Scientific Beta

The National Law Review: "Scientific Beta, a “smart beta” index provider associated with the Edhec Research Institute, a French academic think-tank, studied 24 ESG strategies that were found to “outperform” and concluded that although ESG leaders typically outperformed “ESG laggards” by nearly three percent per year, the results were driven by “quality metrics” such as high profitability and conservative investment rather than non-financial ESG factors. In other words, performance is based on “quality strategies mechanically constructed from accounting ratios.”"

The National Law Review 02/02/2022

"(...) "But others contend that the correlation between “ESG” and fund performance is overstated in large part due to informational and classification challenges. Scientific Beta, a “smart beta” index provider associated with the Edhec Research Institute, a French academic think-tank, studied 24 ESG strategies that were found to “outperform” and concluded that although ESG leaders typically outperformed “ESG laggards” by nearly three percent per year, the results were driven by “quality metrics” such as high profitability and conservative investment rather than non-financial ESG factors. In other words, performance is based on “quality strategies mechanically constructed from accounting ratios.” The study also credited higher performance of ESG funds as being driven by ESG “momentum” and predicted that the performance of most ESG funds will, at some point, return to long-term market averages. “Between the countless ways of measuring and weighing ESG scores, the ad hoc nature of ‘ESG integration’ and the reality of ESG performance reflecting sectoral tilts and quality factors rather than environmental, social or governance drivers, the entire field of ESG investing is built on shaky foundations that crumble under closer scrutiny.” Scientific Beta’s position is that investors focused on “changing the world” should invest capital in “better” companies and engage with those companies on how they can improve their practices. " (...)"