Scientific Beta

Financial Investigator: "Many index providers are constructing indices that combine ESG scores and climate scores. An important question for investors is the conflict that could arise when adding ESG objectives to carbon reduction objectives in equity portfolios. We quantify the loss of greenness (in other words the increase in carbon intensity) that investors face when weighting stocks by combinations of ESG scores and carbon intensity."

Financial Investigator 24/10/2023

By Felix Goltz, Research Director, and Antoine Naly, Senior Quantitative Researcher, both at Scientific Beta

"(...) Many index providers are constructing indices that combine ESG scores and climate scores. An important question for investors is the conflict that could arise when adding ESG objectives to carbon reduction objectives in equity portfolios. (...) We quantify the loss of greenness (in other words the increase in carbon intensity) that investors face when weighting stocks by combinations of ESG scores and carbon intensity. The successive growth of ESG and climate investing has led practitioners to promote strategies that aim to fulfil both higher ESG scores and lower carbon emissions, without ever considering the potential trade-off between these two dimensions. (...)".