Comparative Analysis of Cryptocurrency Portfolio Strategies Integrating ESG Criteria Across Market Conditions and Time Periods

Abstract

Objective: This study investigates how Environmental, Social, and Governance (ESG) criteria can be integrated into cryptocurrency portfolio strategies, evaluating their performance across different market conditions and time periods. Theoretical Framework: This research is based on Modern Portfolio Theory (MPT) and principles of ESG investing. The study uses Markowitz's mean-variance optimization and the triple bottom line approach to understand the benefits of ESG integration in investment strategies. Method: The research involves a comparative analysis of various cryptocurrency portfolio strategies, including Buy-and-Hold, Simple Moving Average (SMA), MinVar, and MaxSharpe. Data was collected daily from October 1, 2016, to September 31, 2021. The study uses mean-variance analysis to assess risk-return profiles, incorporating ESG factors into the evaluation framework. Results and Discussion: The results show that the Buy-and-Hold strategy consistently yielded the highest returns across most portfolios. However, during volatile periods, strategies like MinVar and MaxSharpe provided better risk-adjusted returns. The discussion contextualizes these results within the theoretical framework, highlighting how ESG integration enhances risk management and aligns investments with sustainable development goals (SDGs). Research Implications: This research suggests that integrating ESG criteria into cryptocurrency portfolios can improve risk management and align investments with sustainability goals. These findings have practical implications for investment strategy development and sustainable finance practices. Originality/Value: This study offers a unique analysis of cryptocurrency portfolio strategies that incorporate ESG criteria. Its findings are relevant for influencing sustainable investment practices and optimizing cryptocurrency portfolios in line with ESG principles.