We examine a scenario for how a sudden disruption in credit markets could affect portfolios, especially given indications of the market’s fragility.  

With stubborn inflation, a plunging Japanese yen and unpredictable elections around the globe, 2024 has proven challenging for fixed-income investors — and for central banks. We sat down with MSCI’s global head of fixed-income solutions research, Afsaneh Mastouri, to talk about the state of fixed-income markets, and what the rest of the year may hold.

We found a strong historical correlation between a company’s MSCI ESG Rating and its cost of capital in both equity and debt markets. Firms assessed as the most resilient to financially material sustainability-related risks financed themselves more cheaply. 

Our analysis of data spanning the last 18 years indicates that systematic options strategies linked to the MSCI EAFE and MSCI Emerging Markets Indexes have consistently exhibited lower risk and lower drawdowns compared to their parent indexes.  

It’s early days for sustainability-linked bonds, where issuers see their interest rates rise after missing sustainability targets. But instead of throwing in the towel after some initial setbacks, we talk about companies that have doubled down on their sustainability commitments.

Board expertise is one lens through which investors can scrutinize companies’ efforts to manage the risks and opportunities of AI, but just how expert in AI are these directors? We use GPT-4 to find out. 

Good governance is foundational to effective capital markets, promoting accountability, transparency and sound decision-making aligned with investor interests. But how do those potential benefits translate into market performance? Well today, we answer that question for you! We answer the question: does governance even matter.

Climate-conscious investors often ask themselves: Are the companies I invest in planning ahead by setting emissions-reduction targets? And, how are these companies performing against those targets?  We look at one way to help answer these questions. 

Ultra-low interest rates provided a massive boon to commercial real estate for years. With higher rates now in effect, what might be the impact on cross-border investors, who have been a key influence on market liquidity and pricing? 

The MSCI Resilient Future Indexes capture eight environmental-opportunity subthemes to help investors broadly identify business activities with the potential to make positive contributions toward achieving a resilient future. 

Private-market investors experienced a sustained slump in distributions across buyout and venture capital and, to a lesser extent, private credit. We look at the recent apparent recovery in private-market cash-flow activity and what that could mean for limited partners. 

The emissions intensity of the sectors that compose the small- and large-cap universes differs, helping to explain why small caps’ emissions intensity has exceeded that of their larger-cap peers. 

Chief Research Officer, Ashley Lester and team assess the evolution of the five key themes affecting investors in 2024. What does the landscape look like for the second half of the year? 

Good governance is foundational to effective capital markets, promoting accountability, transparency and sound decision-making aligned with investor interests. But how do those potential benefits translate into market performance? 

Our panel of experts, led by chief research officer, Ashley Lester, takes stock of global markets as we enter the back half of 2024. Ashley and team examine the short- and long-term issues affecting investors, including the ever changing geopolitical landscape, the continued impact of AI and the role of private markets in the carbon transition.

Currency relationships have been in flux since early 2022. We analyze how these changes have impacted global equities and outline the economic and political events that could influence fixed-income performance over the balance of 2024. 

Indexes can provide vital benchmarks for investors navigating private markets, a significant but relatively opaque investment ecosystem. We explain the hallmarks of building a foundational dataset and creating indexes that are reliable and robust. 

The Federal Reserve is signaling only one rate cut this year, compared to signaling three in March, so rates appear bound to remain higher for longer. Against this backdrop, we updated our macroeconomic scenarios to reflect the latest market data. 

We segmented India’s public equity market to study patterns in its factor, thematic and industry exposures. And to assess how the current market profile could change, we also analyzed private firms that may be in the pipeline to become public. 

A drop in commercial-property prices has led to concern about the loan losses of U.S. lenders. We analyze the collateral for the loans by property type and location to identify what has hurt — or boosted — loan books.  

Data from over 4,000 issuers, spanning nearly a decade revealed that companies with better MSCI ESG Ratings tended to have a lower cost of capital. It’s big news for investors and another step towards understanding the relationship between sustainability and financial performance. 

