Abstract
This work presents an application of the modern portfolio theory (MPT). The United Nations 2030 Agenda of sustainable development goals establishes 17 sustainable development goals (SDGs) and 169 targets each associated with indicators, integrating the economic, social and environmental dimensions of sustainable development. This constitutes a complex system to be used by more than 150 countries having different priorities and levels of development. Concerning the 2030 Agenda Goals, MPT can help to define strategies to handle resource allocation problems. In economics, MPT appraises that when choosing a portfolio of assets looking for returns, some investors prefer fewer risks; others accept higher risks. To optimize the countries’ path to sustainability, the decision makers may distribute their resources, acting similarly to an investor. In this case, an SDG corresponds to a portfolio and the assets to the indicators associated with a given Goal. Constructing an efficient frontier of optimal portfolios of assets, MPT provides a method to obtain the maximum possible expected returns for a given level of risk and, besides, the risks and expected returns involved in a weighting choice. The present work restricts the analyses to the indicators of Goal 7 (affordable and clean energy), related to energy sustainability, for the five BRICS countries. This choice leads to an ensemble of situations that highlights the applicability of MPT to sustainability. Calculations are presented in detail for Brazil, and a general discussion is presented for the BRICS. The present approach considers the main features of a multi-criteria decision-making method, except the ranking of options by the decision makers.
This is a preview of subscription content, log in via an institution to check access.
Similar content being viewed by others
References
Asadabadi MR, Chang E, Saberi M (2019) Are MCDM methods useful? A critical review of analytic hierarchy process (AHP) and analytic network process (ANP). Cogent Eng 6(1):1623153. https://doi.org/10.1080/23311916.2019.1623153
Bragge J, Korhonen P, Wallenius H, Wallenius J (2010) Bibliometric analysis of multiple criteria decision making/multiattribute utility theory. Lect Notes Econ Math Syst 634:259–268. https://doi.org/10.1007/978-3-642-04045-0_22
C2ES (2019) Global emissions | center for climate and energy solutions. https://www.c2es.org/content/international-emissions/. Accessed 25 Nov 2019
Charouz J, Ramík J (2010) A multicriteria decision making at portfolio management. Econ Manag 2. http://www.ekonomie-management.cz/en/archiv/search/detail/709-a-multicriteria-decision-making-at-portfolio-management/
Chiu MC, Wong HY (2014) Mean-variance portfolio selection with correlation risk. J Comput Appl Math. https://doi.org/10.1016/j.cam.2013.12.050
Delmas M, Blass VD (2010) Measuring corporate environmental performance: the trade-offs of sustainability ratings. Bus Strategy Environ 19(4):245–260. https://doi.org/10.1002/bse.676
dos Santos SF, Brandi HS (2015) Model framework to construct a single aggregate sustainability indicator: an application to the biodiesel supply chain. Clean Technol Environ Policy 17(7):1963–1973. https://doi.org/10.1007/s10098-015-0919-8
dos Santos SF, Brandi HS (2016a) Application of the GUM approach to estimate uncertainty in measurements of sustainability systems. Clean Technol Environ Policy 18(2):493–505. https://doi.org/10.1007/s10098-015-1029-3
dos Santos SF, Brandi HS (2016b) Introducing measurement science into sustainability systems. Clean Technol Environ Policy 18(2):359–371. https://doi.org/10.1007/s10098-015-1044-4
dos Santos SF, Brandi HS (2017) Selecting portfolios of indicators for composite indexes—application of modern portfolio theory to competitiveness. Clean Technol Environ Policy 19(10):2443–2453
Fernández E, Figueira JR, Navarro J (2019) An interval extension of the outranking approach and its application to multiple-criteria ordinal classification. Omega 84(April):189–198. https://doi.org/10.1016/J.OMEGA.2018.05.003
Goodman LA, Arrow KJ (1953) Social choice and individual values. Am Sociol Rev. https://doi.org/10.2307/2087870
Hair FJ, Black CW, Badin NJ, Anderson ER, Tatham RL (2005) Multivariate data analysis. Pearson Education Inc, Hoboken
Hester PT, Velasquez M, Hester PT (2013) An analysis of multi-criteria decision making methods mission creep view project systemic thinking view project an analysis of multi-criteria decision making methods. Int J Oper Res 10 https://www.researchgate.net/publication/275960103
IEA (2017) World energy balances. https://www.iea.org/statistics/balances/. Accessed 5 Dec 2018
IEA, World Bank, IRENA, United Nations, WHO (2018) TRACKING SDG7: the energy progress report. Washington. https://trackingsdg7.esmap.org/data/files/download-documents/tracking_sdg7-the_energy_progress_report_full_report.pdf. Accessed 5 Dec 2018
Kumar A, Sah B, Singh AR, Deng Y, He X, Kumar P, Bansal RC (2017) A review of multi criteria decision making (MCDM) towards sustainable renewable energy development. Renew Sustain Energy Rev 69(March):596–609. https://doi.org/10.1016/J.RSER.2016.11.191
MacGregor BD, Nanthakumaran N (1992) The allocation to property in the multi-asset portfolio: the evidence and theory reconsidered. J Prop Res 9(1):5–32. https://doi.org/10.1080/09599919208724048
