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Financial Analytics: Science and Experience
 

Approaches to shaping portfolio strategies based on the socially responsible investing concept

Vol. 14, Iss. 4, DECEMBER 2021

Received: 12 August 2021

Received in revised form: 24 August 2021

Accepted: 10 September 2021

Available online: 15 November 2021

Subject Heading: FINANCIAL INSTRUMENTS

JEL Classification: G11, G17

Pages: 376–392

https://doi.org/10.24891/fa.14.4.376

Natal'ya A. KHUTOROVA Russian Presidential Academy of National Economy and Public Administration (RANEPA), Moscow, Russian Federation
khutorova-na@ranepa.ru

https://orcid.org/0000-0002-2123-4573

Nikita A. NAZIN AO FINAM, Moscow, Russian Federation
nazinnik1997@yandex.ru

https://orcid.org/0000-0001-9261-6694

Subject. The article considers formulation of portfolio strategies that rest on the concept of socially responsible investing.
Objectives. The purpose of this study is to analyze approaches to shaping the portfolio strategies based on the principle of socially responsible investing in the Russian stock market.
Methods. The study employs general scientific research methods; logical, comparative, and statistical analyses; graphical analysis techniques.
Results. We formulated and tested two strategies of socially responsible investing, i.e. Short ESG Ranking of Russian Companies and Long ESG Ranking of Russian Companies. The testing demonstrated below market return for the entire period. Thus, the strategies cannot be considered effective. To increase profitability, we proposed to optimize the strategies by including ESG-related debt instruments. Green bonds enabled to significantly increase profitability and outstrip OFZ yields. Despite the fact that according to the testing, the effect of both strategies turned out to be worse than IMOEX and MOEXBC indices, the strategies can be considered as relevant and acceptable for portfolio simulation.
Conclusions. Under the current conditions in the financial markets caused by serious shocks during the coronavirus pandemic and significant changes in the monetary policy of the Bank of Russia, the proposed strategies can be used by socially responsible institutional investors to shape investment policy and by individuals to manage funds in individual investment accounts. New bonds of Russian issuers in the sustainable development sector of the Moscow Exchange expanded the list of ESG instruments. They can serve as an effective optimization tool.

Keywords: investment strategy, ESG, socially responsible investing, securities market

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