Using TOPSIS for assessing the sustainability of government bond funds

• A procedure based on TOPSIS for evaluating the sustainability of the countries and the government bond funds has been introduced.
• The constructed evaluation is according to the most influential sustainability indexes.
• Assessment process takes into account experts׳ opinions and investor׳s interests.
• An additive -TOPSIS version to model the relative importance of the two criteria: closeness to the ideal point and remoteness to the anti-ideal point is presented.
• A Compromise Programming model for portfolio selection incorporating the sustainability of the portfolio is proposed.

The aim of this paper is to provide a methodology to assess the sustainability of investments in sovereign bonds using a technique for order preference by similarity to the ideal solution (TOPSIS). TOPSIS is a multi-criteria decision making technique used to rank a finite set of alternatives based on the minimization of distance from an ideal point and the maximization of distance from an anti-ideal point. The proposal presented herein can be a potential solution to the research works raised with respect to the difficulty of finding a unified measurement of the sustainability performance of investments in order to support investor decision-making process. The assessment presented is according to both the most frequently used sustainability indicators and the most interesting concerns for a particular investor. The Adjusted Net Saving (ANS), the Ecological Footprint (ECF), the Environmental Performance Index (EPI) and the Human Development Index (HDI) have been used in this paper. Our approach has been applied for evaluating government fixed income funds domiciled in three European countries: France, Italy and the Netherlands. In addition, the developed approach is incorporated in a compromise model for portfolio selection of government bond funds.