  This paper proposes an expected multivariate utility analysis for ESG
investors in which green stocks, brown stocks, and a market index are modeled
in a one-factor, CAPM-type structure. This setting allows investors to
accommodate their preferences for green investments according to proper risk
aversion levels. We find closed-form solutions for optimal allocations, wealth
and value functions. As by-products, we first demonstrate that investors do not
need to reduce their pecuniary satisfaction in order to increase green
investments. Secondly, we propose a parameterization to capture investors'
preferences for green assets over brown or market assets, independent of
performance. The paper uses the RepRisk Rating of U.S. stocks from 2010 to 2020
to select companies that are representative of various ESG ratings. Our
empirical analysis reveals drastic increases in wealth allocation toward
high-rated ESG stocks for ESG-sensitive investors; this holds even as the
overall level of pecuniary satisfaction is kept unchanged.
