cross-posted from: https://exploding-heads.com/post/565438

Scientific Beta, an index provider and consultancy, found that companies rated highly on ESG metrics - and even just the ‘Environmental’ variable alone - often pollute just as much as other companies.

“ESG ratings have little to no relation to carbon intensity, even when considering only the environmental pillar of these ratings. It doesn’t seem that people have actually looked at [the correlations]. They are surprisingly low.”

He added: “The carbon intensity reduction of green [ie low carbon intensity] portfolios can be effectively cancelled out by adding ESG objectives.”

“On average, social and governance scores more than completely reversed the carbon reduction objective,” he continued. “It can very well be that a high-emitting firm is very good at governance or employee satisfaction. There is no strong relationship between employee satisfaction or any of these things and carbon intensity."