Efficient Surfaces and Special Curves for ESG Integration

This paper presents a tri-criterion approach for controlling tradeoffs among risk, return, and ESG in investment decisions. The approach responds to investors whose strength of interest in ESG makes that a criterion along with mean and variance. For such investors, ideal solutions are not on the efficient frontier, but on the problem's tri-criterion efficient surface, in regions unfindable by bi-criterion techniques. To avoid forcing a tri-criterion problem into a bi-criterion solution framework, the completely new tri-criterion approach developed herein, using efficient surfaces and special (non-contour) curves, allows for the finding of unfindable regions and points of best ESG-integration within them.