Decarbonising passive funds costs next to nothing – research

Low-carbon versions of index trackers face negligible return drag, paper suggests

How far could investing in a low-carbon benchmark crimp returns? Not much. That’s according to a new paper by two Amundi quants, who find that tilting benchmarks such as the S&P 500 away from ‘dirty’ stocks in favour of less-polluting companies has a negligible impact on annual returns.

The paper aims to address what one of the report’s co-authors, Hamza Bahaji, calls a key question among passive investors about sustainable investing: “What is the expected cost of decarbonisation?”

Bahaji, who