3D Investing Shows Sustainability Gains Need Not Come at the Expense of Risk-Adjusted Returns

This white paper by Robeco’s quant research and sustainability team outlines a framework for integrating sustainability directly into portfolio optimization alongside risk and return.

• A 3D optimization approach jointly targets return, risk, and sustainability, avoiding the hidden costs of constraint-based ESG integration.

• Proprietary climate, biodiversity, and SDG metrics capture distinct, weakly correlated sustainability dimensions, enabling diversified impact.

• Empirical results show material sustainability improvements can be achieved with modest increases in tracking error.

How might this framework reshape portfolio construction as investor sustainability preferences continue to evolve?