Developing countries have increasingly looked to carbon markets for conservation finance. But the biodiversity financing gap remains wide. Could Japan’s expansion of its Joint Credit Mechanism into nature-based projects help address this problem?  

Post-election U.K. market surprises seem unlikely, but both major political parties’ manifestos are placing AI and energy in the spotlight. 

There is often a misconception among investors that when it comes to investments in renewables, there is a trade-off between climate impact and financial returns. We crunch the numbers to see if this holds true.  

Our demand for electricity is growing for the first time in decades. Nuclear energy is being proffered as the answer to our voracious energy-appetites. But are investors capable of propping up an industry with so much complexity and risk? This episode provides an answer.

Performance of the MSCI ACWI ESG and Climate Indexes was a mixed bag over the first five months of 2024, but exposures to momentum, information technology and the Magnificent Seven were important contributors to positive returns.  

Investors with climate objectives may rely on temperature-alignment metrics to set goals and track progress. We compare the MSCI Implied Temperature Rise with the metrics from the Science Based Targets initiative to assess their correlation. 

We summarize the performance of major asset classes based on the latest update of MSCI’s private-funds data universe and explore trends in distributions — a key concern for asset owners.  

Since inclusion in the MSCI Emerging Markets Index in 2019, the Saudi equity market has evolved, offering an expanded and more diversified opportunity set. Vision 2030 has the potential to build on this progress, but risks and challenges remain.

What is impact materiality, you ask? And how is it different from financial materiality? A fine and important question, listener! In this episode we take you through all the details you need to parse through the most important sustainability-jargon out there. Including, an explanation of the EU's Corporate Sustainability Reporting Directive, or the CSRD, which has its first required reporting cycle due next year.  

Over the last 20 years, most U.S. sectors had low performance correlations, suggesting that sector rotation strategies had the potential to improve portfolio return or that combining less-correlated sectors had the potential to reduce portfolio risk over that period. 

The Inflation Reduction Act provides large incentives for a shift to clean energy in the U.S. MSCI teamed up with the RMI to investigate its effects on utilities.

Investment performance is measured using transaction prices in most asset classes. But real estate is illiquid and heterogeneous, so valuations and sales prices can differ. Our annual report compares valuations and sale prices in global real estate.  

Small-cap firms that adopt science-based targets and increase green revenues could be viewed as turning the lemons of high emissions into the lemonade of low-carbon transition, broadening the opportunity set for investors supporting decarbonization.   

We examine the results of the newly launched MSCI Europe Quarterly Private Real Estate Debt Fund Index to identify which loan strategies drove returns in 2023 and how the performance compared against real-estate equity funds in Europe.

The initiation of the rate-hike cycle by the Federal Reserve has positioned U.S. monetary policy as a major driver of financial markets. What could two downside scenarios for financial markets as investors consider their path forward? 

When it comes to climate altering carbon emissions, investors, like asset managers and banks, used to only measure their direct carbon emissions from their buildings and purchased electricity. But now, they are being asked by regulators, stakeholders, and clients to report on the emissions associated with their investment portfolios – a much more complicated and vital task. In this episode, guest Carrie Wang explains to host Mike Disabato why portfolio carbon footprinting is so important to the future of investing and so complicated.

Climate is no longer just a risk for the future but also an opportunity to invest now, stressed speakers at our Capital for Climate Action EMEA Conference, which brought together investors and financial institutions to discuss the importance of investment and finance in speeding the low-carbon transition.

Bond investors are grappling with the challenge of balancing fiduciary responsibilities with their commitment to sustainability. Could following a decarbonization glidepath, or reinvesting cash flows to direct bond portfolios toward a climate target, help? 

Better governance practices by Japanese companies appear to be linked to stronger fundamental metrics, a possible contributor to the recent rally in Japanese equities.  

