MSCI Low Carbon Indexes
The MSCI Low Carbon Indexes are intended to help identify potential risks associated with the transition to a low carbon economy while representing the performance of the broad equity market. Launched in 2014 they are the first benchmark series designed to address two dimensions of carbon exposure: carbon emissions and fossil fuel reserves.
MSCI Low Carbon Indexes can be split into two index suites:
- The MSCI Global Low Carbon Target Indexes re-weight stocks based on their carbon exposure in the form of carbon emissions and fossil fuel reserves. The indexes are designed to achieve maximum carbon exposure reduction and achieve 0.3% (30 basis points) ex ante tracking error target while minimizing the carbon exposure relative to their parent indexes.
- The MSCI Global Low Carbon Leader Indexes aim to achieve at least 50% reduction in the carbon footprint of the parent index by excluding companies with the highest carbon emissions intensity and the largest owners of carbon reserves (per dollar of market capitalization). They also aim to minimize the tracking error relative to their parent index.
KEY POINTS OF MSCI LOW CARBON INDEXES:
- The indexes are designed to address two dimensions of carbon exposure – carbon emissions and fossil fuel reserves.
- They aim to have a low tracking error relative to the parent index.
- The indexes’ stock selection process utilizes MSCI ESG Carbon Metrics and ESG Research.
The indexes can be used to support:
- Asset allocation: Consistent, complete representation that captures the full spectrum of the global equity opportunity set without home bias.
- Performance measurement and attribution: An industry-leading benchmark suite for global mandates, with regional, country, sector and other subsets available for more targeted investment mandates.
- Research: A trusted source for global equity markets and underlying security-level data for sell-side research.
- Investment product development: May be licensed for use as the basis for structured products and other index-linked investment vehicles, such as ETFs and ETNs.
- The MSCI Index Carbon Footprint Metrics are designed for investors that are looking to understand, measure and manage carbon risk in their portfolios.
- ESG Research
- ESG Ratings
- Blog: Beyond Divestment: Using Low Carbon Indexes
- Stranded Assets as Investment Opportunities
- Options for Reducing Fossil Fuel Exposure
Watch this short webinar to learn how you can manage carbon risk with the MSCI Global Low Carbon Target Indexes.