Optimization of sustainable portfolios considering behavioral biases: ESG risk management

Title

Optimization of sustainable portfolios considering behavioral biases: ESG risk management

Creator

Sadineni, Himasri

Description

As the role of sustainability is gaining importance among investors, they are more focused on adopting ESG principles into their portfolios. Despite this, bringing a balance between financial returns and sustainability objectives is frequently challenged by the behavioral biases affecting investor's decision- making. Biases like herd behavior, overconfidence, and loss aversion disrupt the investor's investment decisions, weakening the effectiveness of ESG strategies and negatively affecting portfolio returns. Therefore, it is essential to embed behavioral finance concepts into optimizing sustainable portfolios. This research explores the optimization of sustainable portfolios by addressing behavioral biases and the application of effective risk management techniques. The research identifies the significant cognitive biases that shape investor's behavior in the context of ESG investing. The research then investigates how these biases influence financial returns and ESG goals. 2026 by IGI Global Scientific Publishing. All rights reserved.

Source

Risk Management and Corporate Governance in Unpredictable Business Environments;pp.139-170

Date

01-01-2025

Publisher

IGI Global

Coverage

Sadineni H., Christ University, India

Rights

Restricted Access; Hardcopy may be available in the library

Relation

ISBN: 979-833730615-5; 979-833730613-1;

Format

online

Language

English

Type

Book chapter

Identifier

https://doi.org/10.4018/979-8-3373-0613-1.ch006

https://www.scopus.com/pages/publications/105013827197?origin=resultslist