• Large Oil Spills - the Gordian Knot for the Risk Taker?

    November 7, 2012 9:49 AM


    Despite global economic decline, oil prices have remained at a historically high level of roughly USD 100 per barrel , which has supported the economics of many unconventional petroleum projects. However, environmental liabilities and on-going operating costs in projects requiring assumption of greater operational leverage continue to grow, exemplified by clean-ups of marine hydrocarbon spills, water treatment costs in hydraulic fracturing, and tailings remediation in oil sands projects.

    Continue reading Large Oil Spills - the Gordian Knot for the Risk Taker?

  • Business Benchmark for Animal Welfare (BBFAW) Consultation Roundtable

    July 24, 2012 12:00 AM


    London - Farm animal welfare is an increasingly important issue for companies across all sectors of the food industry - be they retailers, service companies, manufacturers, processors or producers. This has been driven by a range of factors, including regulation, consumer concern, pressure from animal welfare organisations on food business companies and their investors, retailers expecting their suppliers to comply with corporate responsibility policies, and the brand and market opportunities for companies that adopt higher farm animal welfare standards.  Investors are starting to play a more active role as they begin to recognise such issues may represent potential financial risks and opportunities for companies they invest in. A number of ethical (screened) retail funds - such as those in the UK and USA - explicitly consider farm animal welfare issues, and some investors have started to engage with companies to improve their performance and reporting on farm animal welfare. NGOs are beginning to engage with investors and it is possible that this will, over time, result in investors paying more attention to the quality of companies’ management of farm animal welfare issues which, in turn, should contribute to improved practices on the ground. Find out more about BBAFW here.

  • Fukushima Accident Dims Prospects for a Nuclear Revival

    April 20, 2011 5:38 PM


    The ongoing Fukushima disaster is a major setback for the nuclear power industry. A much-anticipated “nuclear renaissance” will be slowed and likely curtailed, as happened after the Three Mile Island and Chernobyl accidents . Increased regulatory scrutiny and safety precautions will add to the rising costs of this industry, which is already losing ground to cost-competitive alternatives, like natural gas, renewables and investments in energy efficiency.

    Government subsidies will be essential for continued nuclear power expansion. Government support is needed to: defray the high capital costs of building nuclear reactors, decommissioning them, permanently disposing of spent fuel, and indemnifying plant operators from potentially huge insurance liabilities. Growing public recognition of these “hidden” costs may further limit nuclear power expansion.

    Nuclear power will remain a part of the global energy mix. It provides nearly 15 percent of global electricity needs. It is promoted as a carbon-free power source that fights climate change. Its use may grow in nations with limited energy resources, policies to cap carbon emissions, and where public opinion continues to view nuclear power as a comparatively safe and affordable form of electricity. However, even pro-nuclear nations are reassessing their policies in light of the latest nuclear accident at Fukushima.

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    Investment Implications

    Price changes after Japan nuclear disaster

    March 11 

    April 14

    % Change

    Tokyo Electric Power Company




    MSCI Japan Electric Utilities Index




    MSCI Global Alternative Energy Index




    New safety reviews will add to rising construction and operating costs of nuclear power plants. Added regulatory and investor scrutiny will increase costs in the following areas:

    • Disaster planning and backup power
    • Evacuation zones and community preparedness
    • Storage and protection of spent nuclear fuel
    • Plant financing and capital costs
    • Insurance indemnification

    MSCI ESG Research is factoring these cost considerations into its ongoing research of nuclear-generating electric utilities. Financial effects will vary by company and region. Electric utilities operating in countries with centrally planned generating systems, and which continue to receive substantial government support for nuclear power, will likely continue with their nuclear power expansion plans, albeit at a more tempered pace. Utilities operating in countries with more independent and decentralized regulatory systems, and which have reactors in areas of high seismic activity or in proximity to large population centers, are more vulnerable, and are likely to see a contraction of nuclear plant licensing extensions and new reactor orders.

    MSCI ESG Research on Nuclear Power and Product Offerings

    We take an in-depth and multi-faceted approach to companies involved in nuclear power. Our research addresses an array of client needs in portfolio screening, identification of controversies, and ESG ratings and profiles.

    • ESG Manager: We track all publicly traded companies that manufacture or operate nuclear power plants so that concerned investors can screen these companies from their portfolios.
    • Global Compact+: We alert investors to event risks at nuclear plants, including safety issues, questionable or unethical management practices, and regulatory decisions that invite controversy or reduce investor confidence in nuclear utilities.
    • Intangible Value Assessment ratings and profiles: We assess risk exposure and management performance of nuclear plant operators in sector comparisons with other electric utility providers.

