This study proposes an ambiguity-aware framework for optimal asset allocation under uncertainty in firms’ ESG scores. Unlike traditional sustainable investing models that assume fully reliable ESG information, the proposed approach explicitly accounts for imperfect and noisy ESG signals by jointly integrating financial and sustainability criteria in a probabilistic setting. Portfolio weights are modeled as random variables, and low informativeness in ESG scores, measured through a signal-tonoise ratio, is penalized by reallocating assets toward financially robust investments when ESG information is weak or ambiguous. Empirical results show that the proposed framework promotes greater diversification and delivers enhanced robustness to parameter uncertainty, exhibiting lower sensitivity to model assumptions and more stable out-of-sample performance compared to standard expected-utility-based ESG portfolios.

Bongermino, G., Romagnoli, S., Rossi, P. (In stampa/Attività in corso). Sustainable investing under uncertainty: A dual-criterion probabilistic framework. DECISIONS IN ECONOMICS AND FINANCE, NA, N/A-N/A [10.1007/s10203-026-00593-6].

Sustainable investing under uncertainty: A dual-criterion probabilistic framework

Bongermino, Giorgio;Romagnoli, Silvia
;
In corso di stampa

Abstract

This study proposes an ambiguity-aware framework for optimal asset allocation under uncertainty in firms’ ESG scores. Unlike traditional sustainable investing models that assume fully reliable ESG information, the proposed approach explicitly accounts for imperfect and noisy ESG signals by jointly integrating financial and sustainability criteria in a probabilistic setting. Portfolio weights are modeled as random variables, and low informativeness in ESG scores, measured through a signal-tonoise ratio, is penalized by reallocating assets toward financially robust investments when ESG information is weak or ambiguous. Empirical results show that the proposed framework promotes greater diversification and delivers enhanced robustness to parameter uncertainty, exhibiting lower sensitivity to model assumptions and more stable out-of-sample performance compared to standard expected-utility-based ESG portfolios.
In corso di stampa
Bongermino, G., Romagnoli, S., Rossi, P. (In stampa/Attività in corso). Sustainable investing under uncertainty: A dual-criterion probabilistic framework. DECISIONS IN ECONOMICS AND FINANCE, NA, N/A-N/A [10.1007/s10203-026-00593-6].
Bongermino, Giorgio; Romagnoli, Silvia; Rossi, Pietro
File in questo prodotto:
Eventuali allegati, non sono esposti

I documenti in IRIS sono protetti da copyright e tutti i diritti sono riservati, salvo diversa indicazione.

Utilizza questo identificativo per citare o creare un link a questo documento: https://hdl.handle.net/11585/1074613
 Attenzione

Attenzione! I dati visualizzati non sono stati sottoposti a validazione da parte dell'ateneo

Citazioni
  • ???jsp.display-item.citation.pmc??? ND
  • Scopus ND
  • ???jsp.display-item.citation.isi??? ND
  • OpenAlex ND
social impact