The chapter presents a general model for constructing portfolios in which environmental, social, and governance (ESG) rating (or score) assessments are added alongside traditional risk and return objectives. The design of portfolios involves ESG scores as an additional objective. Then multiobjective optimisation models are employed to construct the corresponding efficient frontiers. Moreover, the authors introduce a technique for selecting the optimal portfolio according to the investor’s preferences toward the three objectives. Six investor profiles that would position themselves in their optimal portfolio, using variance and conditional value at risk (CVaR) as risk measures, are identified for experimental analysis. Starting with Refinitiv’s ESG ratings for 538 companies that are part of the STOXX Europe 600 Index from January 2016 to December 2021, the effectiveness of the proposed methodology is finally confirmed ex-post.
