The price of going green: Multi-objective optimization in the energy equity space

Federico Platania, Celina Toscano Hernandez, Imane El Ouadghiri and Jonathan Peillex ()
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Federico Platania: ISG - ISG International Business School [Paris]
Celina Toscano Hernandez: ISC Paris - Institut Supérieur du Commerce de Paris
Imane El Ouadghiri: PULV - Pôle Universitaire Léonard de Vinci
Jonathan Peillex: ICD International Business School Paris, LEFMI - Laboratoire d’Économie, Finance, Management et Innovation - UR UPJV 4286 - UPJV - Université de Picardie Jules Verne

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Abstract: This paper develops a three-objective portfolio optimization framework for the energy sector that simultaneously maximizes expected return, minimizes volatility, and improves environmental performance, measured by the Environmental Pillar Score. Using NSGA-III and rolling 60-month windows from 2010 to 2024, we analyze the U.S. and European equity markets and extract four representative strategies: Max-Return, Min-Volatility, Max-Environmental, and Balanced. Our findings show that trade-offs between financial performance and environmental impact are systematic and regionally specific. U.S. portfolios generally achieve higher returns with greater risk and lower environmental scores, while European portfolios offer stronger sustainability outcomes and lower volatility. The Balanced strategy proves to be a robust compromise among environmental scores, reduced risk, and moderate returns, offering a viable path for investors seeking alignment between financial and sustainability objectives. These results emphasize the value of multi-objective optimization in designing portfolios that align with both financial and sustainability goals.

Keywords: Multi-objective portfolio optimization; Environmental; Energy marker; NSGA-III (search for similar items in EconPapers)
Date: 2026-06
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Published in Energy Economics, 2026, 158, pp.109302. ⟨10.1016/j.eneco.2026.109302⟩

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Persistent link: https://EconPapers.repec.org/RePEc:hal:journl:hal-05579661

DOI: 10.1016/j.eneco.2026.109302

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