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Portfolio Management with News-Based Sustainability Scores

In: SUSTAINABLE INVESTING Problems and Solutions

Author

Listed:
  • Ron Große
  • Viet Hoang Le
  • Fei Liu
  • Hans-Jörg von Mettenheim

Abstract

In this chapter, we present a novel approach to produce Environmental, Social, and Governance (ESG) and Sustainable Development Goal (SDG) scores based on near-real-time news. Through the application of Natural Language Processing (NLP) techniques, we extract the relevant entities, topics, and likely effects of the news. The individual information is aggregated into scores on a regular time grid. Based on the scores, we build topic-oriented portfolios and compare them to a benchmark. The data have been provided in the AiData.green database that was co-developed by the authors of this chapter. In our studies, we cover mostly European and US markets. We find that substantial risk-adjusted outperformance of portfolios can be achieved by taking sustainability topics into account.

Suggested Citation

  • Ron Große & Viet Hoang Le & Fei Liu & Hans-Jörg von Mettenheim, 2024. "Portfolio Management with News-Based Sustainability Scores," World Scientific Book Chapters, in: Anatoly B Schmidt (ed.), SUSTAINABLE INVESTING Problems and Solutions, chapter 13, pages 337-374, World Scientific Publishing Co. Pte. Ltd..
    • Handle: RePEc:wsi:wschap:9789811297786_0013
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