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Integrating Financial and ESG Criteria in Investment Fund Ratings: A Fuzzy TOPSIS Approach
Antonio Terceño, Maria-Teresa Sorrosal-Forradellas, Laura Fabregat-Aibar and Maria-Glòria Barberà-Mariné
This paper focuses on the rising interest in the consideration of Environmental, Social, and Governance (ESG) criteria in investment decisions in the investment fund industry. It examines the existing discrepancy between financial and ESG ratings, highlighting the absence of a tool that effectively combines these two criteria into a single score. To address this gap, the use of TOPSIS, a multi-criteria decision model, is proposed to rank a variety of investment funds based on both financial and ESG criteria. This novel approach provides investors with a more comprehensive and flexible assessment, enabling them to make investment decisions from a sustainable investment perspective, considering both financial and non-financial factors.
Keywords: Ratings, financial criteria, ESG, morningstar, investment funds, TOPSIS