Low carbon credits have indeed underperformed, but to a very marginal extent: the current drawdown in the carbon relative index based on ECOBAR is a mere 25 basis points (0.25% of return). The relative return of the low carbon strategy was -15bp in 2021. This should be taken in context that over the six years for which there is data, the low carbon index has outperformed by 1.83% in return terms or 28 bps of returns per year, with 2021 as the first down year.
This may seem small in the context of other investment return prospects, but for a benchmarked real money manager, this would be considered sizable. The annualised Sharpe ratio is 1.27. In this report, we show the relative return of the S&P500 IG carbon efficient re-weighted bond index versus its standard equivalent, duration and spread beta neutral and oil prices.
