Analysis and selection of investment objects and optimisation of investment volumes

In their investment decisions commercial banks and private funds traditionally evaluate projects-based solely on their private returns, while often neglecting social and environmental concerns. More recently, however, climate change fears and rising inequality prompted calls for more environmentally and socially responsible governance of investment activities (ESG initiatives). For example, numerous pension funds and development agencies started shifting investment priorities away from fossil fuels toward renewable energy production. These efforts are hindered by the absence of well-developed techniques for evaluating investment projects in terms of their social and environmental impacts. This study investigates and outlines possible strategies for integrating social and environmental priorities into an investment selection process. We developed project selection and evaluation processes that a national development agency or a public fund could employ to enhance social effectiveness of its investment activities. More specifically, our general pre-investment evaluation procedure includes algorithms for determining optimal investment portfolios, taking in account both standard financial profitability criteria and ESG priorities.