Scientific Beta

IPE: "The carbon intensity of companies hardly affects the ESG ratings they receive from rating agencies MSCI, Moody’s and Refinitiv, according to an analysis by index provider Scientific Beta. The provider of factor investing strategies and indices has been investigating the effect of adding additional ESG objectives to a low-carbon benchmark. The outcome of that experiment was surprising, research director Felix Goltz told a Scientific Beta conference in Amsterdam recently."

IPE 08/12/2023

"(...) The carbon intensity of companies hardly affects the ESG ratings they receive from rating agencies MSCI, Moody’s and Refinitiv, according to an analysis by index provider Scientific Beta. The provider of factor investing strategies and indices has been investigating the effect of adding additional ESG objectives to a low-carbon benchmark. The outcome of that experiment was surprising, research director Felix Goltz told a Scientific Beta conference in Amsterdam recently. “It turned out that adding other environmental themes to the index leads to a huge dilution of the original goal of reducing carbon intensity,” said Goltz. Scientific Beta found a dilution of on average 92% across analysed portfolios, meaning that 92% of the carbon intensity reduction investors could have reached by solely weighting stocks to minimise carbon intensity is lost when adding ESG scores as a partial weight determinant. (...)"