Rational Socially Responsible Investment

Activity: Talk or presentationConference PresentationsResearch

Benjamin Tobias Peylo - Speaker

The concept of rationality on part of the investor can be regarded as a central foundation of modern finance. It is considered incompatible with the assessment of non-financial criteria, thus constituting an important criticism on socially responsible investment (SRI). Recently, the extant literature has provided both qualitative arguments for the expediency of additional investment criteria and the empirical proof of their increasing application in the reality of investment. These results foster the logic and, in an expanded meaning of the word, also the rationality of SRI. In contrast, the status quo of the SRI methodology and investment process is still based on the separation of qualitative and quantitative investment criteria and results in portfolios that are often not clearly defined regarding their respective levels of sustainability or risk-return efficiency. It is this lacking ability to capture portfolio effects and to implement a comprehensive investment strategy that actually marks the gap to a truly rational investment. To bridge the gap this paper integrates an optimization methodology combining quantitative financial criteria as well as qualitative sustainability criteria into a stringent investment framework. It enables the investor to define and implement his respective financial and SRI-related objectives in a balanced yet portable strategy and thus act as close to the concept of rationality as possible. For an empirical analysis, the framework is applied to the German Stock Market Index (DAX) for the period of 2003-2012. The findings confirm the concept with regard to both sustainability and performance-related investment objectives.
01.10.201203.10.2012

Event

5th PRI-CBERN Academic Network Conference 2012: Evolution of Responsible Investment: Navigating Complexity

01.10.1203.10.12

Toronto, Canada

Event: Conference

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