Incorporate Corporate Social Responsibility In Multi-objective Portfolio

Since the reform and opening up, China’s economy has achieved rapid development, but also exposed a lack of coordination between economic and social development. Social responsibility Investment (SRI) as a newly investment philosophy aims to guide enterprises and investors concern about the economic benefits and the interests of the community. But the concept of CSR is difficult to quantify. In reality, how to quantify and make it as selection basis lacks theoretical and empirical basis.On the basis of previous theory and empirics, the study aims to quantify CSR and thus to build a portfolio model and work out the investment weights. This study selects a sample of enterprises according to the Global Standard Industrial Classification (GICS) and respectively in10one industry constitutes10sample data. Base on the framework of the International KLD social responsibility rating, this study quantify CSR of the samples. Then select three indicators including Product, Corporate Governance, Community Relations and together with the traditional Variance and Expected Returns which constitute the five objectives portfolio. Further this study use multi-objective genetic algorithm (MOGA) to solve the model. Finally, the effective set was projected onto the surfaces of Variance-Returns. According to the theory of "efficient frontier", this study select15investment points and make T-test with the Shanghai Composite Index, Shenzhen Component Index, CSI300, SSE50etc. from2010.1.8to2012.3.9of the weekly earnings data. Results show that income mean of CSR portfolio is60%higher than the market index over the same period. This is confirmed to some extent that concerned about social responsibility will generate revenue for investors in the equity investment process. This can also encourage enterprises to fulfill their social responsibility. This study helps lay an empirical foundation of SRI in China’s development.