{"title":"Curvature and the mean-variance-ESG frontier: A new measure of risk-return-ESG trade-offs","authors":"Amine Mounir","doi":"10.1016/j.frl.2025.106765","DOIUrl":null,"url":null,"abstract":"This article develops a measure of portfolio return, variance, and ESG trade-offs, using the concept of curvature in differential geometry. This measure assesses the return reduction or risk expansion when seeking higher ESG scores for a given optimal portfolio. The application of curvature across four global markets indicates that (1) investors in the global minimum variance and the maximum Sharpe ratio portfolios can improve their ESG performance without a reduction in return or an expansion in risk; and (2) that investors with lower risk aversion have better opportunities to improve their portfolio's ESG score without considerable reductions in return compared to those with higher risk aversion.","PeriodicalId":12167,"journal":{"name":"Finance Research Letters","volume":"9 1","pages":""},"PeriodicalIF":7.4000,"publicationDate":"2025-01-06","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":"0","resultStr":null,"platform":"Semanticscholar","paperid":null,"PeriodicalName":"Finance Research Letters","FirstCategoryId":"96","ListUrlMain":"https://doi.org/10.1016/j.frl.2025.106765","RegionNum":2,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":null,"EPubDate":"","PubModel":"","JCR":"Q1","JCRName":"BUSINESS, FINANCE","Score":null,"Total":0}
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Abstract
This article develops a measure of portfolio return, variance, and ESG trade-offs, using the concept of curvature in differential geometry. This measure assesses the return reduction or risk expansion when seeking higher ESG scores for a given optimal portfolio. The application of curvature across four global markets indicates that (1) investors in the global minimum variance and the maximum Sharpe ratio portfolios can improve their ESG performance without a reduction in return or an expansion in risk; and (2) that investors with lower risk aversion have better opportunities to improve their portfolio's ESG score without considerable reductions in return compared to those with higher risk aversion.
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Finance Research Letters welcomes submissions across all areas of finance, aiming for rapid publication of significant new findings. The journal particularly encourages papers that provide insight into the replicability of established results, examine the cross-national applicability of previous findings, challenge existing methodologies, or demonstrate methodological contingencies.
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