Sustainable Multi-Manager Portfolio Optimization under Factor Model Uncertainty

Benoit Begoc, Christophe Boucher, Patrick Kouontchou () and Sessi Tokpavi
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Benoit Begoc: EconomiX - EconomiX - UPN - Université Paris Nanterre - CNRS - Centre National de la Recherche Scientifique
Christophe Boucher: EconomiX - EconomiX - UPN - Université Paris Nanterre - CNRS - Centre National de la Recherche Scientifique
Patrick Kouontchou: CEREFIGE - Centre Européen de Recherche en Economie Financière et Gestion des Entreprises - UL - Université de Lorraine
Sessi Tokpavi: LEO - Laboratoire d'Économie d'Orleans [2022-...] - UO - Université d'Orléans - UT - Université de Tours - UCA - Université Clermont Auvergne

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Abstract: Practical Applications Market Perspectives Top Picks Experts Submit an article More Sustainable Multi-Manager Portfolio Optimization under Factor Model Uncertainty Benoit BegocChristophe BoucherPatrick KouontchouSessi Tokpavi The Journal of Portfolio Management Factor-Based Investing 2026, 52 ( 3) 255 - 279 DOI: 10.3905/jpm.2025.1.790 To download content, you need to upgrade your trial to full subscription. Please contact your account manager to do this. Please log-in to or register for your personal account in order to save a bookmark. Log-in/register Please log-in to or register for your personal account in order to apply a label. Log-in/register You must be logged in as an individual apply an alert. Log-in/register The Journal of Portfolio Management Vol 52 Issue 3 The Journal of Portfolio Management Vol 52 Issue 3 Volume 52, Issue 3 Factor-Based Investing 2026 Download issue PDF To download content, you need to upgrade your trial to full subscription. Please contact your account manager to do this. lock Log in to access this content or Request a Demo Request a Demo Find topics, articles or authors... Article Authors Abstract Beyond environmental and ethical objectives, the performance of sustainable funds has been shown to vary significantly over time due to their exposure to identifiable investment factors such as growth and quality. The authors introduce a straightforward allocation method of sustainable funds that smooths performance over market cycles by capping unwanted style risks and boosting genuine outperformance (alpha). This is accomplished through an empirical strategy that accounts for uncertainty in factor models when estimating fund sensitivities and abnormal returns, combined with an optimization program that requires no tuning parameters and limits portfolio rebalancing. Empirical applications to a European universe—including Sustainable Finance Disclosure Regulation Articles 8 and 9 environmental, social, and governance (ESG) funds—demonstrate that the proposed active strategy outperforms many widely used passive ESG indexes, as well as competing active and smart beta approaches. These results also hold over an extended universe of both sustainable and nonsustainable funds, underscoring the robustness of the methodology.

Date: 2025-12-31
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Published in Journal of portfolio management, 2025, 52 (3), pp.255-279. ⟨10.3905/jpm.2025.1.790⟩

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Persistent link: https://EconPapers.repec.org/RePEc:hal:journl:hal-05505171

DOI: 10.3905/jpm.2025.1.790

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