Towards sustainable portfolios: a multi-criteria optimization approach integrating Refinitiv ESG scores

Purpose As sustainable investing becomes increasingly central to global financial markets, integrating environmental, social, and governance (ESG) criteria into portfolio construction remains a critical challenge for both researchers and practitioners. This study develops and empirically validates a novel tri-objective portfolio optimization framework that simultaneously incorporates financial return, risk management and ESG performance, demonstrating how multi-criteria optimization can effectively balance profitability, volatility and sustainability considerations within a unified decision-making structure. Design/methodology/approach A robust tri-objective optimization model combining Pareto efficiency and weighted goal programming is proposed to identify efficient portfolios reflecting trade-offs among return, risk, and ESG performance. The model is applied to standardized ESG scores from Refinitiv Asset4 for 100 international firms over the period 2018–2023. Controlled random portfolio simulations in R generate Pareto-optimal solutions, enabling systematic analysis of the interactions between financial and sustainability objectives. Findings The results indicate that ESG-prioritized portfolios achieve superior sustainability performance with only a marginal reduction in expected financial returns compared to return-focused portfolios. Balanced portfolios offer an effective compromise, sustaining moderate returns, controlled risk and strong ESG outcomes. Furthermore, ESG integration appears to reduce portfolio volatility, suggesting a stabilizing effect on overall investment performance. Originality/value The proposed framework provides investors, portfolio managers, and regulators with a quantitative decision-support tool to reconcile profitability, risk control, and sustainability objectives. By operationalizing ESG integration within a rigorous multi-criteria optimization setting, the study demonstrates that responsible investing can be systematically implemented without materially compromising financial performance, thereby offering both methodological innovation and actionable insights for sustainable finance theory and practice.