Scientific Beta

Benefits and Pensions Monitor: "The low carbon factor is not a rewarded factor, says Scientific Beta. In a research paper, ‘When Greenness is Mistaken for Alpha: Pitfalls in Constructing Low Carbon Equity Portfolios,’ says analysis of the performance of the low carbon factor decreases it from 1.74 per cent to -0.32 per cent once exposures to the traditional rewarded equity factors are accounted for. Mistakenly using low carbon strategies as a source of alpha actually reduces portfolio performance for investors who have access to standard equity factors."

Benefits and Pensions Monitor 10/06/2021

"(...) The low carbon factor is not a rewarded factor, says Scientific Beta. In a research paper, ‘When Greenness is Mistaken for Alpha: Pitfalls in Constructing Low Carbon Equity Portfolios,’ says analysis of the performance of the low carbon factor decreases it from 1.74 per cent to -0.32 per cent once exposures to the traditional rewarded equity factors are accounted for. Mistakenly using low carbon strategies as a source of alpha actually reduces portfolio performance for investors who have access to standard equity factors. Constructing portfolios using low carbon scores like any other alpha score does not improve performance and leads to problems with concentration and investability. The costs borne by investors who build portfolios with a mistaken belief in a positive low carbon alpha are substantial. (...)"