Scientific Beta

Investment News New Zealand: "Environmental, social and governance (ESG) investors face outsize fund-specific selection risks with a wide dispersion of returns between similar strategies, according to a new Scientific Beta report."

Investment News New Zealand 12/05/2024

"(...) Environmental, social and governance (ESG) investors face outsize fund-specific selection risks with a wide dispersion of returns between similar strategies, according to a new Scientific Beta report. The study found a 6.5 per cent gap (or almost 5 per cent after allowing for industry tilts) between the best- and worst-performing strategy among a cohort of sustainable- or ESG-themed passive US equities exchange-traded funds (ETFs) over the six years to the end of 2022. “Over single years, the dispersion can be even more dramatic, reaching a maximum of 22.5% in terms of returns adjusted for market exposures, and 25.3% in terms of industry-adjusted returns,” the Scientific Beta report titled ‘From ESG Confusion to Return Dispersion: Fund Selection Risk is a Material Issue for ESG Investors’ says. And the study suggests traditional gauges used to screen funds for risk such as “past performance or tracking error” don’t translate to the ESG product universe. (...)"