Objective - The integration of environmental, social, and governance (ESG) criteria into investment portfolios has emerged as a critical field of study, underscoring the interconnectedness between financial markets and global sustainability objectives.

Methodology/Technique - This systematic literature review analyzes 157 academic documents, focusing on ESG portfolio optimization methodologies and identifying emerging trends. Key methods reviewed include genetic algorithms, dynamic optimization models, multi-objective optimization frameworks, and machine learning techniques.

Findings - Despite considerable advancements, gaps remain, such as the need for broader application across diverse markets and asset classes, improved risk-return assessments, and standardized ESG data reporting. Future research should also investigate the role of central banks and regulators in fostering sustainable finance.

Novelty - By addressing these gaps, stakeholders can better align investment practices with sustainability goals, contributing to a more resilient and inclusive global economy.

Type of Paper - Review

Keywords: Sustainable Investment, Sustainable Finance, ESG Portfolio Performance, ESG Risk Management, ESG Portfolio Optimization

JEL Classification: G11, Q56, G28, G32

URI: http://gatrenterprise.com/GATRJournals/AFR/vol9.2_2.html

DOI: https://doi.org/10.35609/afr.2024.9.2(2)

Pages 65 – 73