Annals of Operations Research: Empirical analysis of the trade-offs among risk, return, and climate risk in multi-criteria portfolio optimization
This paper contains an empirical analysis that studies trade-offs among risk, return, and climate risk in asset management. Using a multi-criteria optimization approach to generate nondominated portfolios in a tri-criterion context, we document how it is possible in a portfolio to reduce climate risk substantially by allowing expected return to be reduced only slightly. The empirical tests conducted use the sample of stocks that were in the S &P 500 over the period 2001–2020. In demonstrating the versatility of our approach, six different linear measures of climate risk are employed.
Utz, S., & Steuer, R. E. (2025). Empirical analysis of the trade-offs among risk, return, and climate risk in multi-criteria portfolio optimization. Annals of Operations Research, 353(1), 53-76.