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While a score-based approach to environmental, social and governance (ESG) serves the interest of ratings providers, it is not always a useful guide for investors and could lead to increased risk.
According to Scientific Beta, in its paper
‘Scoring against ESG? Avoiding the pitfalls of ESG scores in portfolio construction’, scoring was not found to guide investors on ESG investing. There were numerous different types of scoring, definitions and data available which created inconsistences and led to subjective assessments being made.
This echoed previous criticism by the OECD who said ESG scores should not be viewed as a meaningful indicator of a strategy’s ESG goals.
Scientific Beta highlights pitfalls of ESG scores in portfolio construction
Scientific Beta highlights pitfalls of ESG scores in portfolio construction
ESG scores may lead to higher levels of greenhouse gas emissions and favour greenwashing
Many asset managers and index providers construct portfolios or benchmarks that provide very significant improvement in ESG scores.
In a recent paper written by Erik Christiansen, ESG and Low Carbon Investment Specialist, and Frédéric Ducoulombier, ESG Director, entitled Scoring against ESG? Avoiding the Pitfalls of ESG Scores in Portfolio Construction, Scientific Beta underscores the danger of using average overall scores at the portfolio level, whether for investment or reporting decisions. While the ESG score-based approach to responsible investing serves the commercial interests of rating providers, academic research has underlined that these ESG scores would not be able to guide investors who are concerned about social welfare and env
Scientific Beta highlights pitfalls of ESG scores in portfolio construction
Scientific Beta highlights pitfalls of ESG scores in portfolio construction
ESG scores may lead to higher levels of greenhouse gas emissions and favour greenwashing
Many asset managers and index providers construct portfolios or benchmarks that provide very significant improvement in ESG scores.
In a recent paper written by Erik Christiansen, ESG and Low Carbon Investment Specialist, and Frédéric Ducoulombier, ESG Director, entitled Scoring against ESG? Avoiding the Pitfalls of ESG Scores in Portfolio Construction, Scientific Beta underscores the danger of using average overall scores at the portfolio level, whether for investment or reporting decisions. While the ESG score-based approach to responsible investing serves the commercial interests of rating providers, academic research has underlined that these ESG scores would not be able to guide investors who are concerned about social welfare and
Scientific Beta Highlights Pitfalls Of ESG Scores In Portfolio Construction - ESG Scores May Lead To Higher Levels Of Greenhouse Gas Emissions And Favour Greenwashing Date
17/12/2020
Many asset managers and index providers construct portfolios or benchmarks that provide very significant improvement in ESG scores.
In a recent paper written by Erik Christiansen, ESG and Low Carbon Investment Specialist, and Frédéric Ducoulombier, ESG Director, entitled Scoring against ESG? Avoiding the Pitfalls of ESG Scores in Portfolio Construction, Scientific Beta underscores the danger of using average overall scores at the portfolio level, whether for investment or reporting decisions. While the ESG score-based approach to responsible investing serves the commercial interests of rating providers, academic research has underlined that these ESG scores would not be able to guide investors who are concerned about social welfare and environmental sustainability. Scientific Beta s criticis
By Susanna Rust2020-12-10T16:02:00+00:00
Sweden’s AP2 has pulled out of fossil fuel companies in connection with portfolio changes leaning on rules for a recently introduced EU climate benchmark, the fund’s latest step towards the goal of aligning its investments with the Paris Agreement.
The state pensions buffer fund today announced it had adjusted its internal indices and portfolios for foreign equities and corporate bonds to ensure the holdings were consistent with the EU Paris-Aligned Benchmark (PAB).
The changes relate to half of AP2’s portfolio – AP2 has total assets of just over SEK360bn (€34.6bn). The fund said the adjustments had been made in such a way that the return and risk characteristics of its indices were not compromised.