Ukraine war exposes risks in ‘naive’ ESG investing

Quants say funds have underperformed and will not aid transition to net zero

The Zaporizhzhia power plant has been a key battleground following Russia's invasion of Ukraine
The Zaporizhzhia power plant has been a key battleground following Russia's invasion of Ukraine

Quantitative investors believe the war in Ukraine and the resulting energy crisis have illustrated the “naivety” of environmental, social and governance strategies that attempt to divest from entire sectors, such as fossil fuels.

“There was a lot of uncompensated risks in those strategies,” says Matthew Picone, portfolio manager at Acadian Asset Management. “We’ve identified these risks for a number of years and it’s only just now that they’re playing out.”

Research by Investment Metrics

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