Sustainability (Jun 2019)

Macro Asset Allocation with Social Impact Investments

  • Massimo Biasin,
  • Roy Cerqueti,
  • Emanuela Giacomini,
  • Nicoletta Marinelli,
  • Anna Grazia Quaranta,
  • Luca Riccetti

DOI
https://doi.org/10.3390/su11113140
Journal volume & issue
Vol. 11, no. 11
p. 3140

Abstract

Read online

Using a unique dataset of 50 listed companies that meet the majority of the OECD requirements for social impact investments, we construct a social impact finance stock index and investigate how investing in social impact firms can contribute to portfolio risk-return performance. We build portfolios with three different methodologies (naïve, Markowitz mean-variance optimization, GARCH-copula model), and we study the performance in terms of returns, Sharpe ratio, utility, and forecast premium based on a constant relative risk aversion function for investors with different levels of risk aversion. Consistent with the idea that social impact investment can improve portfolio risk-return performance, the results of our macro asset allocation analysis show the importance of a large fraction of investor portfolios’ stake committed to social impact investments.

Keywords