustainability World Index
and, through an econometric model, verified that, on average, compa-
nies with CSR have a better financial performance than non-CSR com-
panies. Ziegler (2012) analyzed the effect on financial performance of
inclusion in the DJSI World. The micro-econometric analysis per-
formed showed insignificant effects on the return of assets to the
United Kingdom and Ireland, in contrast to the positive effect verified
for other European countries. DiSegni, Huly, and Akron (2015) in their
study on corporate social responsibility, environmental leadership,
and financial performance compared the financial performance of all
U.S. corporations that make up the DJSI. They concluded that compa-
nies that are proactive in supporting accountability and social and
DE CASTRO SOBROSA NETO ET AL.
environmental sustainability have greater measures of profit in rela-
tion to other companies in the same industry and sector, although not
when considering the whole market.
Ortas and Moneva (2011) analyzed multivariate evidence from
the DJSI STOXX and found that one of the most relevant results was
that the market responds positively when companies outside the DJSI
STOXX are not considered in the annual reviews analyzed. They
observed the market's interest in investing in companies that maintain
a strategic relationship with their stakeholders. Thus, corporations
have the incentive to follow a strategic model that reliably acts not
only considering their shareholders, but also their stakeholders, since
this tends to increase their CSP levels in the long term, and the survey
results verified that market players are concerned about such consid-
erations. Robinson, Kleffner, and Bertels (2011) provided evidence
that addition to the DJSI results in a sustained increase in the stock
price of companies and suggested that the benefits of inclusion in the
DJSI outweigh the associated costs. On the other hand, on analyzing
socially responsible investment funds, Statman (2000) concluded that
their performance is similar to that of traditional funds and indexes.
Pätäri, Jantunen, Kyläheiko, and Sandström (2012) compared the
performance of DJSI and nonsustainability companies and the results
indicated that more sustainable companies are better at controlling
their costs and generating profits, and that they also tend to have the
best market values. However, on analyzing the effect of the inclusion
of German corporations in the DJSI STOXX and DJSI World on the
performance of the actions, Oberndorfer, Schmidt, Wagner, and
Ziegler (2013) found that the stock markets can penalize the inclusion
of a company in sustainability indexes. They observed an effect for
DJSI World but no significant mean cumulative abnormal returns were
found with inclusion in the DJSI STOXX. Other researchers, such as
Coffey and Fryxell (1991), Arlow and Gannon (1982) and Chen and
Metcalf (1980), found a negative effect of investment in sustainability.
Cunha and Samanez (2013) analyzed the performance of sustain-
able investments in the Brazilian market through the Brazilian Corpo-
rate Sustainability Index (ISE) and observed some interesting
characteristics in sustainable investments. These included increased
liquidity and low diversifiable risk, but the companies did not reach
satisfactory financial performance in the period analyzed. On the
other hand, in their study on the Brazilian ISE, Ortas, Moneva, and Sal-
vador (2012) obtained results that indicated that investors in emerg-
ing markets can accommodate their ethical values. On examining the
economic implications of Environmental, Social, and Governance
(ESG) disclosures in emerging markets in Egypt, Aboud and Diab
(2018) found that, in comparison to the EGX 100 and all companies
listed in the Egyptian Stock Market, the results indicated a higher cor-
porate value for companies listed in the ESG index, and that compa-
nies with higher rankings in the ESG index have a higher market value.
Chelawat and Trivedi (2016) noted that in the Indian context, good
performance of the ESG index improves the financial performance of
companies.
Rezende, Nunes, and Portela (2008) verified that the ISE per-
formance has similar returns to conventional stock indexes. Castro
(2017) analyzed performance differences between 28 ISE
967
participating companies and 28 nonparticipating companies,
through the Wilcoxon statistical test of average differences (with
95% confidence level). The tests revealed no significant differences
between the two groups. There are significant differences only
when the analysis is carried out by economic sector and type of
index. Several researchers have sought to explain the existence of
a relationship between economic performance and sustainability,
but the results do not allow precise conclusions due to the diver-
sity of phenomena involved. The results of other studies suggest
the relationship is nonexistent or the findings are inconclusive
(Anderson & Frankle, 1980; McWilliams & Siegel, 2000). Although
many authors have sought to verify the existence of a relationship
between adopting sustainable practices and superior financial per-
formance of the company, research shows that there are contradic-
tory results and thus the subject continues to be debated in
academia (Cochran & Wood, 1984; Graves & Waddock, 1994;
Lopez et al., 2007; Orlitzky, 2001).
Lassala, Apetrei, and Sapena (2017) noted that although the rela-
tionship between social and environmental performance and finan-
cial performance in companies has been widely debated, our
understanding is still not conclusive. They carried out research based
on the FTSE4Good Ibex and the results obtained suggested that, for
specific industries, return on assets (ROA) is a necessary condition
for leverage firms to reduce the cost of debt due to their sustainabil-
ity profile, thereby increasing their ROE. In their study on the deter-
minants of corporate sustainability performance of Brazilian
companies, Lourenço and Branco (2013) observed that the Brazilian
companies that are leaders in corporate sustainability are consider-
ably larger and have a higher return on equity than nonleading com-
panies. This is also suggest by other studies, including those in
emerging markets with contextual characteristics, such as Brazil and
China, and is an interesting way to analyze the influence of state and
foreign properties on CSP. Rodriguez-Fernandez (2015) investigated
the bidirectional relationship between corporate social responsibility
and financial performance in Spanish companies and concluded that
those registered on the Madrid Stock Exchange show positive rela-
tions in both directions, noting that “social is lucrative” and “lucrative
is social.”
Santis et al. (2016) analyzed the financial and economic perfor-
mance of ISE-listed companies and compared them with the perfor-
mance of companies listed on the Ibovespa. They found no evidence
of differences in economic and financial performance between the
two sets of companies. As previously identified by other authors, their
results showed that other characteristics, such as sectoral classifica-
tion, have a stronger influence on the economic and financial perfor-
mance of companies than their investments in sustainable initiatives.
Therefore, this debate remains current, with society becoming more
discerning and demanding, especially as it is seen that the majority of
the Stock Exchanges around the world have started to offer options
of sustainability indexes to their investors. In this regard, Van Mar-
rewijk and Werre (2003) concluded that organizations that seek to
continuously improve their quality need to adapt to a more socially
responsible way of managing sustainability.
968 DE CASTRO SOBROSA NETO ET AL.

