There is a lot of research out there on ESG but it's the "wrong sort of ESG research", says Robert Sawbridge, head of responsible investment at Insight Investment.
He says there have been numerous efforts to define climate change, including in the ESG investing space, but the methodologies used might not be effective.
"There is a lot of ESG research out there but we would argue that potentially it's the wrong sort of ESG research or it's got the wrong goals for it," Sawbridge says.
"Over the past few years there's sort of been this relentless quest to define something like climate change using a single metric or a couple of metrics, a sort of quest for the holy grail.
"We think it's appropriate that we take a step back and go, 'OK this is a really really big systemic change that is going to happen to the system – do the traditional methods that we've used to analyse risk and return, do they work in this context?'"
He explains metrics such as volatility, often used in investments, might not be appropriate to define issues such as climate risk, which has no real historical precedent.
"We think it's really important that there is more academic research that is done into this new area and we think it's particularly important that it's done in a cross disciplinary manner."
He says the reason is, there is good knowledge in different areas across climate change, but very few people can see the full value chain of its impact.
For financial advisers more research would mean they would end up with a better product and find it easier to explain its impact, he adds.
To hear more about how academic research could change sustainable investing, what it could mean for investment labels, and what an ideal ESG investing landscape might look like, click on the link above
carmen.reichman@ft.com
