A DECISION SUPPORT TOOL FOR SOCIALLY RESPONSIBLE CONSCIOUS INVESTORS

4 DECISION 252 SISTEMA DE INFORMACIÓN
8 DECISION 562 DIRECTIVES FOR THE PREPARATION
FINDINGS AND DECISION FILE NUMBER MC085 APPLICANT PRONGHORN

(200607) VOLUME 21 INLAND REVENUE BOARD OF REVIEW DECISIONS
(200708) VOLUME 22 INLAND REVENUE BOARD OF REVIEW DECISIONS
(201011) VOLUME 25 INLAND REVENUE BOARD OF REVIEW DECISIONS

A Decision Support Tool for Socially Responsible Conscious Investors

A Decision Support Tool for Socially Responsible Conscious Investors

Alexei Gaivoronski (Dep. of Industrial Economics and Technology Management, Norwegian University of Science and Technology)

Blanca Pérez-Gladish (Dep. of Quantitative Economics, University of Oviedo, Spain)

Paz Mendez (Dep. of Quantitative Economics, University of Oviedo, Spain)



Abstract

Socially Responsible Investing (SRI), also known as sustainable or ethical investing, corresponds to an investment practice that takes into account not only the usual return-risk criteria, but also other non-financial dimensions, namely in terms of environmental, social and governance concerns. Recently, given the causes of the 2008 financial crisis, these concerns became even more relevant. However, while a diverse set of models has been developed to support investment decision-making based on financial criteria, models including also socially responsible criteria are rather scarce. In this paper, we first discuss the diversity of environmental, social and governance aspects that can be taken into account when analyzing mutual funds, and try to contribute to fulfill this gap on the financial literature, suggesting a multicriteria value model to analyze and rank U.S. large cap equity mutual funds members of Social Investment Forum. Second, we propose a portfolio selection model on mutual funds taking into account both, financial and SRI criteria considering also individual targets of SRI conscious investor. Financial criteria include both, return and risk targets and are based on VaR related risk measures. In addition we compare efficient frontiers that correspond to different levels of investor’s SRI consciousness that again are based on the modern risk measures like VaR and CVaR. In this way we develop a set of decision support tools for SRI conscious investor. An empirical study is carried out on socially responsible portfolio selection with the application of VaR to 110 U.S. domiciled large cap equity mutual funds (conventional and socially responsible SIF members).

Key words: Capital Markets; Socially Responsible Investment; Governance (ESG) practices, Equity Mutual Funds, Multicriteria Decision Analysis; Morningstar Rating; Value-at-Risk, Conditional Value-at-Risk.



(201213) VOLUME 27 INLAND REVENUE BOARD OF REVIEW DECISIONS
(201314) VOLUME 28 INLAND REVENUE BOARD OF REVIEW DECISIONS
(201617) VOLUME 31 INLAND REVENUE BOARD OF REVIEW DECISIONS


Tags: conscious investors, sri conscious, responsible, support, investors, socially, decision, conscious