3 | M E TH O DO LO GY their obsolete management practices. In this regard, Kazmi and

In the History of Methodological Adequacy of the B3 Indexes (2019),
it is stated that the calculation of Ibovespa began in January of 1968.
It was subjected to several adjustments in its form of disclosure but
not to methodological changes. In mid-2012, BM&FBOVESPA began
a process of re-evaluating its methodology. The Working Group pres-
ented suggestions for improving this methodology in July 2013,
mainly considering the economic scenario of the time and aiming to
maintain it as an index that accurately represents the performance of
the Brazilian market. On July 11, 2013, Ibovespa announced changes
to its methodology, with the implementation of these suggestions
being staggered in two stages. These changes included: (a) the
weighting function, which would now be conducted using the Nego-
tiability Index (NI) set at twice the hypothetical weight of the constitu-
ent starting from the portfolio of January 2014, whereas previously it
was based on liquidity; (b) the calculation based on the NI began to
consider 2/3 of the financial volume share and 1/3 of the share in the
number of trades; (c) the cut-off point on the NI used to select the
assets for the index portfolio rose from 80 to 85%; (d) the minimum
presence requirement in the trading sessions increased from 80 to
95%; and (e) a participation limit was introduced per company in the
portfolio.
This new methodology was implemented on September
11, 2013. In the January 2014 review, these new criteria were applied
with emphasis on the participation of the assets in the portfolio,
which was calculated considering 50% of the participation in the NI
and 50% of the participation according to the new weighting criterion.
In the May 2014 review, holdings were fully determined by the new
model. These changes in methodology from 2014 were considered in
the choice of the sample considered in this research. Ibovespa and ISE
data were collected from the period of 2014 to 2018, from the B3
website and Economática software (created in 1986), which maintains
all of its focus on data collection and data management. It can be con-
sidered an intelligence tool that assists in the analysis of the funds
and stock markets. The Economática software analyzes more than
5,000 companies and 25,000 funds and is present in 250 sectors with
data from companies in more than 45 countries (Economática, 2019;
Metodologia do Índice Bovespa, 2019).
Naaranoja (2015) sought to explain the current occurrence where
adequacy to intelligence and technical practices are required for the
competitive environment and the application of the concept of sus-
tainable development remains, since it attempts to embrace the rela-
tionship between socioeconomic and the environment and has gained
significant recognition (Giddings et al., 2002). The ISE and Ibovespa
companies were separated into three groups: (a) companies that were
only part of ISE, without being listed on Ibovespa; (b) companies that
were only part of Ibovespa, without being listed on ISE; and
(c) companies that were simultaneously part of ISE and Ibovespa. This
grouping was carried out year by year from 2014 to 2018. The analy-
sis in this research was performed for each of the years (2014 to
2018) for the companies of groups 1 and 2, without considering the
indexes (ISE and Ibovespa) of the other years. Santis et al. (2016) used
a similar analysis technique, as did Lopez et al. (2007). However, the
latter did not analyze the group of companies of the two groups
simultaneously (group 3).
3.2 | Variables
The indicators analyzed, obtained from Economática, were ROA, ROE,
and ROIC and they are described in Table 3, with their respective for-
mulas and meanings.
3.3 | Statistical analysis
The levels of performance of the groups of companies listed in the ISE
and Ibovespa (groups 1–3), from 2014 to 2018, were compared using
the ROA, ROE, and ROIC indicators. In order to verify the normality
of the data of these indicators, the Kolmogorov–Smirnov test was
conducted, with a significance level of 0.05, using SPSS software.
Considering the p-value result obtained in this test, it was verified that
it is not possible to accept H0, that is, that the data have a normal dis-
tribution (p-value>.05) for all indicators in the years analyzed,
according to Table 4.
TABLE 3 Financial ratios with their equations and meanings

Equation Ratio Meaning

3.1 | Population and sample Net Income
ROA = Average Return on The return generated
Total Assets
assets by every monetary
The research population is all companies in category B3, listed in the unit applied in a
company
ISE (40 companies) or listed in the Ibovespa (121 companies), in the
period between 2014 and 2018. Companies in the financial sector ROE = Average Net Income
Stockholders0 Equity Return on Measures the return
equity generated in the
(financial intermediaries, securitization of receivables, various financial
stockholders'
services, pension, and insurance), and Kroton, which was no longer investments
traded on July 4, 2014, were excluded. Companies in the financial sec- ROIC = NetAverage
Operating Profit After Taxes
Return on Evaluates the return
Invested Capital
tor have also be excluded in previous studies (Pérez-Calderón et al., invested generated from
2012). According to Luke (2005), any company that intends to prevail capital the total capital
invested
in the current market climate needs to be able to turn sustainability
into a key strategic asset. However, a few organizations still support Source: Produced by the authors.
DE CASTRO SOBROSA NETO ET AL. 969

T A B L E 4 Kolmogorov–Smirnov
2014 2015 2016 2017 2018
normality test
Indexes Portfolios Sig. Sig. Sig. Sig. Sig.
ROA IBOV 0.078 0.025 0.200a 0.025 0.200a
ISE 0.200a 0.200a 0.200a 0.200a 0.200a
ROE (avg. stck. eq.) IBOV 0.005 0.019 0.000 0.000 0.007
a a
ISE 0.121 0.200 0.200 0.101 0.200a
ROIC (avg. IC) IBOV 0.006 0.162 0.000 0.000 0.000
a a a
ISE 0.153 0.200 0.200 0.200 0.200a

Source: Produced by the authors based on SPSS software (2019).

Abbreviations: ROA, return on assets; ROE, return on equity; ROIC, return on invested capital.
a
This is a lowest limit of true significance.

