“Even though investors and managers communicate extensively about the use of climate data to construct their portfolios, these data points represent at most 12% of the determinants of portfolio stock weights on average,” Goltz said.
Funds need to go beyond displaying the “green scores” of their portfolios and instead invest in stocks “in a way that provides incentives for companies to act on climate change.
To promote true alignment with climate objectives, rather than avoiding utilities altogether as a way of enhancing a green score, fund managers should put pressure on those industries to invest in technologies that can drastically reduce greenhouse gases. Read more