Using MSCI Climate Change Metrics and the Net Zero Investment Framework, we assessed listed companies in developed and emerging markets to see how well they were aligned with the goals of the Paris Agreement and global net-zero emissions by 2050.

The role of risk management for institutional investors is evolving. Risk leaders are looking to broaden their teams’ focus beyond traditional risk measurement and increase their influence with investment teams. How could AI help? 

Historically, climate investing has focused on portfolio decarbonization, but investors are increasingly turning to a “finance-the-transition” approach, seeking to invest in transition opportunities. The two approaches are not exclusive and best used hand in hand. 

They may not be new, but climate funds have recently hit their stride. From managing transition risk, to targeting technology opportunities, to aligning with the Paris agreement – these funds come in all shapes and sizes and with pretty diverse objectives. On this episode we catch you up on where climate funds stand today, and how differently they’re evolving in public and private markets.

The Integrity Council for the Voluntary Carbon Market has announced the first set of projects that qualify for its Core Carbon Principles, marking a major milestone for the voluntary carbon market and one that could pave the way for a bifurcated market. 

ESMA’s new fund-naming guidelines could impact one in three SFDR Article 8 and 9 funds, necessitating name changes or adherence to new investment thresholds and fossil-fuel exclusions for compliance. 

At our recent APAC climate conference, which brought investors, companies and financial institutions together, discussion focused on financing decarbonization, the usefulness of looking beyond emissions and the development of biodiversity metrics. 

MSCI Implied Temperature Rise (ITR) can be used to assess the temperature alignment of companies and portfolios with global climate goals. Here, we offer an attribution framework to understand what causes a portfolio’s ITR to change over time.

Outbound investment from China has grown steadily in recent years, and Chinese companies with the highest exposure to international revenue sources have outperformed the broader China market.

The 2024 European parliamentary elections could mark a shift in the EU's political landscape, potentially impacting key policies such as the European Economic Security Strategy and the European Green Deal.  

Although transparency around the use of carbon credits is improving, variations in rules across jurisdictions can add complexity and an extra reporting burden for companies, and make it harder for investors to report on credit use across their portfolio. 

APAC firms are increasingly disclosing value-chain emissions and climate targets, reflecting progress in climate transparency. Smaller companies, however, lag in this area, and potentially face growing investor and regulatory pressure for disclosures. 

With climate change amplifying, global markets are facing uneven readiness for the low-carbon transition. A capital shift from emission-intensive assets to zero-carbon alternatives could redefine market performance and business winners. 

Despite the recent pause in the Federal Reserve’s aggressive monetary tightening, rates remain at their current high level and refinance risk has emerged in Ginnie Mae securities made up of loans backed by the U.S. Department of Veterans Affairs. 

The global number of publicly traded firms has grown steadily for more than two decades, but not consistently across regions. The variations in supply patterns have translated to differences in buyback yields and EPS growth rates.

Maybe a rose by any other name would smell as sweet, but that’s not going to fly for sustainability funds in the EU. On this episode we break down ESMA’s latest fund guidelines and discuss their place in a regulatory landscape with all kinds of moving pieces.

Based on MSCI Low Carbon Patent Scores, Asia-Pacific companies are leading the charge in low-carbon technology, with superior patent-quality scores in renewable-energy and energy-efficiency technologies.

How does Adam Gibbon of AXA IM balance climate impact with investment results? We get his take on the voluntary carbon markets, and how he assesses potential opportunities for his fund’s portfolio.

U.S. utilities are increasing investments in solar, wind and battery installations. Investors can learn more about a company’s transition strategy from these energy-generation plans than from tracking past performance on emissions. 

Nature-based solutions have emerged as a potential tool in the battle against climate change. We explore their viability in the APAC region.

Getting a read on price change during a deal drought is paramount for commercial-property investors. Can valuation-based indexes buttress transaction-based gauges of pricing in turbulent times? 

