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Sustainable Investing and Asset Allocation at Global Scale

In: The Financial Ecosystem

Author

Listed:
  • Satyajit Bose

    (Columbia University)

  • Guo Dong

    (Columbia University)

  • Anne Simpson

    (CalPERS)

Abstract

We describe the narrative framework called modern portfolio theory, including mean-variance optimization, the capital asset pricing model, arbitrage pricing theory, and the efficient markets hypothesis, that serves as a foundation for asset allocation and performance attribution in the investment management industry. We evaluate its key assumptions and implications. We then examine the financial and social objectives of universal asset owners and their methods of achieving those goals. In practice, sustainable portfolio choice requires a consideration of a far wider set of systemic risk factors than is dreamt of in modern portfolio theory, solutions to the principal-agent problem in financial intermediation and investor efforts at addressing collective action problems.

Suggested Citation

  • Satyajit Bose & Guo Dong & Anne Simpson, 2019. "Sustainable Investing and Asset Allocation at Global Scale," Palgrave Studies in Impact Finance, in: The Financial Ecosystem, chapter 0, pages 225-251, Palgrave Macmillan.
    • Handle: RePEc:pal:psifcp:978-3-030-05624-7_10
    DOI: 10.1007/978-3-030-05624-7_10
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    Cited by:

    1. Torinelli, Viviane Helena & Silva Júnior, Antônio Francisco de Almeida da, 2021. "Environmental risk analysis (ERA) in the strategic asset allocation (SAA) of the international reserves (IRs) managed by central banks (CBs)," Latin American Journal of Central Banking (previously Monetaria), Elsevier, vol. 2(1).
    2. Viktor P. Ivanitsk & Larisa D. Petrenko, 2020. "Development of responsible investment within the concept of sustainable finance," Journal of New Economy, Ural State University of Economics, vol. 21(4), pages 63-78, December.

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