How do investors value sustainability?
Loading...
Date
2022-11-30
Authors
Journal Title
Journal ISSN
Volume Title
Publisher
Alternative Title(s)
A utility-based preference optimization
Abstract
We investigate how an investor’s preference for sustainable assets in the portfolio varies for differing levels of risk aversion. Using a sample of 411 publicly listed firms in the S&P 500, we calculate financial and sustainability returns, on which the investor’s utility depends. We approximate the investor’s preference by the exponential and s-shaped utility function and optimize with regard to the sustainability preference. We find that with increasing levels of risk aversion, both minimum-variance and maximum Sharpe ratio type investors seek to incorporate sustainable assets in the portfolio.
Description
Table of contents
Keywords
ESG, Socially responsible investing, Expected utility theory, Portfolio theory
Subjects based on RSWK
Corporate Social Responsibility, Investitionsentscheidung, Nachhaltigkeit, Erwarteter Nutzen, Moderne Portfoliotheorie, Investitionsrisiko