Airlines are part of a hard to abate industry for a reason, as there is not one straightforward path to decarbonization. In this episode, we discuss the options that airlines have to reduce their direct emissions in the coming decades – and we tell you which ones are more likely to be more viable.

Amid the debate over the voluntary carbon market’s role in corporate decarbonization, we investigated trends in the Asia-Pacific region. Which are the markets leading the way and what role are the region’s authorities playing? 

Investors are still waiting for a recovery in commercial real estate. We outline the state of play in early 2024 and identify potential signposts for an upturn in the asset class.  

What’s behind the varying emissions-disclosure rates across the APAC region? We assessed the individual markets to see who’s making progress and also analyzed the numbers by market capitalization.

Mortgage portability would enable borrowers in the U.S. to move their mortgages from their current homes to new homes. How could it affect portfolios of mortgage-backed securities? Our new paper appeared in the Journal of Fixed Income. 

Alcoholic beverage companies are trying to navigate through a changing world, one where tastes are evolving, and resources are getting scarcer. In this episode, delve into the significant challenges and innovative strategies the alcoholic beverage industry is employing to combat this shift in drinking trends.

The carbon markets allow companies to purchase credits to offset their carbon footprint until long-term reduction plans become a reality. We take a look at these markets and try to understand how they impact investors, companies and our future.

Instead of a predicted recession, U.S. equity markets have soared since 2022, and a few mega-cap technology stocks dominated the market. We analyze the most- and least-crowded market segments to help investors prudently monitor their portfolios. 

Subscription lines of credit have become widespread across buyout, private-debt and real-estate funds, but elevated interest rates are prompting investors to reassess their sub lines’ value. How much has it cost funds to service this debt?

Although Chinese equities generally performed poorly from 2021 through 2023, certain dedicated China funds earned double-digit annualized returns. We propose a three-layer framework to help demystify the drivers of excess returns in the China market. 

Assessing the carbon footprint of a portfolio is the first step in addressing the investment implications of climate change. But in a complex and fast evolving landscape, which are the best metrics and underlying inputs to use?  

Sovereign bonds from emerging markets constitute a substantial proportion of the global asset universe. We look at the MSCI Emerging Markets Sovereign Bond Index to assess issuance trends, credit quality and other characteristics of index constituents. 

Senior-debt funds led 2023 private-asset performance, followed by mezzanine debt. We summarize the leaders and the laggards from the Q4 2023 update of the Burgiss Manager Universe, and chart the trend in private-equity distributions.  

Our panel discusses what’s happening in public equity markets, the importance of governance and of sustainable investing more broadly, as well as the growing world of private assets, including private credit and the ways in which these assets might come to resemble their public counterparts more than they do today.

Over the last nearly 50 years, changes in interest rates have had a more pronounced impact on the performance of factor and sector indexes than the rate level itself. Insights from these findings may be helpful in realigning portfolios to a shifting macro view. 

In recent years, there has been a notable shift in private investments in energy. Understanding these trends and the financial side of renewable investments may be key for investors looking to allocate private money to energy-transition opportunities. 

Everyone is talking about AI, but on today’s episode we focus on the technology’s potential to disrupt health care. Then, we switch things up to look at how wildfires are exacerbating physical, legal and financial risks for electric utilities in the U.S.

As proxy season nears, investors looking at how companies in their portfolios are working toward establishing and meeting climate goals may find it useful to note trends around shareholder say-on-climate proposals. 

Sustainable investing often necessitates reducing portfolio emissions. But adding emission-reduction targets requires a careful navigation of market complexities and risk considerations alongside sustainability objectives. Could using a climate glidepath help? 

A global equity portfolio may not be as broadly diversified as it appears. Understanding how deglobalization and megatrends are impacting regions, industries and asset classes can help in designing a portfolio with the desired diversification profile. 

