Carbon metrics on their own lack the forward-looking insights for assessing the financial risks and opportunities from moving to a low-carbon economy, according to investment professionals.
A poll by global advisory broker Willis Towers Watson (WTW) found 85% rejected carbon metrics as the best measure to assess the financial risks of the transition to their investments.
WTW said net-zero targets are leading regulators around the world to increasingly require investors to disclose their climate-related financial risks and companies to report their carbon emissions.
The survey conducted as part of New York Climate Week, found data quality and consistency topped the list of barriers to the greater adoption of environmental, social and governance (ESG) principles across investment portfolios, with 66% citing this a significant hurdle.
A total of 41% criticised the availability of tools and metrics to accurately measure transition risk while the same percentage pointed to a lack of conviction that ESG integration will improve long-term performance.
Investment professionals said the social component of ESG was the most challenging to assess and incorporate into their analyses with 71% admitting this area was a struggle. Governance came next with 24% while 22% found the environmental component difficult to assess.