Scientific Beta

Financial Times: "Passive exchange traded funds tracking “low carbon”, “climate change” or “Paris-aligned” indices allocate little of their money to the greenest companies and habitually increase the weighting of companies whose environmental performance is deteriorating. Worse still, these ETFs starve sectors at the heart of the transition to a cleaner economy of capital, claims Doing Good or Feeling Good? Detecting Greenwashing in Climate Investing, a paper from Edhec, a French business school and think-tank."

Financial Times 20/09/2021

"(...) Climate-focused investment funds are undermining the fight against global warming by routinely engaging in greenwashing, academic research has claimed. Passive exchange traded funds tracking “low carbon”, “climate change” or “Paris-aligned” indices allocate little of their money to the greenest companies and habitually increase the weighting of companies whose environmental performance is deteriorating. Worse still, these ETFs starve sectors at the heart of the transition to a cleaner economy of capital, claims Doing Good or Feeling Good? Detecting Greenwashing in Climate Investing, a paper from Edhec, a French business school and think-tank. “Since considerable investment is necessary to ensure electrification of the economy and decarbonisation of electricity, underfunding of this sector in climate-aligned benchmarks, which can correspond to a reduction in capital allocation of up to 91 per cent, would constitute the most dangerous form of portfolio greenwashing,” said Felix Goltz, co-author of the paper. The key issue is not how to restrict investment in these industries, but rather, how to make sure that these industries invest in technology that allows them to produce needed goods and services with minimum release of greenhouse gases,” he argued. (...)"