Details nur auf Englisch.
Sustainable investing, also known as ESG (environmental, social, and corporate governance) investing, is currently of intense interest in the investment world. We consider an economy with a risky and a risk-free asset. Utility is defined as the weighted sum of a prospect theory value function and an ESG score function. In addition, to greenness of the risky asset, the ESG score of risk-free asset is considered explicitly. We derive optimal investment strategies, which depend on the relative greenness of the risky to the risk-free asset. An extensive sensitivity analysis is performed that provides properties of investor's risk taking and the indirect utility (happiness) with respect to reference return, loss aversion, ESG-scores, and the weight of the ESG score function. We show that the investment in an asset increases if the corresponding asset becomes greener. If the ESG score function becomes more important, then investment into the greener asset increases. An increase in loss-aversion decreases investment into risky asset. Finally, we observe that investment into the risky asset is first decreasing and then increasing in the reference return, as often observed in pure prospect theory.
Presentations
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Annual Conference of the Austrian Economic Association (NOeG), Vienna, September 2024
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Final presentation of the project funded by OeNB Anniversary Fund, Institute for Advanced Studies (IHS), Vienna, June 2025
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Annual Conference of the Austrian Economic Association (NOeG), Krems, September 2025 (scheduled)