Prioritizing the European Investment Sectors Based on Different Economic, Social, and Governance Factors Using a Fuzzy-MEREC-AROMAN Decision-Making Model

• Published in: Sustainability 2024, Vol.16 (17)
• Main Authors: Olteanu (Burca), Andreea Larisa, Ionascu, Alina Elena, Cosma, Sorinel, Barbu, Corina Aurora, Popa, Alexandra, Cioroiu, Corina Georgiana, Goswami, Shankha Shubhra
• Format: Report
• Language: English
• Subjects: Corporate governance; Corporate social responsibility; Environmental aspects; Environmental sustainability; Fuzzy algorithms; Fuzzy logic; Fuzzy systems; Investments; Management; Multiple criteria decision making; Social aspects
• ISSN: 2071-1050; 2071-1050
• DOI: 10.3390/su16177790

This study tackles the challenge of identifying optimal investment sectors amid the growing importance of environmental, social, and governance (ESG) factors, which are often complex and conflicting. This research aims to effectively evaluate and prioritize ten investment sectors based on twelve ESG criteria by integrating expert evaluations with two advanced multi-criteria decision-making (MCDM) methods. Three expert teams assessed each sector’s performance based on these criteria using fuzzy logic to manage uncertainties in expert judgments. The MEREC (MEthod based on the Removal Effects of Criteria) identified biodiversity and land use as the most critical factor, while transparency and disclosure was least significant. The AROMAN (Alternative Ranking Order Method Accounting for two-step Normalization) method was further used to rank the ten alternative sectors, with impact investing funds emerging as the top choice, followed by renewable energy and sustainable responsible investment funds. Conversely, ESG-compliant stocks, ESG-focused exchange-traded funds, and ESG-focused real estate investment trusts ranked the lowest. The study’s findings were validated through comparisons with other MCDM tools and sensitivity analysis, confirming the robustness of the proposed model. This research offers a valuable framework for investors looking to incorporate ESG considerations into their decision-making, promoting sustainable and responsible investing practices.