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Sustainable Investing and Asset Allocation at Global Scale

  • Satyajit BoseEmail author
  • Guo Dong
  • Anne Simpson
Chapter
Part of the Palgrave Studies in Impact Finance book series (SIF)

Abstract

We describe the narrative framework called modern portfolio theory, including mean-variance optimization, the capital asset pricing model, arbitrage pricing theory, and the efficient markets hypothesis, that serves as a foundation for asset allocation and performance attribution in the investment management industry. We evaluate its key assumptions and implications. We then examine the financial and social objectives of universal asset owners and their methods of achieving those goals. In practice, sustainable portfolio choice requires a consideration of a far wider set of systemic risk factors than is dreamt of in modern portfolio theory, solutions to the principal-agent problem in financial intermediation and investor efforts at addressing collective action problems.

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Copyright information

© The Author(s) 2019

Authors and Affiliations

  1. 1.Columbia UniversityNew YorkUSA
  2. 2.CalPERSSacramentoUSA

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