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Scientific Beta survey shows that most investors do not believe in ESG outperformance

·2-min read

Press Release - Boston, London, Nice, Paris, Singapore, Tokyo, November 9, 2021

Scientific Beta survey shows that most investors do not believe in ESG outperformance

Survey collected market participants’ views on the Scientific Beta study ‘“Honey, I Shrunk the ESG Alpha”: Risk-Adjusting ESG Portfolio Returns’

A survey conducted by Scientific Beta to collect market participants’ views on its recent white paper ‘“Honey, I Shrunk the ESG Alpha”: Risk-Adjusting ESG Portfolio Returns’ received responses from investment professionals with roles such as portfolio manager, chief investment officer, director of investment strategy research, head of asset allocation, head of ESG research, ESG analyst and research analyst. The respondents to this survey come from institutional investors, asset managers, banks, consultants and wealth managers managing assets worth USD3.3 trillion, USD645bn, USD4.1 trillion, USD179bn and USD7.7bn respectively.

The white paper questions the popular belief that ESG strategies generate outperformance and shows that the ESG alpha disappears when adjusting for industry and factor exposures. The results of the survey show that:

  • Most of the respondents agree that there is no sound evidence that ESG strategies offer any incremental value in terms of performance, and that most of the performance is captured by style factors.

  • Only 17% of respondents believe that the finding of absence of outperformance is surprising.

Dr Felix Goltz, co-author of the study and Research Director at Scientific Beta, said, “Our study of ESG performance comes to a clear conclusion: when using standard risk adjustments in performance measurement, widely cited findings on positive ESG alpha disappear. Irrespective of performance, however, a key driver of the adoption of ESG investing is that non-pecuniary and risk characteristics of their portfolios matter to investors. Rather than turning ESG investing in another hunting ground for alpha, asset managers should perhaps take such non-pecuniary and risk objectives seriously. Judging from our survey respondents, focusing on objectives other than alpha is a credible value proposition for ESG investing.”

The Scientific Beta survey can be accessed through the link below:

"Honey, I Shrunk the ESG Alpha”: Reactions of Investment Professionals, Scientific Beta Publication, November 2021

About Scientific Beta:
Scientific Beta aims to be the first provider of a smart factor and ESG/climate index platform to help investors understand and invest in advanced factor and ESG/climate equity strategies. Established by EDHEC-Risk Institute, one of the top academic institutions in the field of fundamental and applied research for the investment industry, Scientific Beta shares the same concern for scientific rigour and veracity, which it applies to all the services that it offers investors and asset managers.

On January 31, 2020, Singapore Exchange (SGX) acquired a majority stake in Scientific Beta. SGX is maintaining the strong collaboration with EDHEC Business School, and principles of independent, empirical-based academic research, that have benefited Scientific Beta’s development to date. Since 2015, Scientific Beta has also been offering highly advanced strategies in the area of ESG and climate change, whether involving options integrated into smart beta indices or pure ESG or climate benchmarks.

As a complement to its own research, Scientific Beta supports an important research initiative developed by EDHEC on ESG and climate investing and cooperates with V.E and ISS ESG for the construction of its ESG and climate indices.

Scientific Beta, 1 George Street, #15-02, Singapore 049145. For further information, please contact: contact@scientificbeta.com, Web: www.scientificbeta.com.


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