The integration of environmental, social and governance criteria in portfolio optimization: An empirical analysis

Guido Abate, Ignazio Basile and Pierpaolo Ferrari

Corporate Social Responsibility and Environmental Management, 2024, vol. 31, issue 3, 2054-2065

Abstract: The increasing interest of investors in environmental, social, and governance (ESG) issues has prompted asset managers to develop new approaches to strategic asset allocation that can effectively integrate ESG factors into the optimization process. This study reviews the main techniques of the most recent ESG‐efficient portfolio optimization models. Furthermore, this study conducts an empirical investigation to identify the impact of ESG constraints on mean–variance efficient allocations, and extends existing approaches by incorporating a downside risk framework. Our findings reveal that social and combined ESG ratings mitigate the negative skewness of portfolio returns, and that ESG rating, environmental rating, social rating, and combined ESG rating allow the sustainable investor to incur lower transaction costs.

Date: 2024
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

Downloads: (external link)
https://doi.org/10.1002/csr.2682

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:wly:corsem:v:31:y:2024:i:3:p:2054-2065

Access Statistics for this article

More articles in Corporate Social Responsibility and Environmental Management from John Wiley & Sons
Bibliographic data for series maintained by Wiley Content Delivery ().