    Continue reading Fukushima Accident Dims Prospects for a Nuclear Revival

  • Implications of the Japanese Nuclear Disaster: An ESG Research Perspective

    March 25, 2011 2:53 PM


    The ongoing nuclear power crisis in Japan will have lasting implications for power generation around the globe. A much-anticipated “nuclear renaissance” could be curtailed as the world absorbs lessons from the worst nuclear accident since the Chernobyl disaster 25 years ago.

    The United States, with 104 operating reactors, and Europe, with 143 reactors in 27 countries, now plan extensive reviews of their nuclear plants and disaster preparedness. China, with 11 operating reactors, has also suspended approval of more than two dozen new reactors.

    This may give a boost to competing low-carbon generating sources, such as natural gas and renewable energy. MSCI’s Global Alternative Energy Index recorded a 10.1 percent gain in the first 10 days after Japan’s nuclear crisis began. This compares with a 22.8 percent loss for the MSCI Japan Electric Utilities Index over the same period. Coal may also get a short-term lift, since nuclear power is its chief rival in providing base-load power generation.

    Stock price changes after Japanese nuclear disasterMarch 11 
    (price at open)
    March 21  
    (price at close)
    % Change
    Tokyo Electric Power Company 25.0016.00-36.0
    MSCI Japan Electric Utilities Index114.0788.05-22.8
    MSCI Global Alternative Energy Index85.7494.3710.1

    Source:  MSCI Sector and Thematic Indices

    Continue reading Implications of the Japanese Nuclear Disaster: An ESG Research Perspective

  • The Next Storm: How ESG Risks are Reconfiguring the Insurance Industry

    February 28, 2011 10:01 AM


    New MSCI ESG Research and Webcast on Pivotal Global Insurance Sector

    The 2008 US bailout of American International Group underscored the ties between the insurance sector and the health of the global economy. AIG was granted then-unprecedented access to US Treasury funds, and subjected to a government-led management overhaul.

    And yet, in 2011, AIG’s management delayed a planned repayment of government funds to bolster reserves in the face of unexpected losses. If a firm that has been a ward of the state for years is still uncovering ugly new surprises, then how can private investors gauge how much risk is hidden inside other “too big to fail” multi-line insurance giants?

    To uncover potential risk and opportunity in major multi-line insurance firms, the MSCI ESG Research team has developed a series of innovative metrics. A January 2011 industry report applies this methodology to 28 global multi-line insurers, plus 4 major insurance brokerage firms. (Click here to learn how to get access to this report, as well as forthcoming studies of property & casualty and life & health insurers.)

    The multi-line insurance industry is also the subject of a March 3 MSCI ESG Research webinar. Click here to register for The Next Storm: How ESG Risks are Reconfiguring the Insurance Industry.  The presentation for this webinar will be available for download after the event.

    Continue reading The Next Storm: How ESG Risks are Reconfiguring the Insurance Industry

  • Dodd-Frank Not Just About Banks: Conflict Mineral Reporting Requirements will Affect Chipmakers, Other Electronics Firms

    January 18, 2011 3:23 PM


    Since its passage in July 2010, the Dodd-Frank Act has gotten a lot of attention, mostly for its sweeping new regulations affecting the financial industry. But buried in all those pages, in Section 1502 to be exact, is also a small provision aimed at addressing the problem of conflict minerals originating from the Democratic Republic of Congo (DRC). Along with requiring the US Secretary of State to develop a strategy to address the issue, Dodd-Frank requires companies under the jurisdiction of the SEC to report annually on whether they are using minerals from the DRC or its nine immediate neighbors. All companies must also report on the due diligence they have undertaken to verify their supply chain and avoid tainted metals. The SEC has until April 2011 to develop regulations to carry out this mandate.

    In December 2010, MSCI ESG Research published an Industry Report on makers of semiconductors and related equipment. Along with other key ESG metrics, we looked at how the 34 firms in this space managed their supply chains. Our analysis included, in the wake of Dodd-Frank, an assessment of company efforts to keep conflict minerals out of their products. We found a wide variation in supply chain-related ESG risk exposure between leaders and laggards; click here to get access to the full report.

    Continue reading Dodd-Frank Not Just About Banks: Conflict Mineral Reporting Requirements will Affect Chipmakers, Other Electronics Firms

  • 'Corporate Environmental Management and Credit Risk': Moskowitz Prize Study Finds ESG Impact on Debt Costs

    December 6, 2010 3:09 PM


    Each year, the winner of the Moskowitz Prize for scholarly research of socially responsible investing (SRI) is announced at the “SRI in the Rockies” conference. The 2010 Prize winner is “Corporate Environmental Management and Credit Risk,” by Rob Bauer and Daniel Hann. Their study found that companies with strong environmental records consistently pay lower costs for debt, while firms with weaker records face higher costs of financing and lower credit ratings.

