How do investor preferences on ESG score influence portfolio management? A Markov model for simulating risk-return expectations

IF 4.5 3区管理学 Q1 OPERATIONS RESEARCH & MANAGEMENT SCIENCE

Annals of Operations Research Pub Date : 2025-07-01 DOI:10.1007/s10479-025-06716-3

Salvatore Vergine

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引用次数: 0

Abstract

In recent years, the increasing interest in financial policies in more sustainable economics and the consequent growth of public awareness about environmental, social, and governance (ESG) companies’ issues have modified investors’ portfolio management through ESG considerations in investment decisions. Consequently, the classic Markowitz mean-variance solution based on expected returns and standard deviation has been modified to consider ESG firm characteristics. This study investigates how investors’ ESG preferences influence portfolio choices and decision-making processes. We employ a discrete-time homogeneous Markov model to analyze ESG rating migration patterns, simulate possible configurations of the efficient frontier in portfolios aligned with sustainable preferences, and optimize portfolio asset weights complying with ESG portfolio performance over a time period. The obtained results provide a means of assessing the impact of the investor’s propensity toward sustainability over time on portfolio profitability. This approach provides insights into how ESG considerations may reshape portfolio performance over time, fostering more informed and ethically guided financial decisions.

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投资者对ESG评分的偏好如何影响投资组合管理？模拟风险收益预期的马尔可夫模型

近年来，人们对更具可持续性经济的金融政策越来越感兴趣，公众对环境、社会和治理（ESG）公司问题的认识也随之提高，这使得投资者在投资决策中考虑ESG因素，从而改变了他们的投资组合管理。因此，基于预期收益和标准差的经典马科维茨均值-方差解决方案已被修改，以考虑ESG公司的特征。本研究探讨投资者的ESG偏好如何影响投资组合选择和决策过程。我们采用离散时间齐次马尔可夫模型来分析ESG评级迁移模式，模拟符合可持续偏好的投资组合有效前沿的可能配置，并优化符合一段时间内ESG投资组合绩效的投资组合资产权重。所获得的结果提供了一种评估投资者的可持续性倾向对投资组合盈利能力的影响的方法。这种方法可以深入了解ESG因素如何随着时间的推移重塑投资组合的表现，从而促进更明智、更有道德指导的财务决策。

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来源期刊

Annals of Operations Research 管理科学-运筹学与管理科学

CiteScore

7.90

自引率

16.70%

发文量

596

审稿时长

8.4 months

期刊介绍： The Annals of Operations Research publishes peer-reviewed original articles dealing with key aspects of operations research, including theory, practice, and computation. The journal publishes full-length research articles, short notes, expositions and surveys, reports on computational studies, and case studies that present new and innovative practical applications. In addition to regular issues, the journal publishes periodic special volumes that focus on defined fields of operations research, ranging from the highly theoretical to the algorithmic and the applied. These volumes have one or more Guest Editors who are responsible for collecting the papers and overseeing the refereeing process.