Scientific Beta

Money Management: "The confusion around what classes as “sustainable” can lead to large fund performance differentials depending on an adviser’s selection, according to Scientific Beta."

Money Management 07/05/2024

"(...) The confusion around what classes as “sustainable” can lead to large fund performance differentials depending on an adviser’s selection, according to Scientific Beta. A study by the firm of sustainable index funds investing in US equity markets titled, From ESG Confusion to Return Dispersion: Fund Selection Risk is a Material Issue for ESG Investors, found significant annual return differentials between funds. (...) “Our findings reveal substantial performance disparities in the cross-section of these ESG funds. Over a six-year period, the difference in annualised returns between the best and worst ESG funds is 6.5 per cent when adjusting for differences in market exposure. When removing effects due to differences in industry exposure, the difference remains high with 4.9 per cent. “Over single years, the dispersion can be even more dramatic, reaching a maximum of 22.5 per cent in terms of returns adjusted for market exposures, and 25.3 per cent in terms of industry-adjusted returns.” (...)"