Scientific Beta

Financial Investigator: "Most institutional funds and mandates that claim to have a positive impact on the climate are exposed to large and obvious greenwashing risks. That is the conclusion of recent research we conducted. There is a clear difference between doing good and feeling good."

Financial Investigator 09/03/2022

By Felix Goltz, Associate Researcher, EDHEC Business School, Member of the EDHEC-Scientific Beta ‘Advanced ESG and Climate Investing’ Research Chair, and Research Director, Scientific Beta

"(...) Most institutional funds and mandates that claim to have a positive impact on the climate are exposed to large and obvious greenwashing risks. That is the conclusion of recent research we conducted. There is a clear difference between doing good and feeling good. (...) Even though investors and managers communicate extensively on the use of climate data to construct their portfolios, these data represent at most 12% of the determinants of portfolio stock weights on average. The lack of consistency between the evolution of companies’ climate performance and their weights in green portfolios has negative consequences for the impact of investor engagement on these same companies. It is only by freeing climate investment from tracking error minimisation constraints and objectives that we can hope to have benchmarks that are consistent with climate alignment objectives. (...)".