TABLE 5 Values for the performance

Indexes Portfolios 2014 2015 2016 2017 2018
indicators
ROA (%) IBOV 2.7990 −1.1686 4.3530 5.6644 5.8332
ISE 4.2760 4.8286 1.5887 1.1129 1.0183
ROE (avg, stck. eq.) % IBOV 4.7560 −2.1711 5.9330 11.9448 14.7456
ISE 9.8940 8.6957 2.4600 0.0757 2.9500
ROIC (avg. IC) % IBOV 9.2710 4.6259 12.4103 12.1585 11.3100
ISE 7.5760 7.8000 5.5700 6.5386 4.9717

Source: Produced by the authors based on Economática Software (2019).

Abbreviations: ROA, return on assets; ROE, return on equity; ROIC, return on invested capital.

In this case, it is not possible to accept H0 (i.e., that all data is normal). TABLE 6 Mann–Whitney U test—ISE × Ibovespa
To obtain a comparison between two groups, one group of ISE compa-
Year 2014 2015 2016 2017 2018
nies and one group of Ibovespa companies, the Mann–Whitney test was
Indexes Sig. Sig. Sig. Sig. Sig.
used. In this case, for H0 the means were equal (significance: p-value
ROA 0.423 0.289 0.352 0.154 0.015
>.05) and for H1 the means were not equal (significance: p-value <.05).
ROE (avg. stck. eq.) 0.604 0.409 0.371 0.383 0.088
ROIC (avg. IC) 0.909 0.194 0.747 0.431 0.081

4 | RESULTS Source: Produced by the authors.

According to ISE B3 (2019), since 2005, when it was created, and
based on the date of November 27, 2018, the Ibovespa posted a prof-
itability of +175.38%, while ISE B3 showed a profitability of +203.8%
in the same period. Regarding volatility, in the same period, ISE B3
recorded 24.67%, while Ibovespa registered 27.46%.
Abbreviations: ROA, return on assets; ROE, return on equity; ROIC, return
on invested capital.
in the performance of the two groups during the 5 years cannot be
confirmed only by comparing the means of the indicators, the next
section describes a statistical analysis of these indicators.

4.1 | Average performance indicators 4.2 | Statistical analysis

The performance indicators used in this research (ROA, ROE, and
ROIC) were obtained from the Economática software for the years
2014 to 2018, for the ISE and Ibovespa groups. Table 5 shows the
mean values for these indicators.
In 2014 and 2015, the averages of two of the three indicators in
the ISE group were higher than those of the Ibovespa. However,
between 2016 and 2018, the averages of the three indicators ana-
lyzed are higher in the Ibovespa group. While the indicators of the
Ibovespa group show an increase in the period from 2014 to 2018,
ISE companies show a deterioration in performance. As the difference
In this section, the results obtained from the Mann–Whitney tests
and cluster analysis are reported.
4.2.1 | The Mann–Whitney U test
The Mann–Whitney U test was carried out to compare the
performance indicators ROA, ROE, and ROIC in the years 2014 to
2018 for two groups of companies (i.e., those listed on ISE or
Ibovespa). The results for the p-value are shown in Table 6.
970 DE CASTRO SOBROSA NETO ET AL.

FIGURE 1 Dendogram obtained in the cluster analysis. Source: Produced by the authors based on SPSS software (2019)

A p-value lower than .05 was only obtained for the 2018 data, analyzed, the p-value was higher than .05 (hypothesis H0), indicating
indicating a difference between the ISE and Ibovespa groups in there is no evidence that the data for the indicators of the two
terms of the ROA indicator. For all other indicators and periods groups differ.
DE CASTRO SOBROSA NETO ET AL. 971

