INCORPORATING ESG RISKS IN THE ASSET SELECTION PROCESS IN THE BRAZILIAN FIXED INCOME MARKET WITH MULTIPLE CRITERIA DECISION ANALYSIS

ABSTRACT ESG risks can no longer be ignored by portfolio managers when allocating financial resources in capital markets. However, ESG risk analysis remains a very technical subject, not easy for portfolio managers to incorporate in their daily routine. In this work, a multiple criteria decision app...

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Bibliographic Details
Published inPesquisa operacional Vol. 45
Main Author Duarte Júnior, Antonio Marcos
Format Journal Article
LanguageEnglish
Published 2025
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Summary:ABSTRACT ESG risks can no longer be ignored by portfolio managers when allocating financial resources in capital markets. However, ESG risk analysis remains a very technical subject, not easy for portfolio managers to incorporate in their daily routine. In this work, a multiple criteria decision approach is proposed to incorporate ESG risks in the asset selection process of portfolio managers. The proposal relies on ESG scores made public by an independent investment research company. Fuzzy mathematics is used to model the uncertainties present in the judgmental criteria. The Brazilian over-the-counter corporate fixed income market was chosen for the numerical examples, including fuzzy sensitivity analyses. The empirical evidence suggests that the consideration of ESG risks in the asset selection process can substantially alter the final list of securities when compared to an analysis based solely on expected return, market risk and credit risk.
ISSN:0101-7438
1678-5142
DOI:10.1590/0101-7438.2025.045.00290997