    SRI strategies have typically been focused on equity investing, but some believe that environmental, social and governance (ESG) metrics could help investors evaluate credit risk and quality. (See this Dec. 1 article from Citywire of the UK, and these 2009 comments from Ran Fuchs of MSCI.) The Bauer/Hann study appears to confirm the utility of ESG research for fixed-income investment.

    Co-authors Bauer (former head of research at Dutch pension fund ABP) and Hann (a PhD candidate at Maastricht University) studied the environmental practices of 582 US firms between 1995 and 2006. Their performance data was drawn from the database of KLD, which is now part of MSCI ESG Research. Along with finding that a company’s environmental performance is associated with its cost of credit, Bauer and Hann also found that this association has grown stronger in recent years – a trend they expect to continue.

    Continue reading 'Corporate Environmental Management and Credit Risk': Moskowitz Prize Study Finds ESG Impact on Debt Costs

  • Investors Seek More Disclosure by US Chamber of Commerce Members: Secrecy of Trade Groups' Political Spending at Issue

    December 2, 2010 3:03 PM


    Earlier this month, a coalition of investors filed resolutions at four corporations whose members sit on the Board of the US Chamber of Commerce. The filers called for Accenture, IBM, Pepsi, and Pfizer to “review their policies and oversight of political expenditures, especially through trade associations,” according to a release by coalition member Walden Asset Management.

    The Supreme Court’s January 2010 Citizens United decision explicitly permitted unlimited, anonymous political spending by private organizations, including unions and corporations. This decision has already sent waves of undisclosed money through the US political system. In the November elections, out-of-state oil companies spent millions on a California ballot proposition, while the Chamber spent almost $30 million on campaigns nationwide, according to BusinessWeek:

    Continue reading Investors Seek More Disclosure by US Chamber of Commerce Members: Secrecy of Trade Groups' Political Spending at Issue

  • Coal Industry a Factor in Midterm Elections: Federal Policies Could Literally Reshape West Virginia

    November 2, 2010 1:33 PM


    The 2010 midterm elections have provided plenty of political theater, and one of the strangest scenes may be West Virginia Governor Joe Manchin firing a rifle at a “cap and trade bill.” An October 27 Boston Globe article explored how Gov. Manchin, a Democrat running for Senate, has positioned himself to the right of his party on many issues. The political logic behind his animus towards climate legislation can be summed up in one word: coal.

    Gov. Manchin is a vocal – and, apparently, armed – supporter of the coal industry’s positions on climate change and mountaintop coal removal (MTR). As a Governor, however, he can only do so much, as key parameters of coal mining’s regulatory framework are set by the US government.

    MSCI ESG Analyst Sam Block researches the coal industry, and as he explains below, federal regulation of coal mining can change drastically depending on which party is in power. If Republicans retake one or both houses of Congress, they could counter the EPA’s anti-MTR efforts under President Obama. Complicating the issue is that other Federal agencies, as well as the courts, also have a say in how the coal industry is regulated.

    Continue reading Coal Industry a Factor in Midterm Elections: Federal Policies Could Literally Reshape West Virginia

  • 'Our Judgments are Shaped by Facts and Experience' MSCI ESG Analyst Sharon Squillace on the Newsweek Green Rankings

    October 22, 2010 11:17 AM


    The current issue of Newsweek presents the 2010 Green Rankings of the 500 largest US companies, and the 100 largest companies worldwide. This is the second annual Green Rankings, and like last year, MSCI ESG Research was a core provider of research and analysis for the project. Joel Makower at Greenbiz.com writes that the Green Rankings have “become a major metric in corporate America.” He describes how, in a recent meeting with 30 corporate sustainability officers, almost all of them knew their firms’ positions on the list.

    Mr. Makower also provides some points to keep in mind as we compare one company’s ranking to another’s, and compare this year’s list to last year’s. He explains that the methodology changed somewhat since last year; that the scores are normalized so that a “100” score doesn’t indicate perfection, but rather than a firm has done comparatively better than all others; and that there is some “subjectivity” behind the analysis and rankings of each company.

    Sharon Squillace, the MSCI ESG Research Analyst responsible for the Green Rankings project, offered to explain some of the thinking behind the Rankings methodology. She writes that the availability of accurate performance data by researched companies helps temper the “subjectivity” of a firm’s Green Ranking:

    Continue reading 'Our Judgments are Shaped by Facts and Experience' MSCI ESG Analyst Sharon Squillace on the Newsweek Green Rankings


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