Portfolio optimization with green assets

The aim of this work is to show the relationship between the economic and the environmental performance of a portfolio of European stocks. To do so we use the data from STOXX Europe 600 for the period 03/01/2007 30/12/2019 and the Environmental score (E score) as a proxy of the environmental performance of each stock. In the mean-CVaR space, we derive the efficient frontier maximising for each target E score the Mean-to-CVaR (MtC). We find a trade-off between portfolio performance and E score. We show that portfolios with higher E score have lower CVaR and lower expected return. Above a certain threshold E score only inefficient portfolios are obtained. This holds true for all sectors except Energy, where portfolios with higher E score show higher risk.