TABLE 7 Categorization of companies in clusters

Clusters
1 2 3 4 5
Company Portfolio Company Portfolio Company Portfolio Company Portfolio Company Portfolio
MARFRIG IBOV B2W DIGITAL ISE BRF FOODS/ IBOV AES TIETE ISE SMILES IBOV
BRF SA
SID IBOV CELESC ISE AMBEV IBOV
NACIONAL
CYRELA REALT IBOV BR MALLS PAR IBOV
ELETROPAULO ISE BRADESPAR IBOV
EMBRAER IBOV COSAN IBOV
JBS IBOV DURATEX ISE
LIGHT S/A ISE ELETROBRAS IBOV
P.ACUCAR-CBD IBOV EQUATORIAL IBOV
PETROBRAS IBOV ESTACIO PART IBOV
RUMO SA (ALL IBOV GERDAU IBOV
AMER LAT)
SUZANO PAPEL IBOV GERDAU MET IBOV
USIMINAS IBOV HYPERMARCAS IBOV
VIAVAREJO IBOV IGUATEMI IBOV
KROTON IBOV
LOCALIZA IBOV
MAGAZ LUIZA IBOV
MULTIPLAN IBOV
QUALICORP IBOV
RAIADROGASIL IBOV
SABESP IBOV
TAESA IBOV
ULTRAPAR IBOV
VALE R DOCE IBOV

Source: Produced by the authors (2019).

