Scientific Beta

ETF Stream: The report argued: “We suggest that when climate considerations represent less than 50% of the determinants of the weight of the stocks in a portfolio that is presented as promoting the transition to a low carbon or net-zero economy, then this portfolio should be considered to be at a significant risk of greenwashing and should not be permitted to claim that it is climate-friendly or aligned with net-zero ambitions.”"

ETF Stream 22/09/2021

"(...) Climate change-related ETFs overstate their virtues while doing little to incentivise emissions reduction in the global economy, according to research conducted by EDHEC Risk-Institute. (...) Looking at methodologies of different climate ETFs, the research said climate scores represent “at most” 12% of the determinants of constituent weightings within these products’ baskets. Meanwhile, market capitalisation “overwhelms” all other considerations, making up an estimated 88% of the factors that dictate stock weights with these ETFs. When combining climate issues with social and governance considerations in ESG ETFs, climate scores have an even smaller impact of just 6%. Overall, ‘E’, ‘S’ and ‘G’ scores have a combined 21% influence in mixed objective sustainable ETFs, though market cap remains the main driver with 73%. The report argued: “We suggest that when climate considerations represent less than 50% of the determinants of the weight of the stocks in a portfolio that is presented as promoting the transition to a low carbon or net-zero economy, then this portfolio should be considered to be at a significant risk of greenwashing and should not be permitted to claim that it is climate-friendly or aligned with net-zero ambitions.” (...)"