Summary:
A green, sustainable, and low-carbon economy is not only an inevitable choice for China but also a powerful impetus for the global economy to move toward higher quality. The establishment of systems and mechanisms that encourage green investment and discourage polluting investment is the key to promoting the green transformation of China's economic development model, and also plays a vital role in implementing the Carbon Peak and Carbon Neutrality Goals. As an emerging green investment concept, environmental, social, and governance (ESG) investment has gradually gained the attention of investors who seek to align economic benefits with social values. Investors worldwide are adapting to the new low-carbon and green financial landscape, which offers substantial opportunities for ESG investment. Although there has been a considerable increase in green financing and the volume of green bonds issued, the supply of equity products that conform to the investment philosophy of ESG remains limited, providing investors with few choices. An important reason is that ESG investment poses a new challenge to traditional investment models and portfolio theory. As a crucial technological step in equity-based ESG investment, the research on portfolios based on ESG integration is still far from comprehensive. From the perspective of investors, the integration of the concept of ESG investment into traditional financial frameworks has become a research hotspot. The ESG integration strategy, as the fastest-growing ESG investment strategy, has gradually attracted attention in both practical and academic circles due to its quantitative approach. Research on ESG investment in China is still in its infancy, and there is limited research on the ESG investment portfolio model. However, with the continuous promotion of green finance policies and improvement of ESG information disclosure systems, the quality of available ESG data is gradually improving. Moreover, the demand for equity-type ESG investment is bound to continue to increase. Thus, designing an investment portfolio model based on the ESG integration strategy and analyzing changes in investors' behavior have become key issues that need to be addressed urgently, forming the focus of this research. From the perspective of investor utility, we establish a portfolio model based on the ESG integration strategy for institutional investors that considers budget constraints, industry constraints, and restrictions on short selling. The ESG penalty term is used in the model to reflect the investor's preference for the ESG level of individual stocks. In addition, we analyze changes in investor behavior under the condition of considering ESG preferences theoretically. When only budget constraints are factored into the model, we provide an explicit solution that illustrates the portfolio selection for ESG-oriented investors. Furthermore, after introducing ESG attributes to assets, we analyze the preference priorities of investors for different assets. In terms of parameter selection, we use the Lagrange method to establish the relationship between ESG levels and preference coefficients for portfolios. To validate the model and understand the sources of returns in ESG portfolio models, we use ESG ratings data from the Chinese stock market for the comparative analysis of the models. According to the four mainstream ESG rating methods available in the market, we construct high-medium-low ESG benchmark portfolios and then conduct a comparative analysis of different ESG portfolio models through numerical experiments. We find that (1) considering ESG utility can change investors' investment behavior and asset portfolio choices, with higher ESG-rated assets receiving greater allocation weights. (2) As ESG levels increase, the ESG-effective frontier surface shows a significant rightward shift. This indicates that investors who consider ESG utility are willing to sacrifice some returns to obtain compensation for ESG utility at the same risk level. (3) The investment portfolio model based on ESG integration effectively weighs risk, returns, and green sustainability, promoting high-quality development in the investment industry. (4) The presence of significant inconsistency in ESG ratings within China's stock market may introduce risks to active portfolio management. This papers helps to understand the impact of inconsistent ESG ratings on investment portfolios based on ESG integration and provides valuable insights for institutional investors to make the informed use of ESG rating information for active portfolio management, thereby indirectly supporting the green and low-carbon transformation of listed companies. We analyze portfolio models under ESG integration strategies and provide theoretical and empirical evidence for the micro-foundations of green finance research in China, with several policy implications. First, in the process of systematically promoting carbon peaking and carbon neutrality goals in China, it is necessary to emphasize the role of institutional investors in the transformation of corporate value growth when investing in ESG. Second, good ESG performance is not always necessarily associated with better investment returns. To achieve established goals at the ESG level, it is necessary to appropriately relinquish some benefits. Finally, institutional investors should focus on the issue of inconsistent ESG ratings, which have a significant impact on active portfolio management based on ESG and are directly related to the success or failure of investment strategies. This also reflects that the current construction of China's ESG investment ecology still needs to be improved. Regulatory authorities, rating agencies, and data service institutions need to promote further improvement in ESG information disclosure.
徐凤敏, 景奎, 李雪鹏. “双碳”目标背景下基于ESG整合的投资组合研究[J]. 金融研究, 2023, 518(8): 149-169.
XU Fengmin, JING Kui, LI Xuepeng. Research on Portfolio Selection Based on ESG Integration under the“Dual Carbon” Goal. Journal of Financial Research, 2023, 518(8): 149-169.
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