Scientific Beta

Money Management: "‘Sustainable’ passive exchange traded funds (ETFs) are taking capital away from companies that could be having more impact on reducing the planet’s carbon footprint, according to research by French business school EDHEC. Part of the reason why this was the case was because climate data only accounted for 12% of ETF stock weightings, while traditional market capitalisation weightings accounted for the overwhelming remainder."

Money Management 22/09/2021

"(...) ‘Sustainable’ passive exchange traded funds (ETFs) are taking capital away from companies that could be having more impact on reducing the planet’s carbon footprint, according to research by French business school EDHEC. Part of the reason why this was the case was because climate data only accounted for 12% of ETF stock weightings, while traditional market capitalisation weightings accounted for the overwhelming remainder. Co-author of the paper, Felix Goltz, said: “If the objective is to transition to a different economy that has net zero greenhouse emissions, we know that requires a change in activity on a drastic level, and so it also requires reallocation of capital at a drastic scale”. “If you just build portfolios that don’t look very different from standard market indices, it’s not clear how you’re going to achieve drastic change by making very small deviations.” (...)"