Finding socially responsible portfolios close to conventional ones

An increasing number of investors are interested in sustainable, responsible and impact investment (SRI). However, there is a concern about the possible financial sacrifice associated to this kind of investments. The design of Decision Support Systems assisting socially responsible investors in their investment decisions can contribute to stimulate SRI. In this paper the financial content of a portfolio selection model is discussed in order to justify that it can be integrated into a Decision Support System designed for investors interested in socially responsible investment but initially reluctant to pay a financial cost in exchange for increasing the social responsibility of their portfolios. Investor's preferences are incorporated by means of adequate parameters of a utility function designed for handling subjective criteria in a reliable way. We show that these parameters can be determined by means of a non-technical questionnaire addressed to the investor, and that they can faithfully reflect his/her preferences about achieving an SRI performance as good as possible without going too far from the financial efficient frontier or even from an initial choice of an efficient pair of financial risk and return. The proposed procedure is illustrated by means of two examples. A first small example illustrates the decision making process followed in order to obtain the required parameters from the investor. The second example is intended to show how the proposed procedure can be applied to real world problems including financial constraints which are hard from a computational point of view.