A bilevel approach to ESG multi-portfolio selection

Francesco Cesarone (), Lorenzo Lampariello (), Davide Merolla (), Jacopo Maria Ricci (), Simone Sagratella () and Valerio Giuseppe Sasso ()
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Francesco Cesarone: Roma Tre University
Lorenzo Lampariello: Roma Tre University
Davide Merolla: Sapienza University of Rome
Jacopo Maria Ricci: University of Bergamo
Simone Sagratella: Sapienza University of Rome
Valerio Giuseppe Sasso: Sapienza University of Rome

Computational Management Science, 2023, vol. 20, issue 1, No 24, 23 pages

Abstract: Abstract We rely on bilevel programming to model the problem of financial service providers that, in order to meet stakeholders’ demands and regulatory requirements, aim at incentivizing accounts’ holders to construct ESG-oriented portfolios so that the overall ESG impact of the firm is optimized, while the preferences of accounts’ owners are still satisfied. We analyze this complicated framework from a theoretical point of view and identify sufficient conditions that make it numerically tractable via a novel, specifically tailored algorithm, whose convergence properties are studied. Numerical testing on real-world data confirms the theoretical insights and shows that our model can be solved even when dealing with considerable problem sizes.

Keywords: Sustainable investment strategies; Multi-portfolio selection; ESG rating scores; Nash equilibrium problems; Bilevel optimization; 90C33; 90C30; 90C26; 65K15; 65K10; 91G10 (search for similar items in EconPapers)
Date: 2023
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Citations: View citations in EconPapers (3)

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DOI: 10.1007/s10287-023-00458-y

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