4.2.2 | Cluster analysis
Cluster analysis of the data for the indicators, considering the qua-
dratic Euclidean distance based on a hierarchical clustering scheme
with the furthest neighbor procedure, for the 2018-year, resulted in
the formation of six clusters, according to the dendogram of
Figure 1.
On applying the analysis to five groups using a cluster analysis
based on the nonhierarchical k-means agglomeration scheme, the
results in Table 7 were obtained. These indicate that clusters 3 and
5 contain only one company, BRF Foods/BRF SA and Smiles respec-
tively, which indicated a much higher performance (Smiles) or signifi-
cantly lower (BRF Foods/BRF SA) than the other companies analyzed.
According to Table 8, Smiles is classified in the cyclic consumption
sector and BRF Foods/BRF SA in the noncyclic consumption sector,
and both are listed in the Ibovespa portfolio. Cluster 1 has only two
companies, Marfrig and SID Nacional, classified in the noncyclic con-
sumption and basic materials sector, respectively, and both are also
listed in the Ibovespa portfolio. For clusters 2 and 4, the test showed
the formation of heterogeneous groups, containing companies from
the two groups (Ibovespa and ISE). The results are consistent with
previous studies that showed a neutral relationship between financial
and sustainable performance. Castro (2017), for instance, stated that,
as a general rule, the tests revealed no significant differences between
the two groups. Santis et al. (2016) also found no evidence of differ-
ences in terms of economic-financial performance between the firms
of the indices studied. They observed that other characteristics, such
as sectorial classification, have a greater influence on the economic
and financial performance of investments. Cunha and Samanez (2013)
conclude that:
the results show that although sustainable investments
presented some interesting characteristics, such as
increased liquidity and low diversifiable risk, they did
not reach a satisfactory financial performance in the
analyzed period. This indicates that the restrictions
972
imposed by this type of investment in the allocation of
capital in Brazil may be harming its return and attrac-
tiveness of risk.
However, it was observed that clusters 3 and 5, which outperform the
other companies analyzed, refer to companies listed in the Ibovespa
portfolio, while Lourenço and Branco (2013) highlight in their
research:
Our results indicate that the main Brazilian corporate
sustainability performance companies are significantly
larger and have a higher return on equity than their
counterparts, which is consistent with previous find-
ings from U.S. companies.
Thus, during the period studied, there is no behavior that demon-
strates a superior or inferior performance of the sustainable compa-
nies in relation to the indexes considered in the study. Levins and
Lewontin (1994) stated that “sustainable” relates to the search for
interaction, and criticized operations involving the separation of the
environment and the search for empirical evidence to verify the exis-
tence of significant differences in the financial performance of com-
panies classified as sustainable. The following hypothesis is tested:
“There is no difference between the performance of sustainable and
unsustainable companies.” Thus, it is inferred that the inclusion of
sustainable practices results in an increase in costs in the short and
medium term, since the companies use the resources in different
ways, and can lead to the reduction of competitive advantage com-
pared to companies with lower sustainability. In this way, sustainable
companies will tend to obtain lower economic and financial perfor-
mance relative to other companies (Preston & O'bannon, 1997).
5 | F I N A L CO N S I D E R A T I O N S
Many authors, according to our literature review, have analyzed the
relationship between sustainable development and economic perfor-
mance. We found that the results vary, with some authors not finding
any relationship between CSP and corporate financial performance
(CFP), others finding neutral relationships where a trend could not be
