An Investing Method That Combined ESG Factor and Modern Portfolio Theory

Xinyi Pan

doi:10.54097/8rfg6t91

Authors

Xinyi Pan

DOI:

https://doi.org/10.54097/8rfg6t91

Keywords:

ESG; Modern Portfolio Theory; Investing Method; Risk-averse.

Abstract

Investors use diverse portfolio theories to guide their decisions. These days, many businesses and investors prioritise sustainable growth and profitability. To compute a portfolio and obtain the highest Sharpe Ratio, the author employed the MPT and Sharpe Ratio theories during the study process. This essay introduces the clear ESG criteria and standards in the first part, then proves that ESG is essential nowadays. Secondly, this essay presents the portfolio theory and methodology used during the research process, along with formulas and explanations. A sample and a detailed introduction to the ESG companies are also provided. Then, this essay presents the financial performance of each stock and portfolio. The specific calculating process of the portfolio is demonstrated, and the return and risk are exhibited. The findings of this study will give investors precise instructions on how to construct portfolios that maximise return per risk while satisfying ESG requirements.

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