Multi-Objective Portfolio Optimization Towards Sustainable Investments

Abstract

The process of financial portfolio optimization involves choosing the most suitable mix of assets to meet a particular investment goal. Conventional portfolio optimization primarily focuses on maximizing returns and minimizing risks while overlooking the importance of social responsibility or sustainability in financial investments. In this paper, we present a Python-based multi-objective portfolio optimization library for sustainable investments (MOPO-LSI). MOPO-LSI is able to take Environmental, Social and Governance (ESG) factors into consideration in financial portfolio, where investors' assets can be well allocated to mutual funds towards the ESG optimization along with their financial goals in the investment. MOPO-LSI is easy to be configured and used, and it is capable of production solutions in two scenarios – when client preferences are known or unknown. The developers can also easily customize the library to adapt it to their own financial objectives.