found, and some reporting positive or negative relationships. Thus,
the aim of this research was to verify the existence of superior eco-
nomic and financial performance of the Brazilian companies that are
part of the Brazilian Corporate Sustainability Index (ISE) in relation to
the other companies that constitute the S~ao Paulo Stock Exchange
(Ibovespa) and are not listed by ISE between the years of 2014
and 2018.
Firstly, we analyzed three performance indicators (ROA, ROE, and
ROIC) obtained from the Economática software, for the years 2014 to
2018, for the ISE and Ibovespa groups of companies. In 2014 and
2015, the averages of two of the three indicators were higher for the
ISE group than the corresponding values for the Ibovespa group.
DE CASTRO SOBROSA NETO ET AL.
However, between 2016 and 2018, the averages of the three indica-
tors analyzed were higher for the Ibovespa group. While the indica-
tors for the Ibovespa group showed an increase in the period from
2014 to 2018, ISE companies showed a deterioration in performance
during this period. As the difference in the performance of the two
groups during the 5-year period could not be confirmed only by com-
paring the means of the indicators, a statistical analysis of the data
was performed.
Secondly, we applied the Mann–Whitney U test to compare the
performance indicators ROA, ROE, and ROIC, in the years 2014 to
2018, for the two groups (ISE and Ibovespa companies). The results
indicated a difference between the ISE and Ibovespa groups only in
2018 for the ROA indicator. For all other indicators and periods ana-
lyzed, there was no statistical evidence that the indicators of the two
groups differed.
Thirdly, we performed cluster analysis considering the quadratic
Euclidean distance, based on a hierarchical clustering scheme with the
furthest neighbor procedure, for the indicators in 2018. The cluster
analysis based on the nonhierarchical k-means agglomeration scheme
resulted in five groups. Clusters 3 and 5 contained only one company
each, BRF Foods/BRF SA and Smiles, respectively, which indicated a
much higher performance (Smiles) and significantly lower performance
(BRF Foods/BRF SA) than the other companies analyzed. Smiles is
classified in the cyclic consumption sector and BRF Foods/BRF SA in
the noncyclic consumption sector and both were listed in the
Ibovespa portfolio. Cluster 1 had only two companies, Marfrig and
SID Nacional, classified in the noncyclic consumption and basic mate-
rials sectors, respectively, and both were also listed in the Ibovespa
portfolio. For clusters 2 and 4, the test showed the formation of het-
erogeneous groups, containing companies of the two groups
(Ibovespa and ISE) which revealed no significant differences between
them. Thus, during the period studied, there is no behavior that dem-
onstrates a superior or inferior performance of the sustainable compa-
nies in relation to the indexes studied.
Thus, we identified a neutral relationship between financial per-
formance and sustainable development, which is consistent with the
results of previous studies referenced and addressed in this research
(Castro, 2017; McWilliams & Siegel, 2000; Rezende et al., 2008;
Santis et al., 2016). The findings of this study contribute to the exis-
ting research on sustainability in financial markets, which is important
given that few scientific articles report investigations using indicators
and statistical treatment to examine the Brazilian sustainability
market.
The debate remains current, with society becoming more discern-
ing and demanding, especially as it is seen that most Stock Exchanges
around the world have started to offer options of sustainability
indexes to its investors. Therefore, organizations that seek to continu-
ously improve their quality need to adapt to a more socially responsi-
ble way of managing sustainability,
Despite the valuable findings and implications of this study, it
contains some limitations that future research could address. The
study is limited to companies which form part of the ISE and
DE CASTRO SOBROSA NETO ET AL. 973

