Approaches to ESG – integration in portfolio optimization using MOEAs. (English) Zbl 07927192
Cappanera, Paola (ed.) et al., Optimization and decision science: operations research, inclusion and equity. ODS, Florence, Italy, August 30 – september 2, 2022. Cham: Springer. AIRO Springer Ser. 9, 109-119 (2023).
Summary: Against a backdrop of growing collective awareness of sustainability, the financial sector plays a key role in aligning financial flows with a path towards sustainable development. In this research, we focus on the process of integrating environmental, social, and governance (ESG) criteria, which will lead to a better reorientation of investments towards socially and environmentally useful projects. With this aim, we approach the ESG-Integration problem in portfolio selection using a recently proposed evolutionary multiobjective optimization procedure called ev-MOGA. This new approach significantly improves over exact methods and allows a better assessment of financial and ESG criteria tradeoffs. As an application example, we compute the mean-variance-ESG non-dominated surface for ESG motivated investors who want to assess the tradeoffs among the three criteria.
For the entire collection see [Zbl 1530.90006].
For the entire collection see [Zbl 1530.90006].
MSC:
| 90Cxx | Mathematical programming |
References:
| [1] | Ballestero, E.; Bravo, M.; Perez-Gladish, B.; Arenas-Parra, M.; Pla-Santamaria, D., Socially responsible investment: a multicriteria approach to portfolio selection combining ethical and financial objectives, Eur. J. Oper. Res., 216, 2, 487-494 (2012) · doi:10.1016/j.ejor.2011.07.011 |
| [2] | Barroso, J.S.S., Araújo, E.A.: Socially responsible investments (SRIs)-mapping the research field. Soc. Responsib. J. (2020) |
| [3] | Bauer, R.; Koedijk, K.; Otten, R., International evidence on ethical mutual fund performance and investment style, J. Bank. Financ., 29, 7, 1751-1767 (2005) · doi:10.1016/j.jbankfin.2004.06.035 |
| [4] | Bilbao-Terol, A.; Arenas-Parra, M.; Cañal-Fernández, V., A fuzzy multi-objective approach for sustainable investments, Expert Syst. Appl., 39, 12, 10904-10915 (2012) · doi:10.1016/j.eswa.2012.03.034 |
| [5] | Bilbao-Terol, A.; Arenas-Parra, M.; Cañal-Fernández, V.; Bilbao-Terol, C., Multi-criteria decision making for choosing socially responsible investment within a behavioral portfolio theory framework: a new way of investing into a crisis environment, Ann. Oper. Res., 247, 2, 549-580 (2016) · Zbl 1406.91401 · doi:10.1007/s10479-015-1947-9 |
| [6] | Bilbao-Terol, A., Arenas-Parra, M., Cañal-Fernández, V., Obam-Eyang, P.N.: Multi-criteria analysis of the GRI sustainability reports: an application to socially responsible investment. J. Oper. Res. Soc. 1-26 (2017) |
| [7] | Bilbao-Terol, A., Jiménez-López, M., Arenas-Parra, M., Rodríguez-Uría, M.V.: Fuzzy multi-criteria support for sustainable and social responsible investments: the case of investors with loss aversion. In: The Mathematics of the Uncertain, pp. 555-564. Springer (2018) |
| [8] | Calvo, C.; Ivorra, C.; Liern, V., Fuzzy portfolio selection with non-financial goals: exploring the efficient frontier, Ann. Oper. Res., 245, 1-2, 31-46 (2016) · Zbl 1349.91241 · doi:10.1007/s10479-014-1561-2 |
| [9] | Charnes, A.; Cooper, WW, Goal programming and multiple objective optimizations: part 1, Eur. J. Oper. Res., 1, 1, 39-54 (1977) · Zbl 0375.90079 · doi:10.1016/S0377-2217(77)81007-2 |
| [10] | Dorfleitner, G.; Nguyen, M., A new approach for optimizing responsible investments dependently on the initial wealth, J. Asset Manag., 18, 2, 81-98 (2017) · doi:10.1057/s41260-016-0011-x |
| [11] | Dorfleitner, G.; Utz, S., Safety first portfolio choice based on financial and sustainability returns, Eur. J. Oper. Res., 221, 1, 155-164 (2012) · Zbl 1253.91165 · doi:10.1016/j.ejor.2012.02.034 |
| [12] | Drut, B., Sovereign bonds and socially responsible investment, J. Bus. Ethics, 92, 1, 131-145 (2010) · doi:10.1007/s10551-010-0638-3 |
| [13] | European Comission: Communication from the Commission to the European Parliament, the European Council, the Council, the European Central Bank, the European Economic and Social Committee and the Committee of the Regions. Action Plan: Financing Sustainable Growth, com (2018) 97 final edn. European Comission (2018) |
| [14] | Fabretti, A., Herzel, S.: Delegated portfolio management with socially responsible investment constraints. Eur. J. Financ. 18(3-4, SI), 293-309 (2012). doi:10.1080/1351847X.2011.579746 |
| [15] | Garcia, F., Gonzalez-Bueno, J., Oliver, J., Riley, N.: Selecting socially responsible portfolios: a fuzzy multicriteria approach. Sustainability 11(9) (2019). doi:10.3390/su11092496 |
