An equation with many variables: unhiding the relationship between sustainability and investment performance

Peylo, Benjamin Tobias; Schaltegger, Stefan

doi:10.1080/20430795.2013.837808

Cited by 20 publications

(14 citation statements)

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“…Instead of relying on a risk and return-oriented decision, they pursue several investment objectives simultaneously. Multi-dimensional optimizations have been applied to various criteria (e.g., portfolio size, transaction costs or aspects of taxation) [61]. The integration of corporate sustainability was proposed by Peylo [62] with a three-dimensional optimization framework.…”

Section: Integrating a Composite Sustainability Index Into Project Pomentioning

confidence: 99%

An Index to Measure Sustainability of a Business Project in the Construction Industry: Lithuanian Case

Dobrovolskienė

Tamošiūnienė

2015

Sustainability

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Abstract:The continuous growth of the world population, resource scarcity and the threat of climate change pose numerous environmental and social problems to the world. Therefore, much hope is put in the concept of sustainability. Companies are increasingly coming under strong global pressure to incorporate sustainability considerations into their project decision-making process. Business projects in the construction industry are among the most important, as this sector is one of the largest sectors and of major importance for the national economy and therefore has a huge impact on the environment and society. Thus, we have to explore ways to integrate sustainability into the management of those projects. This paper presents a composite sustainability index of a project (CSIP) which has been created following a review of existing literature and a pilot research study. A pilot research study was conducted in the Lithuanian construction industry between January 2015 and June 2015. Sustainability criteria were chosen and grouped on the basis of the analysis of the literature and different standards relating to sustainability applicable in the construction industry. A survey was used to select and rank the most important sustainability criteria. The index was constructed using multi-criteria decision-making methods. The results of the pilot study revealed that practitioners in the Lithuanian construction sector attach most importance to 15 sustainability criteria. A composite sustainability index of a project combining all these criteria may be useful in assessing the sustainability of a business project and making decisions regarding project portfolio selection and financial resource allocation. When addressing the issue of financial resource allocation in a project portfolio, the decision-maker could take into account not only the project's return and risk, but also its sustainability. The understanding of this study should enable companies to execute sustainable projects, which could make a contribution to the sustainable development of organizations and thereby increase their competitive advantage.

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Section: Integrating a Composite Sustainability Index Into Project Pomentioning

confidence: 99%

An Index to Measure Sustainability of a Business Project in the Construction Industry: Lithuanian Case

Dobrovolskienė

Tamošiūnienė

2015

Sustainability

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“…The entirely opposite results were obtained by Peylo and Schaltegger [68] and Gasser et al [54]. Peylo and Schaltegger [68] investigated whether and to what extent different levels of sustainability in stock portfolios impact investment return when other factors with known influence on investment performance are neutralized. Their findings showed a clear nonlinear relationship between sustainability and investment performance.…”

Section: Resultsmentioning

confidence: 80%

“…The existing literature examining the relationship between sustainability and a portfolio's financial return is undecided. Most studies compare the financial performance of socially responsible investment (SRI) portfolios with that of traditional portfolios [51,54,58,60,66,68,97]. Bilbao-Terol et al [60] showed that investor's attitudes towards risks affect the loss of return which is conditioned by choosing SRIs.…”

Section: Resultsmentioning

confidence: 99%

“…However, most recently, the additional criterion that seems to be receiving the most consideration is social responsibility [42,57]. Over the past few years numerous papers on social responsibility in portfolio selection have been published [51,52,54,[58][59][60][61][62][63][64][65][66][67][68][69]. One of the most recent works on this subject comes from Utz et al [52] who extended the Markowitz model by complementing it with a social responsibility objective, in addition to the portfolio return and variance, thereby making the traditional efficient frontier a surface.…”

Section: The Application Of Multi-criteria Decision-making Methods Inmentioning

confidence: 99%

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Sustainability-Oriented Financial Resource Allocation in a Project Portfolio through Multi-Criteria Decision-Making

