Eliciting ESG Preferences for Reinforcement Learning-Based Portfolio Optimization

Modern portfolio management increasingly demands a balance between traditional risk-adjusted returns and strict Environmental, Social, and Governance (ESG) mandates. Current Reinforcement Learning (RL) approaches typically optimize for a single ESG provider, neglecting the significant divergence in rating methodologies across the industry and the unintuitive nature of manually weighting conflicting objectives. This paper addresses these limitations by formulating ESG-aware portfolio optimization as a Multi-Objective Reinforcement Learning (MORL) problem that simultaneously incorporates ratings from three distinct ESG agencies. To bridge the gap between high-dimensional algorithmic trade-offs and human decision-making, we integrate a Preference Elicitation framework using Gaussian Processes. This system enables practitioners to infer their latent utility functions through intuitive pairwise comparisons of candidate portfolios based on their Sharpe ratios and aggregate ESG scores. We systematically evaluate our framework by employing Large Language Model (LLM) personas to simulate Portfolio Managers operating under varied regional contexts. Empirical results using historical market data reveal that regional backgrounds fundamentally shift the derived preference weights. For instance, European-based personas tend to prioritize ESG alignment over financial returns, while Texas-based personas favor risk-adjusted performance. This work offers a highly adaptable framework that successfully aligns multi-objective algorithmic trading with diverse, real-world human sustainability preferences.

Natural Language Processing Psychometrics

Natural Language Processing (NLP) models predicting mental health outcomes rarely specify what they measure: contextual knowledge, emotional content, or syntactic structure. NLP Psychometrics treats psychological prediction from text as a psychometric problem, linking scores to interpretable linguistic evidence and testing beyond the training text format. Nine LLMs, conditioned on controlled personas (cognitive digital shadows), completed psychometric questionnaires with textual explanations per item. We extracted emotional profiles and syntactic-semantic structure via textual forma mentis networks, combined with personality and sociodemographic variables in ablated random forest (RF) regressors, using SHAP to identify which features drove performance and in which direction. Full RF models explained up to 70.8% of variance in life satisfaction (SWLS), 55.7% in depression (PHQ-9), and, for DASS-21, 68.5% depression, 76.0% anxiety, 72.4% stress. Sociodemographics alone explained no meaningful variance in depression, anxiety, or stress, but did so for life satisfaction, where emotion features and income were the strongest predictors; neuroticism and network topology instead dominated depression and anxiety, reversing direction between them. Without retraining, RF models separated diaries from low- and high-score personas ($r$ up to 0.91) and, using only network/emotion features, classified clinical from control participants in real transcripts with up to 68% accuracy. These results show the promise and limits of synthetic data: LLM personas can expose model biases, recover patterns consistent with clinical rumination, and support psychometric prediction from human text without a matched questionnaire, but cannot substitute for human validation. NLP Psychometrics makes these distinctions explicit, measurable, and testable through interpretable AI and network/emotional features.