EconPapers    
Economics at your fingertips  
 

On ESG Portfolio Construction: A Multi-Objective Optimization Approach

Panos Xidonas (panos.xidonas@essca.fr) and Eric Essner (eric.essner@essca.eu)
Additional contact information
Panos Xidonas: ESSCA École de Management
Eric Essner: ESSCA École de Management

Computational Economics, 2024, vol. 63, issue 1, No 2, 45 pages

Abstract: Abstract Ahead of the new asset management era that calls for sustainable investments, the limitations of the traditional bi-objective mean–variance framework need to be resolved, to accommodate responsible investment objectives. In this paper, we propose a multi-objective minimax-based portfolio optimization model, attempting to simultaneously maximize the risk performance of the three typical ESG investment objectives. Also, apart from the systematic risk, the underlying formulation incorporates the controversy dimension, associated with each company participating in the optimal ESG portfolio. The validity of the proposed model is assessed through an extensive empirical testing on the EURO STOXX 50, the DAX, the CAC 40 and the DJIA, for a 5-year period. The results are considered as highly satisfactory, since the optimal ESG portfolios produced by the model provide consistently higher risk-adjusted returns, in comparison to their respective market benchmarks.

Keywords: Portfolio selection; ESG investing; Multi-objective optimization (search for similar items in EconPapers)
Date: 2024
References: Add references at CitEc
Citations: View citations in EconPapers (2)

Downloads: (external link)
http://link.springer.com/10.1007/s10614-022-10327-6 Abstract (text/html)
Access to the full text of the articles in this series is restricted.

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:kap:compec:v:63:y:2024:i:1:d:10.1007_s10614-022-10327-6

Ordering information: This journal article can be ordered from
http://www.springer. ... ry/journal/10614/PS2

DOI: 10.1007/s10614-022-10327-6

Access Statistics for this article

Computational Economics is currently edited by Hans Amman

More articles in Computational Economics from Springer, Society for Computational Economics Contact information at EDIRC.
Bibliographic data for series maintained by Sonal Shukla (sonal.shukla@springer.com) and Springer Nature Abstracting and Indexing (indexing@springernature.com).

 
Page updated 2024-12-28
Handle: RePEc:kap:compec:v:63:y:2024:i:1:d:10.1007_s10614-022-10327-6