Dobrovolskienė

Tamošiūnienė

2016

Sustainability

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Abstract:Modern portfolio theory attempts to maximize the expected return of a portfolio for a given level of portfolio risk, or equivalently minimize risk for a given level of expected return. The reality, however, shows that, when selecting projects to a portfolio and allocating resources in the portfolio, an increasing number of organizations take into account other aspects as well. As a result of the sole purpose (risk-return), it offers only a partial solution for a sustainable organization. Existing project portfolio selection and resource allocation methods and models do not consider sustainability. Therefore, the aim of this article is to develop a sustainability-oriented model of financial resource allocation in a project portfolio by integrating a composite sustainability index of a project into Markowitz's classical risk-return scheme (mean-variance model). The model was developed by applying multi-criteria decision-making methods. The practicability of the model was tested by an empirical study in a selected construction company. The proposed sustainability-oriented financial resource allocation model could be used in allocating financial resources in any type of business. The use of the model would not only help organisations to manage risk and achieve higher return but would also allow carrying out sustainable projects, thereby promoting greater environmental responsibility and giving more consideration to the wellbeing of future generations. Moreover, the model allows quantifying the impact of the integration of sustainability into financial resource allocation on the return of a portfolio.

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“…The debate on the superiority of green vis-a-vis sin investments has continued unabated [Statman, 2000, Schroder, 2004, Cui, 2007, L opez et al, 2007, Fabozzi et al, 2008, Renneboog et al, 2008, Hong and Kacperczyk, 2009, Kim and Venkatachalam, 2011, P erez-Gladish et al, 2013, Nofsinger and Varma, 2014, Peylo and Schaltegger, 2014, Leite and Cortez, 2015, Junkus and Berry, 2015, Trinks and Scholtens, 2017, Garvey et al, 2018, Duran-Santomil et al, 2019, Chang et al, 2019, Bolton and Kacperczyk, 2021, Rehman et al, 2021, Aswani et al, 2022, Blitz and Swinkels, 2021, P astor et al, 2022, Vymyatnina and Chernykh, 2022.…”

Section: Introductionmentioning

confidence: 99%

Sin versus green investment: A retrospective study on investor choice during pre- and through COVID regime

Bhatnagar

Bhullar

2023

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PurposeIncreasing focus on socially responsible investments (SRIs) and green projects in recent times, coupled with the arrival of COVID pandemic, are the main drivers of this study. The authors conduct a post-factum analysis of investor choice between sin and green investments before and through the COVID outbreak.Design/methodology/approachA passive investor is introduced who seeks maximum risk-adjusted return and/or investment variance. When presented an opportunity to add sin and/or green investments to her initial one-asset market-only investment position, she views and handles this issue as a portfolio problem (MPT). She estimates value-at-risk (VaR) and conditional-value-at-risk (CVaR) for portfolios to account for downside risk.FindingsGreen investments offer better overall risk-return optimization in spite of major inter-period differences in return-risk dynamics and substantial downside risk. Portfolios optimized for minimum variance perform just as well as the ones optimized for minimum downside risk. Return and risk have settled at higher levels since the onset of COVID, resulting in shifting the efficient frontier towards north-east in the return-risk space.Originality/valueThe study contributes to the literature in two ways: One, it examines investor choice between sin and green investments during a global health emergency and views this choice against the one made during normal times. Two, instead of using the principles of modern portfolio theory (MPT) explicitly for diversification, the study uses them to identify investor preference for one over the other investment type. This has not been widely done thus far.

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An equation with many variables: unhiding the relationship between sustainability and investment performance

Cited by 20 publications

References 65 publications

An Index to Measure Sustainability of a Business Project in the Construction Industry: Lithuanian Case

An Index to Measure Sustainability of a Business Project in the Construction Industry: Lithuanian Case

Sustainability-Oriented Financial Resource Allocation in a Project Portfolio through Multi-Criteria Decision-Making

Sin versus green investment: A retrospective study on investor choice during pre- and through COVID regime

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