Climate Paris Aligned Indexes Intro copy

We are pleased to announce the launch of our new MSCI Climate Paris Aligned Indexes, designed to address climate change in a holistic way by minimizing exposure to transition & physical climate risks and helping investors pursue new opportunities, while aiming to align with the Paris Agreement requirements of limiting global warming to no more than 1.5°C.

What are the Climate Paris Aligned Indexes?

What are the Climate Paris Aligned Indexes?

The indexes are designed to help investors who seek to mitigate transition and physical risks, capture novel investment opportunities and allocate in a way that supports the decarbonization of the economy while being compatible with the Paris Agreement. The MSCI Climate Paris Aligned Indexes incorporate the recommendations of the Task Force on Climate Related Financial Disclosures and are designed to exceed the minimum requirements for the EU Paris Aligned Benchmark.[1,2]

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Designed to address climate change risks and opportunities holistically

Designed to address climate change risks and opportunities holistically

The indexes aim to represent the performance of an investment strategy that reweights or excludes securities based on the risks and opportunities associated with the climate transition, and follows a decarbonization trajectory in order to align with a 1.5°C scenario, while seeking to minimize exclusions from the parent index.

The MSCI Climate Paris Aligned indexes follow a transparent and rules based optimized index methodology with the following objectives:

Transition Risk

Transition Risk

  • Targets at least 50 reduction in Weighted Average Carbon Intensity compared to the reference indexIncentivize companies setting targets
  • Aims to maximize its exposure to companies with carbon reduction targets
  • Underweights high carbon emitters based on Scope 1,2 and 3 emissions
  • Aims to lower its Fossil Fuel exposure
Physical Risk

Physical Risk

  • Aims to reduce Physical Climate Risk by at least 50% using MSCI Climate Value-at-Risk
Green Opportunities

Green Opportunities

  • Shift the weight of constituents from brown to green activities using MSCI Low Carbon Transition score
  • Aims to maximize its exposure to companies providing Clean Technology solutions
1.5°C Alignment

1.5°C Alignment

  • Designed to align with a 1.5° scenario using MSCI Climate Value-at-Risk and an ongoing self-decarbonization rate of 10% year on year

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Using MSCI's state of the art Climate Metrics

Using MSCI's state of the art Climate Metrics3

The indexes are constructed using MSCI ESG Research’s climate metrics and models, including forward-looking data from our enhanced Climate Value-at-Risk Transition and Physical risk models with comprehensive emissions capture and green revenue data, Low Carbon Transition Score, scope 3 emission data and companies’ carbon emission reduction targets.3

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Key features of the MSCI Climate Paris Aligned Indexes

MSCI Climate Paris Aligned Indexes uses a wide variety of key climate metrics from the MSCI Climate Risk Center in its construction.

  • MSCI Climate Paris Aligned Indexes are designed to go beyond EU minimum standards to meet the needs of institutional investors seeking to address climate change risks & opportunities in a holistic manner
  • MSCI Climate Paris Aligned Indexes can be used as a standalone index or as an overlay to an ESG strategy. MSCI offers a wide range of custom index capabilities to help investors integrate climate in their investment process in a way that is aligned with their specific objectives.

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The MSCI Climate Paris Aligned Indexes are part of MSCI Climate Solutions which include tools for climate reporting, risk management, portfolio construction and engagement.

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1The EU Paris Aligned Benchmark is contained in the EU Commission’s Technical Expert Group on Sustainable Finance’s Final Report on Climate Benchmarks and Benchmarks’ ESG Disclosures: https://ec.europa.eu/info/business-economy-euro/banking-and-finance/sustainable-finance/eu-climate-benchmarks-and-benchmarks-esg-disclosures_en

2 MSCI Climate Paris Aligned Indexes are part of the MSCI Climate Toolkit which includes tools for climate reporting, risk management, portfolio construction and engagement.

3MSCI Climate VaR, MSCI Low Carbon Transition Scores, carbon and emissions data are produced by MSCI ESG Research LLC. MSCI ESG Indexes and Analytics utilize information from, but are not provided by, MSCI ESG Research LLC. MSCI Indexes and Analytics are products of MSCI Inc. MSCI Indexes are administered by MSCI Limited (UK).

 

MSCI ESG Research LLC. is a Registered Investment Adviser under the Investment Adviser Act of 1940. The most recent SEC Form ADV filing, including Form ADV Part 2A, is available on the U.S. SEC’s website at www.adviserinfo.sec.gov.

MIFID2/MIFIR notice: MSCI ESG Research LLC does not distribute or act as an intermediary for financial instruments or structured deposits, nor does it deal on its own account, provide execution services for others or manage client accounts. No MSCI ESG Research product or service supports, promotes or is intended to support or promote any such activity. MSCI ESG Research is an independent provider of ESG data, reports and ratings based on published methodologies and available to clients on a subscription basis.  We do not provide custom or one-off ratings or recommendations of securities or other financial instruments upon request.

ESG ADV 2A (PDF)
ESG ADV 2B (brochure supplement)