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How Do Investors Value Sustainability? A Utility-Based Preference Optimization

doi: 10.3390/su142315963
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.
- TU Dortmund University Germany
Environmental effects of industries and plants, expected utility theory, socially responsible investing, TJ807-830, TD194-195, Renewable energy sources, Environmental sciences, ESG, portfolio theory, GE1-350, ESG; socially responsible investing; expected utility theory; portfolio theory
Environmental effects of industries and plants, expected utility theory, socially responsible investing, TJ807-830, TD194-195, Renewable energy sources, Environmental sciences, ESG, portfolio theory, GE1-350, ESG; socially responsible investing; expected utility theory; portfolio theory
citations This is an alternative to the "Influence" indicator, which also reflects the overall/total impact of an article in the research community at large, based on the underlying citation network (diachronically).2 popularity This indicator reflects the "current" impact/attention (the "hype") of an article in the research community at large, based on the underlying citation network.Average influence This indicator reflects the overall/total impact of an article in the research community at large, based on the underlying citation network (diachronically).Average impulse This indicator reflects the initial momentum of an article directly after its publication, based on the underlying citation network.Average