TABLE 8 Categorization of companies by portfolio, cluster, sector, and subsector

Company Portfolio Cluster Sector Subsector

MARFRIG IBOV 1 Cyclic nonconsumption Processed food
SID NACIONAL IBOV 1 Basic materials Steel and metallurgic
B2W DIGITAL ISE 2 Cyclic consumption Trade
CELESC ISE 2 Public utility Electric energy
CYRELA REALT IBOV 2 Cyclic consumption Construction industry
ELETROPAULO ISE 2 Public utility Electric energy
EMBRAER IBOV 2 Industrial goods Transport material
JBS IBOV 2 Noncyclic consumption Processed food
LIGHT S/A ISE 2 Public utility Electric energy
P.ACUCAR-CBD IBOV 2 Noncyclic consumption Trade and distribution
PETROBRAS IBOV 2 Oil, gas and biofuels Oil, gas and biofuels
RUMO SA (ALL AMER LAT) IBOV 2 Industrial goods Transport
SUZANO PAPEL IBOV 2 Basic materials Wood and paper
USIMINAS IBOV 2 Basis materials Steel and metallurgy
VIAVAREJO IBOV 2 Cyclic consumption Trade
BRF FOODS/BRF SA IBOV 3 Noncyclic consumption Processed food
AES TIETE ISE 4 Public utility Electric energy
AMBEV IBOV 4 Noncyclic consumption Beverages
BR MALLS PAR IBOV 4 Financial Real estate exploration
BRADESPAR IBOV 4 Basic materials Mining
COSAN IBOV 4 Oil, gas and biofuels Oil, gas and biofuels
DURATEX ISE 4 Basic materials Wood and paper
ELETROBRAS IBOV 4 Public utility Electric energy
EQUATORIAL IBOV 4 Public utility Electric energy
ESTACIO PART IBOV 4 Cyclic consumption Diversified
GERDAU IBOV 4 Basic materials Steel and metallurgy
GERDAU MET IBOV 4 Basic materials Steel and metallurgy
HYPERMARCAS IBOV 4 Health Trade and distribution
IGUATEMI IBOV 4 Financial Real estate exploration
KROTON IBOV 4 Cyclic consumption Diversified
LOCALIZA IBOV 4 Cyclic consumption Diversified
MAGAZ LUIZA IBOV 4 Cyclic consumption Trade
MULTIPLAN IBOV 4 Cyclic consumption Real estate exploration
QUALICORP IBOV 4 Health Medical services—hospital, analysis and diagnostics
RAIADROGASIL IBOV 4 Health Trade and distribution
SABESP IBOV 4 Public utility Water and sanitation
TAESA IBOV 4 Public utility Electric energy
ULTRAPAR IBOV 4 Oil, gas and biofuels Oil, gas and biofuels
VALE R DOCE IBOV 4 Basic materials Mining
SMILES IBOV 5 Cyclic consumption Diversified

Source: Produced by the authors (2019).

Ibovespa indexes and future research should include companies market-based measures of financial performance. Also, the results
from other indexes. The time period analyzed was 5 years and a obtained are limited to Brazil and thus international comparisons
larger period could be considered in future studies. Only financial are suggested, given differences in the markets, legal systems, and
measures are considered and it would be of interest to include cultures of different countries.
974
ACKNOWLEDGEMEN TS
This study was conducted by the Centre for Sustainable Develop-
ment (Greens), from the University of Southern Santa Catarina
(Unisul), in the context of the project BRIDGE—Building Resilience
in a Dynamic Global Economy: Complexity across scales in the Bra-
zilian Food-Water-Energy Nexus; funded by the Newton Fund, Fun-
daç~ao de Amparo à Pesquisa e Inovaç~
ao do Estado de Santa
Catarina, National Council for Scientific and Technological Develop-
ment (CNPq), Coordination for the Improvement of Higher Educa-
tion Personnel (CAPES), and the Research Councils United
Kingdom (RCUK).
ORCID
José Baltazar Salgueirinho Osório de Andrade Guerra https://orcid.
org/0000-0002-6709-406X
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How to cite this article: de Castro Sobrosa Neto R, de
Lima CRM, Bazil DG, de Oliveira Veras M, de Andrade
Guerra JBSO. Sustainable development and corporate
financial performance: A study based on the Brazilian
Corporate Sustainability Index (ISE). Sustainable Development.
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