Scientific Beta

Quartz: "Investors searching for alpha—to beat the market—won’t find it in socially responsible investing. A new study examining a decade of data finds portfolios of exchange-traded funds (ETFs) that follow environmental, social, and governance (ESG) investing strategies did not perform any better than standard index funds."

Quartz 06/10/2023

"(...) Investors searching for alpha—to beat the market—won’t find it in socially responsible investing. A new study examining a decade of data finds portfolios of exchange-traded funds (ETFs) that follow environmental, social, and governance (ESG) investing strategies did not perform any better than standard index funds. The study by Scientific Beta, an index provider and consultancy linked to France’s EDHEC Business School, found that ESG ETF funds underperformed by an average of 0.2% on an annual basis when compared to a proxy for the US equity market. Only one year, 2020, stood out with ESG ETFs outperforming by 4.2%. That was primarily due to the funds’ exposure to red-hot technology stocks, which alone contributed to more than half the overperformance versus the broad benchmark index. But one good year doesn’t make a trend. The study concluded that on an annual basis, both average relative returns and capital asset pricing model alpha, a measure of excess returns over a benchmark, are close to zero over the past decade.(...)"