| [16] | Garcia-Bernabeu, A.; Pla-Santamaria, D.; Bravo, M.; Perez-Gladish, B., The environmental protection as a selection criterion in socially responsible investments: a multicriteria approach, Econ. Agrar. Y Recur. Nat., 15, 1, 101-112 (2015) · doi:10.7201/earn.2015.01.06 |
| [17] | Garcia-Bernabeu, A., Salcedo, V.J., Hilario, A., Pla-Santamaria, D., Herrero, J.M.: Computing the mean-variance-sustainability nondominated surface by ev-MOGA. Complexity 2019 (2019). doi:10.1155/2019/6095712 |
| [18] | Gasser, SM; Rammerstorfer, M.; Weinmayer, K., Markowitz revisited: social portfolio engineering, Eur. J. Oper. Res., 258, 3, 1181-1190 (2017) · Zbl 1395.91404 · doi:10.1016/j.ejor.2016.10.043 |
| [19] | Gupta, P., Mehlawat, M.K., Inuiguchi, M., Chandra, S.: Ethicality considerations in multi-criteria fuzzy portfolio optimization. In: Fuzzy Portfolio Optimization: Advances in Hybrid Multi-Criteria Methodologies, Studies in Fuzziness and Soft Computing, vol. 316, pp. 255-281 (2014). doi:10.1007/978-3-642-54652-5_9 · Zbl 1302.91002 |
| [20] | Hallerbach, W.; Ning, H.; Soppe, A.; Spronk, J., A framework for managing a portfolio of socially responsible investments, Eur. J. Oper. Res., 153, 2, 517-529 (2004) · Zbl 1102.91323 · doi:10.1016/S0377-2217(03)00172-3 |
| [21] | Herrero, J.M.: Non-linear robust identification using evolutionary algorithms. Ph.D. thesis, Polytechnic University of Valencia (2006) |
| [22] | Herzel, S., Nicolosi, M., Starica, C.: The cost of sustainability in optimal portfolio decisions. Eur. J. Financ. 18(3-4, SI), 333-349 (2012). doi:10.1080/1351847X.2011.587521 |
| [23] | Hilario-Caballero, A.; Garcia-Bernabeu, A.; Salcedo, JV; Vercher, M., Tri-criterion model for constructing low-carbon mutual fund portfolios: a preference-based multi-objective genetic algorithm approach, Int. J. Environ. Res. Public Health, 17, 17, 6324 (2020) · doi:10.3390/ijerph17176324 |
| [24] | Laumanns, M.; Thiele, L.; Deb, K.; Zitzler, E., Combining convergence and diversity in evolutionary multiobjective optimization, Evol. Comput., 10, 3, 263-282 (2002) · doi:10.1162/106365602760234108 |
| [25] | Liagkouras, K., Metaxiotis, K., Tsihrintzis, G.: Incorporating environmental and social considerations into the portfolio optimization process. Ann. Oper. Res. doi:10.1007/s10479-020-03554-3 · Zbl 1501.91163 |
| [26] | Liern, V., Perez-Gladish, B., Mendez-Rodriguez, P.: Measuring social responsibility: a multicriteria approach. In: Zopounidis, C., Doumpos, M. (eds.) Multiple Criteria Decision Making: Applications in Management and Engineering, Multiple Criteria Decision Making, pp. 31-46 (2017). doi:10.1007/978-3-319-39292-9_2 |
| [27] | Markard, J., Rosenbloom, D.: A tale of two crises: Covid-19 and climate. Sustain.: Sci., Pract. Policy 16(1), 53-60 (2020) |
| [28] | Markowitz, H., Portfolio selection, J. Financ., 7, 1, 77-91 (1952) |
| [29] | Metaxiotis, K.; Liagkouras, K., Multiobjective evolutionary algorithms for portfolio management: a comprehensive literature review, Expert Syst. Appl., 39, 14, 11685-11698 (2012) · doi:10.1016/j.eswa.2012.04.053 |
| [30] | Pajares, A.; Blasco, FX; Herrero, JM; Salcedo, JV, Analyzing the nearly optimal solutions in a multi-objective optimization approach for the multivariable nonlinear identification of a PEM fuel cell cooling system, IEEE Access, 8, 114361-114377 (2020) · doi:10.1109/ACCESS.2020.3003741 |
| [31] | Susperregui, A.; Herrero, JM; Martinez, MI; Tapia-Otaegui, G.; Blasco, X., Multi-objective optimisation-based tuning of two second-order sliding-mode controller variants for DFIGs connected to non-ideal grid voltage, Energies, 12, 19, 3782 (2019) · doi:10.3390/en12193782 |
| [32] | Tsai, WH; Chou, WC; Hsu, W., The sustainability balanced scorecard as a framework for selecting socially responsible investment: an effective MCDM model, J. Oper. Res. Soc., 60, 10, 1396-1410 (2009) · doi:10.1057/jors.2008.91 |
| [33] | Utz, S.; Wimmer, M.; Hirschberger, M.; Steuer, RE, Tri-criterion inverse portfolio optimization with application to socially responsible mutual funds, Eur. J. Oper. Res., 234, 2, 491-498 (2014) · Zbl 1304.91210 · doi:10.1016/j.ejor.2013.07.024 |
This reference list is based on information provided by the publisher or from digital mathematics libraries. Its items are heuristically matched to zbMATH identifiers and may contain data conversion errors. In some cases that data have been complemented/enhanced by data from zbMATH Open. This attempts to reflect the references listed in the original paper as accurately as possible without claiming completeness or a perfect matching.
