Gasser, Kremser, Rammerstorfer, and Weinmayer (2015)
Gasser, Stephan M., Thomas Kremser, Margare Rammerstorfer, and Karl Weinmayer. “Markowitz Revisited: Social Portfolio Engineering.” Working paper (Vienna University of Economics and Business - Institute for Finance, Banking and Insurance), 2015.
From the author's abstract: "[W]e revisit Markowitz’ Portfolio Selection Theory and propose a modification allowing to incorporate not only asset- specific return and risk but also a social responsibility measure into the investment decision making process. Applied in an a posteriori fashion, the model results in a three-dimensional capital allocation plane illustrating the complete set of feasible optimal portfolios. It enables investors to custom-tailor their asset allocations and in- corporate all personal preferences regarding return, risk and social responsibility. In an empirical analysis with a data set of over 6,000 international companies (including the complete universe of social responsibility-rated stocks), we find that investors opting to maximize the social impact of their investments do indeed face a statistically significant decrease in expected returns. However, the social responsibility/risk-optimal portfolio yields a statistically significant higher social responsibility rating than the return/risk-optimal portfolio."