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  • What's at Stake?
  • Risks and Opportunities
  • Aligning your Investment Strategy
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What’s at stake


 

What’s at Stake?


Henry Quote

 
 

Capital markets are an essential and critical force to drive the transition to net-zero with concerted action from all participants, ranging from a reallocation of capital by asset owners, to effective channeling of funds by asset managers and banks to greener investments and innovation, alongside the commitment of companies1.

Henry Fernandez, Chairman and Chief Executive Officer, MSCI

What’s at stake paras

Climate change is an existential threat to our planet and the single greatest challenge facing humankind. Its consequences are now being felt. The warming of Earth’s atmosphere caused by human-generated emissions of carbon dioxide and other greenhouse gases is fueling extreme natural disasters, causing sea levels to rise and endangering human health, biodiversity and property.

Averting a climate catastrophe will require the largest reconstruction of the global economy since the Industrial Revolution.2 Decarbonizing the economy may create new markets for clean energy and sustainable products, and demand tremendous advances in technology. Capital markets participants, including asset owners, companies, and asset managers all will likely be part of the solution. They are coming together, setting climate targets and taking action.


Featured Content

Featured Content


The Net-Zero Knowledge Hub

The Net-Zero Knowledge Hub

A professional investor’s guide to navigating the financial impacts of climate change featuring actionable information from MSCI and other thought leaders.

<style>.high-title{font-size: 24px !important; line-height: 28px !important;}</style><span class="high-title">A Brief History of Climate Change Science</span>

A Brief History of Climate Change Science

How did we get here? Travel the scientific trail of climate change with Dr. Oliver Marchand, MSCI’s global head of ESG research and development.

Real Estate Climate Solutions

Real Estate Climate Solutions

We help real estate investors make climate-informed investment decisions, integrate performance, and risk analysis and build more sustainable portfolios.

MSCI Joins the Net Zero Financial Service Providers Alliance

MSCI Joins the Net Zero Financial Service Providers Alliance

MSCI is proud to be a founding member of the Net Zero Financial Service Providers Alliance and is committed to aligning all relevant services and products with the goal of net zero emissions by 2050 or sooner.

Capital in the Net-Zero Economy Intro

 

Capital in the Net-Zero Economy

Owners and managers of capital must play a primary role in achieving a net-zero economy (that is, one that balances greenhouse-gas emissions with an equivalent amount of carbon removal) by the middle of this century. Trillions of dollars in new investment will be needed to change from carbon to clean energy3. Investors can contribute by decarbonizing their portfolios, allocating capital to low-carbon technologies and products, and using their stewardship to encourage companies to set and meet emissions targets. MSCI has identified a series of steps that capital-market participants can take to achieve a net-zero economy. We’ve also detailed our own commitment to achieve net-zero emissions before 2040.


Risks and opportunities

Risks and Opportunities

Climate-related disasters threaten crops, real estate, health and society. At the same time, the transition to net-zero is creating new markets for clean energy and sustainable products and services.

Demand for clean-energy companies also has impacted investment performance. Alternative energy and clean-technology companies performed in line with the MSCI ACWI IMI while oil and gas and other carbon-intensive companies underperformed the index over six-and-a-half years that ended in May 2020, according to an analysis by MSCI4. In the last 20 months of the study, the so-called green companies outperformed the MSCI ACWI IMI while the carbon-intensive companies still underperformed it.


In numbers

In Numbers

Financial Risks from Climate Change


Financial Risks from Climate Change

$825.4 billion

The cost of weather and climate disasters in the U.S. that resulted in damage of at least $1 billion each over the decade that ended in 2020.5

$900 billion

Or roughly one-third of the value of big oil and gas companies that estimates suggest would disappear if governments move to restrict the rise in global temperatures to 1.5° C above pre-industrial levels for the rest of this century.6

Two to three

The number of notches the sovereign credit rating of an oil-exporting nation could fall by 2050 absent steps to diversify its economy, according to Fitch Ratings.7


Financial Opportunities from Climate Change

Financial Opportunities from Climate Change


Financial opportunities from climate change

7.9%

The amount by which a hypothetical index of clean-energy stocks outperformed a hypothetical index of carbon-intensive stocks between September 2018 and May 2020.8

90%

The share of global energy generation that is projected to come from renewable sources by 2050 according to a pathway to net-zero put forward by the International Energy Agency.9

$1.5 trillion

The value of new revenue opportunities from low-carbon goods and services, according to European companies in their 2019 disclosures to CDP.10


Further Resources

Further Reading


<span class="high-title">Integrating Sustainability into the Investment Process</span>

Integrating Sustainability into the Investment Process

Given the growing impact that climate change, social attitudes, institutional governance and technological innovation may have on capital markets in the coming decades, MSCI believes that sustainability should be integrated throughout the entire investment process.

<span class="high-title">Has the Path to Net-Zero shown up in Performance?</span>

Has the Path to Net-Zero shown up in Performance?

How have companies whose businesses support the transition to a low-carbon economy performed compared with carbon-intensive companies?

<span class="high-title">Foundations of Climate Investing </span>

Foundations of Climate Investing

How Equity Markets Have Priced Climate Risks.

Aligning your Investment Strategy

 

Aligning your Investment Strategy

Investors are aligning their investment strategies with the goal of reaching net-zero emissions by the middle of this century. The push to net-zero reflects the marked transformation that climate change is expected to exert on the allocation of capital in the years and decades to come11.

In fact, net-zero targets may toughen in the run-up to the 26th session of the Conference of the Parties to the U.N. Framework Convention on Climate Change Conference (COP26), slated to take place in Glasgow this November.


Integrating a climate strategy into your investment process

Integrating a Climate Strategy into your Investment Process

Reaching net-zero emissions likely will require investors to integrate climate considerations into their investment processes. That may include measuring and reporting on exposure to climate risk, developing low-carbon investment strategies, factoring climate change into risk management, engaging portfolio companies, and benchmarking performance.

Read More

Climate and performance

Climate and Performance

The shift to a net-zero economy may lead to both winners and losers. The transition is creating new markets and paving the way for products and services that enable societies to grow sustainably. At the same time, companies not aligned with a net-zero goal may see their access to capital shrink and demand for their products fade.

Companies’ earnings growth and stock performance were directly related to their greenhouse gas emissions, according to research by MSCI that examined companies in the MSCI ACWI IMI over a period of seven-and-a-half years that ended in January 2021. Stocks of companies at the lowest risk in the transition to a net-zero economy outperformed the stocks of companies in their sector that were less aligned with the transition during the study period.


Page Title

Using Climate Indexes to Benchmark the Transition

Owners and managers of assets may seek to move to investment policy benchmarks that provide a reference point for the path to net-zero. Climate indexes can help investors identify both stranded assets and green opportunities. Such indexes also may be used as the basis of climate-focused investment products.

Learn More

Want to get in touch to find out more


Want to get in touch to find out more?

Contact our ESG Client Service team to learn more about our climate solutions or to discuss your own climate objectives.

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