Orpea affair: Scientific Beta warns about the relevance of ESG indices

The recently published book Les Fossoyeurs by Victor Castanet revealed serious dysfunctions and malpractice within the retirement home group Orpea. This has prompted Scientific Beta, the EDHEC Business School spin-off whose mission is to create ESG and climate indices, to state its position in a press release. According to Scientific Beta’s experts, ESG scores alone “cannot guide investors concerned with social welfare and environmental sustainability”.

This observation is drawn from Scientific Beta”s research work published under the title of “Scoring Against ESG? Avoiding the Pitfalls of ESG Scores in Portfolio Construction”, in which it calls into question the relevance of ESG criteria, not only due to the diversity of evaluation methods employed by the scoring organisations (in terms of objectives, methodologies and definitions), but also to the inherent subjectivity of the evaluations themselves. With these recommendations, Scientific Beta seeks to serve as a safeguard for responsible investors and give them the keys to guide their investment decisions better, particularly by emphasising the low reliability of the ESG data often used to artificially inflate the value of asset portfolios.   

To respond to the issues of corporate transformation, the EDHEC spin-off recommends combining the ESG approach with practical action, underpinned by a voting policy and engagement by shareholders. Pro-active decision-making of this type will help foster the emergence of new practices – like reduced carbon emissions and better management of human capital – and thus contribute positively to society and the fight against climate change. EDHEC encourages these high-impact initiatives, particularly by training future graduates eager to use their knowledge for the benefit of responsible business.

Scientific Beta press release