Hector Rico-Perez, Mar Arenas-Parra and Raquel Quiroga-García
A Robo Advisor (RA) is a fully automated investment advisory service. Its development in recent years has been very relevant within the financial industry. Although most RAs…
Abstract
Purpose
A Robo Advisor (RA) is a fully automated investment advisory service. Its development in recent years has been very relevant within the financial industry. Although most RAs comply with most investment principles (diversification, cost efficiency, personalization and contextualization of investment opportunities to the current environment), their need for standardization reduces their ability to find portfolios that fit the investors’ constraints or needs. The main objective of this paper is to analyze the possibility of eliminating this shortcoming of the RA by including new types of financial instruments or generating different investment portfolios.
Design/methodology/approach
This study performs a bottleneck analysis of all activities related to the management of financial instruments to detect the most affected activities when incorporating new types of instruments. This study also presents a case study on including fixed-income bonds to increase RA personalization and proposes two types of investment portfolios to promote personalization.
Findings
The bottleneck analysis has allowed us to identify that “instrument data validation” and “order management” are the most affected activities if new types of instruments are incorporated. In addition, the liquidity level of financial instruments is a critical variable that must be integrated into an RA.
Originality/value
The results indicate the possibility of designing a new RA with a higher level of personalization. This study helps to understand the difficulties and opportunities when customizing an RA.
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Amelia Bilbao-Terol, Mar Arenas-Parra, Susana Alvarez-Otero and Verónica Cañal-Fernández
Corporate social responsibility (CSR) rating agencies have arisen with the aim of providing external and reliable information about business behaviour. The purpose of this paper…
Abstract
Purpose
Corporate social responsibility (CSR) rating agencies have arisen with the aim of providing external and reliable information about business behaviour. The purpose of this paper is to present a multi-criteria methodology for integrating CSR valuations with the financial performance of companies in a unique measure of global sustainability performance.
Design/methodology/approach
The authors present a hybrid TOPSIS methodology on transformed scores of both the CSR valuations and the financial ratios. The “attribute-specific evaluation” approach into Multi-attribute Prospect Theory (PT) has been applied and the Design of Experiments (DoE) is used with the TOPSIS value of the firm as the response variable.
Findings
The proposal has been applied to 118 companies evaluated by Vigeo and Covalence CSR agencies. The authors also have considered five financial ratios of the companies in order to assess their financial performance. Consistent aggregation for firms has been achieved. Relationships between the different rankings, both those of Vigeo and Covalence and the ones constructed in this research, have been analysed. All top 10 Global sustainable firms rank among the top 10 positions in at least one of the remaining rankings. The results show that Vigeo and Covalence provide different information about the CSR behaviour of the companies.
Research limitations/implications
Another interesting question is to study the discrepancies between Vigeo and Covalence, for example, in which areas there is the greatest divergence between the two agencies and what could be the reasons for this.
Practical implications
The results of this research could be of interest for both investors who want a global picture of companies in their selection process and stakeholders concerned with CSR issues who want to take advantage of different CSR ratings.
Originality/value
The application of PT softens the compensatory behaviour of the classical TOPSIS that may prove unsuitable for social evaluation. The DoE allows the aggregation of the weight sets from various decision markers. The combined methodology facilitates the scoring of new firms and the rank reversal problem can be mitigated with this methodology.
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Monica Singhania, Ibna Bhan and Gurmani Chadha
Sustainable investments (SI) represent a promising class of investments, combining financial returns with mitigating environmental challenges, achieving SDG goals and creating a…
Abstract
Purpose
Sustainable investments (SI) represent a promising class of investments, combining financial returns with mitigating environmental challenges, achieving SDG goals and creating a positive business impact. An enhanced global focus on climate change developments in the backdrop of COP26 and COP27, raised the need for comprehensive literature mapping, to understand the emerging themes and future research arenas in this field.
Design/methodology/approach
The authors apply a quali–quantitative approach of bibliometric methods coupled with content analysis, to review 1,022 articles obtained from the Web of Science (WoS) database for 1991–2023.
