EURO 2025 Leeds
Abstract Submission

2650. Improving portfolio optimization with ESG disagreement information.

Invited abstract in session TD-7: Quantitative methods for systemic and climate risk, stream Risk Management in Commodities and Financial Markets .

Tuesday, 14:30-16:00
Room: Clarendon GR.01

Authors (first author is the speaker)

1. Marco Bonomelli
Management, Economics and Quantitative Methods, University of Bergamo

Abstract

ESG scores are becoming central for integrating sustainability into portfolio selection and investment strategies. Companies with stronger sustainability efforts are believed to be more resilient to ESG-related risks. For this reason, from a theoretical point of view, portfolios with higher sustainability scores should offer greater stability during periods of market volatility and uncertainty.
However, ESG scores for publicly traded companies are issued by multiple providers, and each of them adopts different methodologies and data sources. This results in discrepancies among scores. However, as companies improve reporting practices and adopt best sustainability standards, such as reducing emissions and adopting specific 'green' policy, their scores should move and converge at higher levels over time.
This study examines the link between ESG scores alignment and portfolio performance, focusing on two aspects: score disagreements and the effect of new ESG updates. In our study we aim to assess whether assets with high average score and low disagreement from ESG data contribute to better portfolio performance. These assets, considered “mature” in terms of sustainability, may lead to more stable investment strategies and high long-term returns.

Keywords

Status: accepted

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