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The Portfolio Costs of Sustainability and Three-Dimensional Trade-offs

In: SUSTAINABLE INVESTING Problems and Solutions

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  • Aston S. K. Chan

Abstract

This chapter presents a three-dimensional investment framework that combines factor investing techniques and factorized sustainability data to enable investors to quantitatively connect the sustainability dimension to the risk-and-return dimensions when constructing sustainable investment portfolios. We demonstrate how the portfolio costs of sustainability objectives, in terms of risk-and-return implications, can be modeled, followed by insights into how sustainability can be approached in risk budget terms with an examination of the potential degree of diversification available when multiple sustainability outcomes are targeted.

Suggested Citation

  • Aston S. K. Chan, 2024. "The Portfolio Costs of Sustainability and Three-Dimensional Trade-offs," World Scientific Book Chapters, in: Anatoly B Schmidt (ed.), SUSTAINABLE INVESTING Problems and Solutions, chapter 15, pages 403-419, World Scientific Publishing Co. Pte. Ltd..
    • Handle: RePEc:wsi:wschap:9789811297786_0015
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