Findings
The results identify the leading authors and their collaborations, impactful journals and pioneering articles in sustainable investment literature. The authors also indicate seven major themes of SI to be financial performance; fiduciary duty; CSR; construction of ESG-based portfolios; sustainability assessment tools and mechanisms; investor behavior; and impact investing. Further, content analysis of literature from 2020 to 2023 highlights emerging research issues to be SDG financing via green bonds and social impact bonds; investor impact creation via shareholder engagement and field building strategies; and governance related determinants of firm-level sustainable investments. Finally, the authors discuss the research gaps across these themes and identify future research questions.
Originality/value
This paper crystallizes research themes in sustainable investment literature using a vast coverage of globally conducted studies published in reputed journals till date. The findings of this study coupled with future research questions provide a well-grounded foundation for new researchers to further explore the emerging dimensions of this field.
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Giovanni Landi and Mauro Sciarelli
This paper fits in a research field dealing with the impact of Corporate Ethics Assessment on Financial Performance. The authors argue how environmental, social and governance…
Abstract
Purpose
This paper fits in a research field dealing with the impact of Corporate Ethics Assessment on Financial Performance. The authors argue how environmental, social and governance (ESG) paradigm, meant to measure corporate social performance by rating issuance, can impact on abnormal returns of Italian firms listed on Financial Times Stock Exchange Milano Indice di Borsa (FTSE MIB) Index, developing a panel data analysis which runs from 2007 to 2015.
Design/methodology/approach
This study aims at exploring whether socially responsible investors outperform an excess market return on Italian Stock Exchange because of their investment behavior, testing statistically the relationship between the yearly ESG assessment issued by Standard Ethics Agency on FTSE MIB’s companies and their abnormal returns. To verify the impact of an ESG Rating on a company’s abnormal return, the authors developed a panel data analysis through a Fixed Effects Model. They measured abnormal returns via Fama–French approach, running a yearly Jensen’s Performance Index for each company under investigation.
Findings
The empirical results denote in Italy both a growing interest to corporate social responsibility (CSR) and sustainability by managers over the past decade, as well as an improving quality in ESG assessments because of a reliable corporate disclosure. Thus, despite investors have been applying ESG criteria in their stock – picking operations, the authors found a not positive and statistically significant impact in terms of market premium, when they have been undertaking a socially responsible investment (SRI).
Practical implications
The findings described above show that ethics is not yet a reliable fundraising tool for Italian-listed companies, despite SRIs having a positive growth rate over past decade. Investors seem to be not pricing CSR on Stock Exchange Market; therefore, listed companies cannot be rewarded with a premium price because of their highly stakeholder oriented behavior.
Originality/value
This paper explores, for the first time in Italy, when market extra-returns (if any) are related to corporate social performance and how managers leverage ethics to build capital added value.
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Wafa Boulagouas, Rachid Chaib and Mebarek Djebabra
Decoupling of pressures ranging from regulatory compliance and stakeholders expectations to business competitiveness and sustainability, companies need to align their…
Abstract
Purpose
Decoupling of pressures ranging from regulatory compliance and stakeholders expectations to business competitiveness and sustainability, companies need to align their environmental strategies with a broader consideration of these influences. This paper aims at developing a dynamic alignment model to enhance the environmental performance that considers the influential pressures based on a multi-criteria decision-making process.
Design/methodology/approach
Authors have proposed a dynamic model for the alignment of the environmental performance based on a hybrid multi-criteria decision-making approach combining the analytic hierarchy process (AHP) and Technique for Order Preference by Similarity to Ideal Solution (TOPSIS). This model considers contemporary strategic dynamism of the environmental performance and provides a methodology to assist companies prioritizing the environmental aspects based on the influential pressures and deciding on the enhancement pathways.
Findings
The proposed model based on a hybrid multi-criteria decision-making process allows prioritizing the environmental aspects considering the allocated weights to the alignment-triggered pressures and draw the way to develop different pathways to improve the alignment.
Practical implications
The proposed dynamic alignment model presents an instrument for the continuous alignment of the environmental performance and an effective management of changes and contributes to minimize gaps and divergences.
Originality/value
In this paper, the environmental performance has been approached through the contemporary strategic dynamism with the deployment of the multi-criteria decision-making techniques to yield an alignment framework for the environmental decision that combines the internal and external approaches for an effective and sustainable improvement of the environmental performance.