New Scientific Beta Study Highlights Conflict Between Green and ESG Portfolio Objectives

Press Release - Boston, Frankfurt, London, Melbourne, Nice, Singapore, Sydney, August 8, 2023

New Scientific Beta Study Highlights Conflict Between Green and ESG Portfolio Objectives

Pursuing multiple ESG and climate objectives leads to "green dilution"

A new study from Scientific Beta, entitled "Green Dilution: How ESG Scores Conflict with Climate Investing," shows that the successive growth of ESG and climate investing has led practitioners to promote strategies that aim to fulfil both higher ESG scores and lower carbon emissions, without considering the potential trade-off between these two dimensions.

The study, co-authored by Noël Amenc, Felix Goltz, and Antoine Naly, shows that green dilution is pervasive, regardless of which ESG scores are targeted as objectives, substantial, with an average of 92% across portfolios, and robust across several alternative specifications. A 92% green dilution means that 92% of the carbon intensity reduction investors could have reached by solely weighting stocks to minimise carbon intensity is lost when adding ESG scores as a partial weight determinant. Only 8% of the carbon reduction objective survived the inclusion of ESG scores in portfolio weighting schemes.

Overall, the study provides clear evidence against the quantitative mixing of ESG and carbon scores in equity portfolio weighting schemes, which comes at great carbon cost for green investors. Conversely, the study provides evidence in favour of the exclusionary approach to ESG objectives, to best accommodate multiple non-financial and unrelated objectives.

Commenting on the study, Felix Goltz, co-author, and Research Director at Scientific Beta, said, "The carbon intensity reduction of green portfolios can effectively be cancelled out by adding ESG objectives. On average, social and governance scores more than completely reversed the carbon reduction objective. If you add more unrelated criteria, you are not going to perform well on all of them, so you have to think about your priorities. By adding too many you are losing the focus. If you are interested in reducing the carbon intensity of your portfolio, you are going to get that only by focusing on the carbon intensity, otherwise you are very quickly going to be getting green dilution."

The Scientific Beta study can be accessed here:

Green Dilution: How ESG Scores Conflict with Climate Investing, Scientific Beta Publication, June 2023

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, 2 Shenton Way, #02-02, SGX Centre I, Singapore 068804. For further information, please contact:, Web: