Scientific Beta

Institutional Asset Manager: " In a new research paper, "Honey, I Shrunk the ESG Alpha": Risk-Adjusting ESG Portfolio Returns, Scientific Beta researchers examine equity strategies that exploit information in ESG ratings, following several papers that suggest that these strategies lead to outperformance. While many of the ESG strategies have positive returns, adjusting these returns for risk shrinks “alpha” (or excess risk-adjusted return) to zero. Sector biases and exposures to equity style factors capture the returns of ESG strategies."

Institutional Asset Manager 04/05/2021

"(...) In a new research paper, "Honey, I Shrunk the ESG Alpha": Risk-Adjusting ESG Portfolio Returns, Scientific Beta researchers examine equity strategies that exploit information in ESG ratings, following several papers that suggest that these strategies lead to outperformance. While many of the ESG strategies have positive returns, adjusting these returns for risk shrinks “alpha” (or excess risk-adjusted return) to zero. Sector biases and exposures to equity style factors capture the returns of ESG strategies. In addition, the analysis suggests that returns are inflated when investor attention to ESG rises. The findings do not question that ESG strategies can offer substantial value to investors. Instead, they suggest that investors who look for added value through outperformance are looking in the wrong place. (...)"