Scientific Beta

Today UK News: "Scientific Beta analysed 24 ESG strategies that have been shown to outperform in other academic papers. It did find evidence that ESG funds have tended to outperform, with ESG leaders typically beating ESG laggards by almost 3 percentage points a year. However, in both the US and other developed markets, it found that three-quarters of the outperformance is due to “quality” metrics, such as high profitability and conservative investment."

Today UK News 04/05/2021

"(...) Scientific Beta analysed 24 ESG strategies that have been shown to outperform in other academic papers. It did find evidence that ESG funds have tended to outperform, with ESG leaders typically beating ESG laggards by almost 3 percentage points a year. However, in both the US and other developed markets, it found that three-quarters of the outperformance is due to “quality” metrics, such as high profitability and conservative investment. Quality has long been recognised as one of the investment “factors” that have traditionally tended to drive above-market returns. “Despite relying on analysis of non-financial information by hundreds of ESG analysts, ESG strategies perform like simple quality strategies mechanically constructed from accounting ratios,” the paper said. “Of the 24 strategies, not one has significantly outperformed when you adjust for this factor and that to me is quite striking,” said Goltz. “It’s just the case that over the last decade quality has outperformed and if you use ESG scores that inherently tilts [a portfolio] to quality. (...)"