Mangram ME (2013) A simplified perspective of the Markovitz portfolio theory. Glob J Bus Res 7(1):12
Mardani A, Jusoh A, Nor KM, Khalifah Z, Zakwan N, Valipour A (2015) Multiple criteria decision-making techniques and their applications—a review of the literature from 2000 to 2014. Econ Res Ekonom Istraž 20(1):516–557. https://doi.org/10.1080/1331677X.2015.107513
Markowitz HM (1952) Portfolio selection. J Finance 7(60):77–91. https://doi.org/10.1111/j.1540-6261.1952.tb01525.x
Marling H, Emanuelsson S (2012) The Markowitz portfolio theory. Univ Gothemburg. http://www.math.chalmers.se/Stat/Grundutb/CTH/mve220/1213/gr1_HannesMarling_SaraEmanuelsson_MPT.pdf
Mazzola P, Gerace D (2015) A comparison between a dynamic and static approach to asset management using CAPM models on the Australian securities market. Australas Account Bus Finance J 9(2):43–58. https://doi.org/10.14453/aabfj.v9i2.4
Mulliner E, Malys N, Maliene V (2016) Comparative analysis of MCDM methods for the assessment of sustainable housing affordability. Omega 59(March):146–156. https://doi.org/10.1016/J.OMEGA.2015.05.013
Munda G, Nardo M (2009) Noncompensatory/nonlinear composite indicators for ranking countries: a defensible setting. Appl Econ 14(12):1513–1523. https://doi.org/10.1080/00036840601019364
Nardo M, Saisana M, Saltelli A, Tarantola S, Hoffman A, Giovannini E (2005) Handbook on constructing composite indicators. OECD Statistics Working Papers. https://doi.org/10.1787/533411815016
Nardo M, Saisana M, Saltelli A, Tarantola S, Hoffmann A, Giovannini E (2008) Handbook on constructing composite indicators: methodology and user guide. Methodology. vol 3. https://doi.org/10.1787/9789264043466-en
Navarro IJ, Yepes V, Martí JV (2019) A review of multicriteria assessment techniques applied to sustainable infrastructure design. Adv Civ Eng. https://doi.org/10.1155/2019/6134803
OECD (2008) Handbook on constructing composite indicators: methodology and user guide. OECD. https://doi.org/10.1787/9789264043466-en
Peylo BT (2012) A synthesis of modern portfolio theory < Br > and sustainable investment. J Invest 21(4):33–46. https://doi.org/10.3905/joi.2012.21.4.033
Pourjavad E, Shirouyehzad H (2011) A MCDM approach for prioritizing production lines: a case study. Int J Bus Manag. https://doi.org/10.5539/ijbm.v6n10p221
Rutkauskas AV, Miečinskiene A, Stasytyte V (2008) Investment decisions modelling along sustainable development concept on financial markets. Ukio Technologinis Ir Ekonominis Vystymas 14(3):417–427. https://doi.org/10.3846/1392-8619.2008.14.417-427
Siksnelyte I, Zavadskas EK, Streimikiene D, Sharma D (2018) An overview of multi-criteria decision-making methods in dealing with sustainable energy development issues. Energies. https://doi.org/10.3390/en11102754
United Nations (2018a) About the sustainable development goals. UN Environment. https://www.unenvironment.org/explore-topics/sustainable-development-goals/about-sustainable-development-goals. Accessed 5 Dec 2018
United Nations (2018b) E-handbook on SDG indicators. United Nations Statistics Division. https://unstats.un.org/wiki/display/SDGeHandbook/Goal+7. Accessed 5 Dec 2018
United Nations (2018c) Ensure access to affordable, reliable, sustainable and modern energy. SDG Site. Accessed 5 Dec 2018
United Nations (2018d) Ensure access to affordable, reliable, sustainable and modern energy. Issue Brief SDG 7. Accessed 5 Dec 2018
United Nations (2018e) Global SDG indicators database. SDG Indicators. https://unstats.un.org/sdgs/indicators/database/. Accessed 5 Dec 2018
United Nations (2018f) GOAL 7: affordable and clean energy. UN Environment. https://www.unenvironment.org/explore-topics/sustainable-development-goals/why-do-sustainable-development-goals-matter/goal-7. Accessed 5 Dec 2018
United Nations (2018g) SDG indicators metadata repository. Sustainable Development Goals. https://unstats.un.org/sdgs/metadata/?Text=&Goal=7&Target=. Accessed 5 Dec 2018
United Nations (2018h) The sustainable development agenda—united nations sustainable development. About. https://www.un.org/sustainabledevelopment/development-agenda/. Accessed 5 Dec 2018
WHO (2018) Global health observatory (GHO). Global Health Observatory (GHO) Data. https://www.who.int/gho/en/. Accessed 16 Dec 2018
Xidonas P, Mavrotas G, Zopounidis C, Psarras J (2011) IPSSIS: an integrated multicriteria decision support system for equity portfolio construction and selection. Eur J Oper Res 210(2):398–409. https://doi.org/10.1016/j.ejor.2010.08.028
Yi P, Li W, Zhang D (2019) Assessment of city sustainability using MCDM with interdependent criteria weight. Sustainability 11(6):1632. https://doi.org/10.3390/su11061632
Acknowledgements
HSB acknowledges the partial financial support of the Brazilian Agency CNPq.
Author information
Authors and Affiliations
Corresponding author
Additional information
Publisher's Note
Springer Nature remains neutral with regard to jurisdictional claims in published maps and institutional affiliations.
Rights and permissions
About this article
Cite this article
Brandi, H.S., dos Santos, S.F. Measuring sustainable development goals: an application of modern portfolio theory on sustainability systems. Clean Techn Environ Policy 22, 803–815 (2020). https://doi.org/10.1007/s10098-020-01822-1
Received:
Accepted:
Published:
Issue Date:
DOI: https://doi.org/10.1007/s10098-020-01822-1