Coal still makes up a big cut of China’s energy mix. But the country’s growth in renewables is undeniable. As climate targets are laid down and climate change accelerates, figuring out China’s emissions trajectory will be tricky. And that’s OK – we love a tricky discussion.

Abruptly shutting down all the coal-fired power plants may appeal to some, but there would likely be unintended consequences for investors, as well as plant employees and those who live where the plants are located. A managed coal phaseout with specific target dates and actions may create a level of certainty for all involved.

Corporate issuers around the globe and across the market spectrum are increasingly seeking information, offering feedback and sharing updates related to sustainability, governance and climate-related data. Where has interest been focused?  

Tax-loss harvesting is one strategy individual investors can use to help reduce tax liability and improve after-tax return. It may result, however, in high turnover and tracking error, lowering return. Balancing these factors for each taxpayer is key. 

The Asia Pacific region is at the heart of the global biodiversity crisis. Using MSCI ESG Ratings, we assess APAC companies on their exposure to biodiversity risks. But these risks may also offer opportunities to address the impacts of biodiversity. 

Over the long term, companies with higher MSCI ESG Ratings have outperformed in the Asia Pacific equity markets. Among the three pillars, governance demonstrated the highest outperformance, followed by the social and environmental pillars. 

For some investors, having a climate-savvy director on a company’s board may seem like a non-negotiable. But data from some of the world’s biggest greenhouse gas emitters shows that successful climate governance is complex and may require more than just pinning your hopes on a climate superstar.

Investors contemplating putting their cash to work over the balance of 2024 may wish to consider the impacts of the changing equity-credit relationship and growing regional disparities as they revise their allocations. 

Global forecasters have recently suggested that the world economy is headed for a soft landing. Our latest market stress test looks at how this and other, less benign scenarios could affect a multi-asset-class portfolio in the coming months. 

This week we provide an update to our March 2022 episode titled Children in the Cocoa field that explored the growing problem of child labor in cocoa harvesting. And the attempt by Nestlé to use money and enhanced mapping technology to combat its prevalence. It sounds bleak, but it was a great story about how technology is allowing for better transparency in our world's supply chain.

The auditing industry is facing several challenges, including fee concentration and a decline in practicing accountants. We assess the current state of play to identify potential areas of concern and the impact these could have on investors.

Indian firms have made notable strides in managing their financially relevant sustainability risks over the last five years. Understanding their progress could offer valuable insights to investors in India’s equity market.    

Higher interest rates and a pricing slump have challenged the refinancing of commercial-property debt. We calculate the volume of U.S. loans likely extended from 2023 and chart the lenders behind the slate of maturities starting in 2024. 

A managed coal phaseout could help power generators reduce asset-stranding risk and help countries achieve their decarbonization targets. What might this mean for utilities companies and why might active engagement be the way forward for investors? 

Plastic is an inescapable reality of the modern world. But trading off its convenience and versatility for environmental and health impacts is getting harder. Companies that make or rely on plastic are being pushed to improve recyclability and reuse. And as tempting as it is to believe everything you read on a label, it looks like the road to a genuine circular economy is still going to be a little bumpy.

Name recognition of highflying stocks, as well as their performance, can be brief. The enduring value of thematic and fundamental analysis is the ability to uncover the macroeconomic and business dynamics that influence long-term stock returns.  

The wide gap in U.S. T-bill and equity volatility levels appears to reflect varying perceptions of risk. The historically low hedging premium implies a lower cost to insure against higher equity volatility, should that be the scenario that unfolds.

In recent years, there has been a surge in climate-related names within both public and private funds, but their focus is often on different areas. We analyze the numbers to identify key trends and provide investors with greater clarity.

The SEC’s climate disclosure rule is finally here. It’s been a journey, one akin to a film drama full of plot twists, cliff hangers and edge of the seat moments. So in honor of the drama, this week we do a film review of sorts on this wide reaching regulation - going into the plot, the actors involved, and how the industry is likely to be affected by it.