Scientific Beta

Benefits and Pensions Monitor: "A white paper from Scientific Beta questions the popular belief that ESG (environment, social, and governance) strategies generate outperformance. ‘Honey, I Shrunk the ESG Alpha: Risk-Adjusting ESG Portfolio Returns’ shows that the ESG alpha disappears when adjusting for industry and factor exposures. Most of the respondents to its survey agree that there is no sound evidence that ESG strategies offer any incremental value in terms of performance and that most of the performance is captured by style factors."

Benefits and Pensions Monitor 11/11/2021

"(...) A white paper from Scientific Beta questions the popular belief that ESG (environment, social, and governance) strategies generate outperformance. ‘Honey, I Shrunk the ESG Alpha: Risk-Adjusting ESG Portfolio Returns’ shows that the ESG alpha disappears when adjusting for industry and factor exposures. Most of the respondents to its survey agree that there is no sound evidence that ESG strategies offer any incremental value in terms of performance and that most of the performance is captured by style factors. Only 17 per cent of respondents believe that the finding of absence of outperformance is surprising. Dr Felix Goltz, co-author of the study and research director at Scientific Beta, says, the conclusion is clear ‒ “when using standard risk adjustments in performance measurement, widely cited findings on positive ESG alpha disappear. Irrespective of performance, however, a key driver of the adoption of ESG investing is that non-pecuniary and risk characteristics of their portfolios matter to investors.” He says rather than turning ESG investing in another hunting ground for alpha, asset managers should “perhaps take such non-pecuniary and risk objectives seriously as focusing on objectives other than alpha is a credible value proposition for ESG investing.” (...)"