Scientific Beta

The Business Times: "Research by Scientific Beta, however, is thought-provoking. Last year, it published research on sustainability alpha “in the real world”, examining exchange traded funds (ETFs) invested in US stocks over 10 years until 2022. It found that sustainable ETFs did not outperform benchmarks, and in fact underperformed the US market by 0.2 per cent. Adjusting for market risk exposure, the returns were still 0.1 per cent lower."

The Business Times 22/04/2024

"(...) Research by Scientific Beta, however, is thought-provoking. Last year, it published research on sustainability alpha “in the real world”, examining exchange traded funds (ETFs) invested in US stocks over 10 years until 2022. It found that sustainable ETFs did not outperform benchmarks, and in fact underperformed the US market by 0.2 per cent. Adjusting for market risk exposure, the returns were still 0.1 per cent lower. Returns were diluted even further – minus 0.7 per cent on average – once industry factors were removed. It concluded that integrating ESG information in investment decisions “did not add value from a purely financial perspective”. This year it published research that found investors in sustainable funds face “significant fund selection risk” because of the wide dispersion in returns between the best and worst ESG funds. Adjusting for market exposure, the gap between the best and worst performers over a six-year period was 6.5 per cent. The gap remained wide at 4.9 per cent when the data was adjusted for industry exposure. The difference was even more dramatic – at up to 22.5 per cent – when looking at single-year periods adjusted for market exposures, and 25.3 per cent in terms of industry-adjusted returns. Scientific Beta research director Felix Goltz said: “The large dispersion in returns shows that fund returns are not principally driven by a common sustainability factor. Instead, fund returns largely depend on fund-specific choices of how to integrate ESG information.” (...)"