Skip to main content
Top

2023 | OriginalPaper | Chapter

Is Investment Portfolio Construction Sustainable in the Circular Economy Paradigm—The Case of ESG Investment?

Authors : Nikola Iliev, Marin Marinov, Valentin Milinov, Mariana Petrova

Published in: Circular Business Management in Sustainability

Publisher: Springer Nature Switzerland

Activate our intelligent search to find suitable subject content or patents.

search-config
loading …

Abstract

A circular economy is a “closed-loop” economic process, in which raw resources, products, and services keep their value after being processed, incorporated into production, and used by economic agents. Reiterating CE towards investing and portfolio management, one can wonder what could be their relationship. The study looks at investment caveats when facing CE’s aim of a “closed cycle”-based economy. The authors bridge the gap between the POV of investing and its interpretation by circular economists as hazardous, exploitable, and speculative, through the concept of ESG investment. The research team gives examples of existing ESG investments, crafted to CE values, like for example Circular Economy Funds, analyzed and assessed on both investment characteristics and embodiment of CE principles. Custom portfolios are constructed with attention to measuring performance against the market and Blackrock. Also, the team studies specific KPIs of BlackRock and custom portfolios in terms of CE embodiment. The findings are as follows: 1. BlackRock is easily beatable by using simple portfolio construction strategies like Naïve Diversification or P/E Weight Scoring. 2. Weight Scoring fails at delivering additional returns over naïve diversification. 3. Lagrangian optimal weight portfolio underperforms against BlackRock 4. The top 33% of stocks in BlackRock are enough to outperform the whole fund.

Dont have a licence yet? Then find out more about our products and how to get one now:

Springer Professional "Wirtschaft+Technik"

Online-Abonnement

Mit Springer Professional "Wirtschaft+Technik" erhalten Sie Zugriff auf:

  • über 102.000 Bücher
  • über 537 Zeitschriften

aus folgenden Fachgebieten:

  • Automobil + Motoren
  • Bauwesen + Immobilien
  • Business IT + Informatik
  • Elektrotechnik + Elektronik
  • Energie + Nachhaltigkeit
  • Finance + Banking
  • Management + Führung
  • Marketing + Vertrieb
  • Maschinenbau + Werkstoffe
  • Versicherung + Risiko

Jetzt Wissensvorsprung sichern!

Springer Professional "Technik"

Online-Abonnement

Mit Springer Professional "Technik" erhalten Sie Zugriff auf:

  • über 67.000 Bücher
  • über 390 Zeitschriften

aus folgenden Fachgebieten:

  • Automobil + Motoren
  • Bauwesen + Immobilien
  • Business IT + Informatik
  • Elektrotechnik + Elektronik
  • Energie + Nachhaltigkeit
  • Maschinenbau + Werkstoffe




 

Jetzt Wissensvorsprung sichern!

Springer Professional "Wirtschaft"

Online-Abonnement

Mit Springer Professional "Wirtschaft" erhalten Sie Zugriff auf:

  • über 67.000 Bücher
  • über 340 Zeitschriften

aus folgenden Fachgebieten:

  • Bauwesen + Immobilien
  • Business IT + Informatik
  • Finance + Banking
  • Management + Führung
  • Marketing + Vertrieb
  • Versicherung + Risiko




Jetzt Wissensvorsprung sichern!

Literature
9.
go back to reference Brealey, R.A., Myers, S.C., Allen, F., Mohanty, P.: Principles of corporate finance. Tata McGraw-Hill Education (2012) Brealey, R.A., Myers, S.C., Allen, F., Mohanty, P.: Principles of corporate finance. Tata McGraw-Hill Education (2012)
13.
go back to reference de Finetti B (1940) “Il problema dei pieni”, Giornale Istituto Italiano Attuari, 9, 1–88. (English translation by L. Barone available as “The problem of “Full-risk insurances”, Ch. 1 ‘The problem in a single accounting period’, Journal of Investment Management, 4, 19–43, 2006) de Finetti B (1940) “Il problema dei pieni”, Giornale Istituto Italiano Attuari, 9, 1–88. (English translation by L. Barone available as “The problem of “Full-risk insurances”, Ch. 1 ‘The problem in a single accounting period’, Journal of Investment Management, 4, 19–43, 2006)
16.
go back to reference Eaton, M.J., Yurek, S., Haider, Z., Martin, J., Johnson, F.A., Udell, B.J., Charkhgard, H., Kwon, C.: Spatial conservation planning under uncertainty: adapting to climate change risks using modern portfolio theory. Ecol. Appl. 29(7), 1–19 (2019). https://www.jstor.org/stable/26797128 Eaton, M.J., Yurek, S., Haider, Z., Martin, J., Johnson, F.A., Udell, B.J., Charkhgard, H., Kwon, C.: Spatial conservation planning under uncertainty: adapting to climate change risks using modern portfolio theory. Ecol. Appl. 29(7), 1–19 (2019). https://​www.​jstor.​org/​stable/​26797128
22.
go back to reference Folke, C., Österblom H., Jouffray, J., Lambin, E., Adger, W., Scheffer, M., Crona, B., Nyström, M., Levin, S., Carpenter, S.: Transnational corporations and the challenge of biosphere stewardship. Nat. Ecol. Evol. 3, 1396–1403 (2019). https://doi.org/10.1038/s41559-019-0978-z Folke, C., Österblom H., Jouffray, J., Lambin, E., Adger, W., Scheffer, M., Crona, B., Nyström, M., Levin, S., Carpenter, S.: Transnational corporations and the challenge of biosphere stewardship. Nat. Ecol. Evol. 3, 1396–1403 (2019). https://​doi.​org/​10.​1038/​s41559-019-0978-z
36.
41.
go back to reference Rasekhschaffe, K.C., Jones, R.C.: Machine learning for stock selection. Financ. Anal. J. 75(3), 70–88 (2019)CrossRef Rasekhschaffe, K.C., Jones, R.C.: Machine learning for stock selection. Financ. Anal. J. 75(3), 70–88 (2019)CrossRef
49.
go back to reference Wu, X., Ye, Q., Hong, H., Li, Y.: Stock selection model based on machine learning with the wisdom of experts and crowds. IEEE Intell. Syst. 35(2), 54–64 (2020)CrossRef Wu, X., Ye, Q., Hong, H., Li, Y.: Stock selection model based on machine learning with the wisdom of experts and crowds. IEEE Intell. Syst. 35(2), 54–64 (2020)CrossRef
54.
go back to reference Zara, C., Iannuzzi, M., Shyham, R.: The impact of Circular Economy on Public Equity in Europe. Understanding de-risking effect and risk-adjusted performance. In: Presented at the 19th International Conference on Credit Risk Valuation, 24–25 September 2020. Università di Venezia (2020) Zara, C., Iannuzzi, M., Shyham, R.: The impact of Circular Economy on Public Equity in Europe. Understanding de-risking effect and risk-adjusted performance. In: Presented at the 19th International Conference on Credit Risk Valuation, 24–25 September 2020. Università di Venezia (2020)
Metadata
Title
Is Investment Portfolio Construction Sustainable in the Circular Economy Paradigm—The Case of ESG Investment?
Authors
Nikola Iliev
Marin Marinov
Valentin Milinov
Mariana Petrova
Copyright Year
2023
DOI
https://doi.org/10.1007/978-3-031-23463-7_2