| Issue |
SHS Web Conf.
Volume 218, 2025
2025 2nd International Conference on Development of Digital Economy (ICDDE 2025)
|
|
|---|---|---|
| Article Number | 02002 | |
| Number of page(s) | 9 | |
| Section | Finance Tech Advances: Impacts and Innovations | |
| DOI | https://doi.org/10.1051/shsconf/202521802002 | |
| Published online | 03 July 2025 | |
Portfolio Optimization under ESG Constraints: Markowitz Model vs. Index Model
Business, Economics and Law, The University of Queensland, Brisbane, QLD 4072, Australia
* Corresponding author: S4814074@uq.edu.au
This study addresses how to optimize portfolios under ESG constraints and short position constraints and explores the trade-off between sustainable investing and financial performance. This study is significant as it provides some new ideas and insights for improving sustainable finance by providing insights into how ESG factors affect portfolio construction and risk management to drive the development of sustainable finance. In this study, the Markowitz Model (MM) and Index Model (IM) are used to construct the optimal portfolio of 10 stocks in the US market, and the constraints of banning short selling and ESG score restrictions are added. The results show that MM is more effective in integrating ESG constraints, which can improve the portfolio ESG score and reduce the exposure to high carbon emission industries, and is more suitable for investors who prioritize sustainability, while IM is more suitable for investors who adopt passive investment strategy. The study highlights the importance of incorporating ESG factors into portfolio optimization, providing some valuable ideas for institutions and investors in balancing financial returns with sustainable practices.
© The Authors, published by EDP Sciences, 2025
This is an Open Access article distributed under the terms of the Creative Commons Attribution License 4.0, which permits unrestricted use, distribution, and reproduction in any medium, provided the original work is properly cited.
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