Reconciling Environmental and Financial Performance: EDHEC-Risk Institute

2 Feb 2017 – Investors show increasing interest in the decarbonification of portfolios to demonstrate their commitment to reducing the climate impact of their investments and contributing to the transition towards a low carbon economy as well as to reduce the long-term investment risks from climate change.

Traditional low carbon indices hope to outperform in the long term by being better positioned towards assets that will benefit from the transition to a low carbon economy while keeping short- and medium-term performance in line with that of standard investment benchmarks.

A pioneer of socially responsible investing smart beta indices since 2009, EDHEC-Risk Institute has taken a radically different approach with the low greenhouse gas emissions indices it unveiled on the occasion of the Paris Climate Change Conference.  While immediately producing a sharp reduction in the carbon footprint of investment and offering long-term climate-change risk mitigation benefits, the Scientific Beta Low Carbon indices use consensual results from sixty years of financial research to deliver excess returns relative to conventional benchmarks in the medium and long-term so as to reconcile environmental and financial performance.

In his presentation, Professor Frédéric Ducoulombier reviewed the evidence on the financial performance of Environmental, Social and Governance investment, justified the greenhouse gas emissions reduction approach employed by ERI Scientific Beta, explained the sources of financial performance exploited to improve the risk/return profile of investment and discussed the environmental and financial performance of the indices:

The performance of Environmental, Social and Governance investment funds and indices

  • Justification of index construction methodology
  • Filtering out investments with high stranding risk, high greenhouse gas emissions and poor carbon efficiency
  • Tilting investments towards better rewarded systematic risks
  • Diversifying unrewarded risks
  • Analysis of environmental and financial performance of the ERI Scientific Beta Low Carbon indices
  • Q&A Session




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