When using mean-variance optimization (MVO) models, ESG-related issues most likely:

The manual notes:

“ESG integration can lead tonew investable universes(such as green bonds, social bonds, or renewable infrastructure) that behave differently from conventional asset classes. Hence, they canadd new sub-asset classesto traditional portfolio optimization frameworks.”

This aligns with optionC, as ESG factors may alter the efficient frontier by introducing differentiated risk/return characteristics.

????Reference:2021-Final-Book.pdf, Chapter 8, Portfolio Optimization and ESG Integration Section.