A traditional method used to calculate expected returns and risk by institutional investors is limited by the scarce amount of available carbon emissions data, according to a report from BNP Paribas.

The report, which used the MSCI world index and the MSCI world Paris-aligned benchmark index as investment universe benchmarks, found that when assessing the impact on returns due to net-zero greenhouse gas emissions goals, there was a serious limitation in carbon emissions data, which would result in the need for “strong approximation” when deploying historical simulations.

It noted quantitative managers traditionally use historical simulations to gain an insight as to how their strategies would have performed in the past.

Read: Six pension plan members share their perspectives on ESG investing

“Moreover, beyond the problem with the availability and quality of historical relevant data, such simulations would not consider other issues such as changes in regulations, the technological advances and shifts in market sentiment on de-carbonizing the economy or the need to de-carbonize,” said the report.

The study suggested institutional investors’ multifactor equity strategies can still be aligned with Paris-aligned benchmark constraints and provide the expected returns through specific measures. It also found that only specific voluntary criteria could have a significant impact in expected returns and even the minimum requirements of the Paris-aligned benchmark didn’t impact the performance of portfolios deployed by the researchers.

“We recommend that investors keep market cap-weighted benchmarks while imposing alignment constraints only to the multifactor portfolio,” said the report.

Read: ESG investing can help investors identify, address systemic risks in portfolios