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Prioritizing the European Investment Sectors Based on Different Economic, Social, and Governance Factors Using a Fuzzy-MEREC-AROMAN Decision-Making Model

Author

Listed:
  • Andreea Larisa Olteanu (Burcă)

    (Accounting Doctoral School, Bucharest University of Economic Studies, 010374 Bucharest, Romania)

  • Alina Elena Ionașcu

    (Department of Finance and Accounting, Faculty of Economic Sciences, Ovidius University of Constanta, 900001 Constanța, Romania)

  • Sorinel Cosma

    (Department of Economics, Ovidius University of Constanta, 900001 Constanta, Romania)

  • Corina Aurora Barbu

    (Department of Business Administration, Ovidius University of Constanta, 900001 Constanta, Romania)

  • Alexandra Popa

    (Department of Business Administration, Ovidius University of Constanta, 900001 Constanta, Romania)

  • Corina Georgiana Cioroiu

    (Department of Economics, Ovidius University of Constanta, 900001 Constanta, Romania)

  • Shankha Shubhra Goswami

    (Department of Mechanical Engineering, Abacus Institute of Engineering and Management, Hooghly 712148, India)

Abstract

This study tackles the challenge of identifying optimal investment sectors amid the growing importance of environmental, social, and governance (ESG) factors, which are often complex and conflicting. This research aims to effectively evaluate and prioritize ten investment sectors based on twelve ESG criteria by integrating expert evaluations with two advanced multi-criteria decision-making (MCDM) methods. Three expert teams assessed each sector’s performance based on these criteria using fuzzy logic to manage uncertainties in expert judgments. The MEREC (MEthod based on the Removal Effects of Criteria) identified biodiversity and land use as the most critical factor, while transparency and disclosure was least significant. The AROMAN (Alternative Ranking Order Method Accounting for two-step Normalization) method was further used to rank the ten alternative sectors, with impact investing funds emerging as the top choice, followed by renewable energy and sustainable responsible investment funds. Conversely, ESG-compliant stocks, ESG-focused exchange-traded funds, and ESG-focused real estate investment trusts ranked the lowest. The study’s findings were validated through comparisons with other MCDM tools and sensitivity analysis, confirming the robustness of the proposed model. This research offers a valuable framework for investors looking to incorporate ESG considerations into their decision-making, promoting sustainable and responsible investing practices.

Suggested Citation

  • Andreea Larisa Olteanu (Burcă) & Alina Elena Ionașcu & Sorinel Cosma & Corina Aurora Barbu & Alexandra Popa & Corina Georgiana Cioroiu & Shankha Shubhra Goswami, 2024. "Prioritizing the European Investment Sectors Based on Different Economic, Social, and Governance Factors Using a Fuzzy-MEREC-AROMAN Decision-Making Model," Sustainability, MDPI, vol. 16(17), pages 1-46, September.
    • Handle: RePEc:gam:jsusta:v:16:y:2024:i:17:p:7790-:d:1473148
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    References listed on IDEAS

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    1. Emiel Duuren & Auke Plantinga & Bert Scholtens, 2016. "ESG Integration and the Investment Management Process: Fundamental Investing Reinvented," Journal of Business Ethics, Springer, vol. 138(3), pages 525-533, October.
    2. Xiaokai Meng & Ghulam Muhammad Shaikh, 2023. "Evaluating Environmental, Social, and Governance Criteria and Green Finance Investment Strategies Using Fuzzy AHP and Fuzzy WASPAS," Sustainability, MDPI, vol. 15(8), pages 1-19, April.
    3. Sakis Kotsantonis & Chris Pinney & George Serafeim, 2016. "ESG Integration in Investment Management: Myths and Realities," Journal of Applied Corporate Finance, Morgan Stanley, vol. 28(2), pages 10-16, June.
    4. Małgorzata Janicka & Artur Sajnóg, 2022. "The ESG Reporting of EU Public Companies—Does the Company’s Capitalisation Matter?," Sustainability, MDPI, vol. 14(7), pages 1-17, April.
    5. Akrum Helfaya & Rebecca Morris & Ahmed Aboud, 2023. "Investigating the Factors That Determine the ESG Disclosure Practices in Europe," Sustainability, MDPI, vol. 15(6), pages 1-23, March.
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