ESG Outperformance Narrative ‘Is Flawed’, New Research Shows
Metrics for ‘quality’ such as profitability and conservative investment explain most of sector’s ‘alpha’, academics say
A recent NYU paper found that the majority of more than 200 studies published since 2015 concluded that ESG boosted returns. These studies have helped open the floodgates to ESG investing, with self-proclaimed ESG funds attracting $340bn of inflows over the past two years, according to EPFR.
However, fresh analysis by Scientific Beta, a “smart beta” index provider linked to the Edhec Research Institute, a French academic think-tank, disputes the claims that ESG funds have tended to outperform the wider market, or, in industry jargon, generate “alpha”.