Low carbon investing products are typically built on the assumption that green stocks produce positive alpha. Economic theory contradicts this assumption: all else being equal, green firms should earn lower returns than brown firms because they provide non-pecuniary benefits and risk-hedging benefits to investors. This webinar analyses how low carbon strategies can be mistaken for alpha and what the consequences are for investors.
Overview
Low carbon investing products are typically built on the assumption that green stocks produce positive alpha. Economic theory contradicts this assumption: all else being equal, green firms should earn lower returns than brown firms because they provide non-pecuniary benefits and risk-hedging benefits to investors. The empirical literature does not support the claim of positive alpha for low emission firms either.
Our research results suggest that using low carbon strategies as a source of alpha is costly to investors. This does not imply that investors cannot benefit from low carbon investing. Investors should analyse whether low carbon strategies can help them hedge climate risks or make a positive impact on corporate behaviour.
This webinar analyses how low carbon strategies can be mistaken for alpha and what the consequences are for investors.
Hosts
Felix Goltz, PhD, is Research Director at Scientific Beta. He has been with Scientific Beta since inception. He carries out research in empirical finance and asset allocation, with a focus on alternative investments and indexing strategies. His work has appeared in various international academic and practitioner journals and handbooks, including the Journal of Portfolio Management, the Financial Analysts Journal, the Journal of Index Investing, the Journal of Investment Management and the Handbook of Finance (Wiley). He obtained an MSc and a PhD in finance from the University of Nice Sophia-Antipolis after studying economics and business administration at the University of Bayreuth and EDHEC Business School.
Mikheil Esakia is a quantitative research analyst at Scientific Beta. He does research in empirical finance, with a focus on the relation of macro-economy and equity markets, portfolio construction, and liquidity of systematic equity strategies. He has co-authored various articles published in practitioner journals and magazines. Prior to joining Scientific Beta, he worked as an operational risk analyst at Liberty Bank, Georgia. He obtained a master’s degree in Finance from EDHEC Business School after studying business administration at Free University of Tbilisi.
Date/Time:
Tuesday 9 November, 2021 (choice of two different sessions):