Climate ETFs do little to decarbonise the economy, report finds

Press review ETF Stream “Climate change-related ETFs overstate their virtues while doing little to incentivise emissions reduction in the global economy, according to research conducted by EDHEC-Risk Institute. While examining ETFs tracking “low carbon”, “Paris-aligned” and “climate change” indices from commercial providers such as MSCI, S&P Dow Jones Indices and FTSE Russell, the report, titled Doing Good or Feeling Good? Detecting Greenwashing in Climate Investing, found green-labelled products were allocating more heavily to companies with deteriorating climate performance than those with a key role in decarbonising the economy. Looking at methodologies of different climate ETFs, the research said climate scores represent “at most” 12% of the determinants of constituent weightings within these products’ baskets. Meanwhile, market capitalisation “overwhelms” all other considerations, making up an estimated 88% of the factors that dictate stock weights with these ETFs." https://www.etfstream.com/features/climate-etfs-do-little-to-decarbonise-the-ec… 2021