Interactive Assets
MSCI ESG Investing:
Powering Better Investment Decisions
The world is changing rapidly...
creating new risks and opportunities.
Alongside traditional financial analysis, environmental, social and governance (ESG) and climate insights can help you understand how companies are positioned in this changing world - powering better investment decisions.
This interactive page explores the rapid rise in ESG investing, the drivers of growth, how you can integrate ESG and climate into your investment processes and how MSCI1 can help. If you would like more information or have a question, please contact us.
1MSCI ESG Indexes and MSCI Analytics utilize information from, but are not provided by, MSCI ESG Research LLC. MSCI Equity Indexes are products of MSCI Inc. and are administered by MSCI UK Limited
ESG Momentum
Adoption of ESG investing has grown rapidly as investors increasingly integrate ESG and climate factors alongside financial factors to measure the resiliency of portfolios to long-term ESG risks and opportunities.
There's been incredible momentum for ESG...
2 As of Q4 2020; defined as each share class of an exchange traded fund, as identified by a separate ticker. Only primary listings, and not cross-listings, are counted. Equity ETF values for periods prior to April 26, 2019 were based on data from Bloomberg and MSCI, while the values for periods on or after April 26, 2019 were based on data from Refinitiv and MSCI.
3 Source: PRI data as of June, 2020 Launched in New York in 2006, the Principles for Responsible Investment has grown to more than 3,000 signatories in more than 50 countries, managing over $100 trillion in AUM.
Three main drivers accelerating ESG
The world is changing
Global challenges, such as climate risk, increased regulatory pressures, social and demographic shifts and privacy and data security concerns, represent new or increasing risks for investors. The economic pressure the COVID-19 pandemic has placed on some industries has affected companies' exposure to ESG risks and their ability to manage them. Companies face rising complexities and greater scrutiny if they are not adequately managing their ESG or climate risks.
A new generation of investors
Over the next two to three decades, the millennial generation is expected to direct between $15 trillion and $20 trillion into U.S. domiciled ESG investments, roughly doubling the size of the U.S. equity market.4 A growing body of research suggests that millennials are asking more of their investments.
Better data and technology for more meaningful insights
Advanced technology, including artificial intelligence (AI) and alternative data extraction techniques help minimize our reliance on voluntary disclosure from companies. Machine learning and natural language processing help us increase the timeliness and precision of data collection, analysis and validation to deliver dynamic content and financially relevant ESG insights.
A greater opportunity
With advances in technology and AI, we have access to more data and information than ever before. MSCI ESG Research was the first ESG provider to assess companies based on industry materiality, dating back to 1999. Today, we employ some of the latest AI tech and alternative data collection techniques to provide forward-looking insights on ESG-driven risks and opportunities.
4 Bank of America Corporation (2016) 'Environmental, Social & Governance Report', pg.3
ESG leaders showed resilience during a global crisis...
Our research showed that the MSCI ESG Indexes outperformed the MSCI ACWI Index parent during the peak of the COVID-19 crisis.
Relative performance of select MSCI ESG Indexes to MSCI ACWI Index
Data from Dec. 31, 2019, to April 30, 2020. MSCI ESG Universal Index represents an ESG weight-tilt approach; MSCI ESG Leaders a 50% best-in-class sector approach; MSCI SRI a 25% best-in-class sector approach; and MSCI ESG Focus an optimized approach designed to maximize ESG exposure.
...and have demonstrated stronger performance in the longer term
The chart below shows the relative outperformance of the MSCI ACWI ESG Leaders, ESG Focus, ESG Universal and SRI Indexes compared with the parent Index, MSCI ACWI Index.
Relative performance of select MSCI ESG Indexes to MSCI ACWI Index
Data from Nov. 30, 2012, to December 31, 2020. MSCI ESG Universal Index represents an ESG weight-tilt approach; MSCI ESG Leaders a 50% best-in-class sector approach; MSCI SRI a 25% best-in-class sector approach; and MSCI ESG Focus an optimized approach designed to maximize ESG exposure.
ESG leader characteristics
Companies with high MSCI ESG Ratings have historically demonstrated:
5 Guido Giese, Linda-Eling Lee, Dimitris Melas, Zoltan Nagy, and Laura Nishikawa, (2019), The Journal of Portfolio Management, 'Foundations of ESG Investing - How ESG Affects Equity Valuation, Risk, and Performance', volume 45, number 5
Objectives to ESG Investing
We understand that when it comes to ESG investing, one size does not fit all. While the practices can vary, the objectives can broadly fit into three categories.
Values-based investing
aims to align investments with an organization's or individual's ethical values by expressing preferences for what industries and companies they invest in.
Impact investing
targets investments to generate a profit from positive social or environmental impact in line with the investor's views or mission.
ESG integration
aims to assess long-term financial risks and opportunities related to ESG issues as a core component of building a resilient and sustainable portfolio for the specific purpose of enhancing long-term risk-adjusted returns.
To learn more visit msci.com/what-is-esg
How can you integrate ESG and Climate into your investment strategy?
Explore common ESG integration approaches by investor type.
Asset Owners
Large consultants are incorporating ESG dimensions into manager selection in reaction to asset owner requests.
Engagement is becoming an important tool for improving company performance and returns.
Visit our asset owners page.
Asset Management
Asset managers are moving beyond fundamental equity and integrating ESG into fixed income and quantitative strategies with growing sophistication.
Visit our asset managers page.
Risk Management
Risk teams are increasingly systematically reporting on ESG and climate risk.
Visit our risk management page.
Wealth Managers
Growing demand for active and index-linked ESG Funds across asset classes for total portfolio exposures.
Visit our wealth managers page.
Corporate & Corp Finance
Growing demand from issuers and their advisors to assess and report on ESG and climate risk and for ESG-linked financing.
Visit our issuers and advisors page.
ESG solutions
Our 34-year legacy6, measuring and modelling corporate ESG performance has helped to develop our solutions and technology today and shapes our research and innovations for tomorrow.
Remy Briand
Head of MSCI ESG
6 Origins of ESG business date from 1972 through MSCI legacy companies. Legacy companies include KLD, Innovest, IRRC, and GMI Ratings.
MSCI ESG and Climate Solutions
MSCI ESG Research brings transparency of ESG and Climate risks and opportunities to our clients worldwide.
Whatever your investment strategy or approach to ESG and climate, our aim is to provide the data, ratings, indexes and analytic tools to help meet your objectives.
MSCI ESG Research's7 AI-enhanced ESG and climate data and ratings are integrated across MSCI Indexes, Analytics, Real Estate solutions
MSCI ESG Data & Ratings
MSCI ESG Research provides ratings of companies and mutual funds to provide greater transparency and scrutiny of corporate practices for institutional investors seeking to avoid controversies and mitigate risk. Our ESG and climate metrics for over 14,000 issuers provide forward looking assessment of ESG risks and opportunities.
Learn more about MSCI ESG Ratings.
Learn more about our Climate Solutions.
MSCI's Real Estate service
MSCI's Real Estate service is designed to deliver analytical solutions, objective indexes and benchmarks and highly relevant research, so you can make better decisions throughout the investment process. MSCI Real Estate Climate Value-at-Risk (Climate VaR) provides a forward-looking and return-based valuation assessment of climate risk for individual assets and portfolios across commercial and private real estate.
Learn more about Real Estate Climate Solutions.
MSCI ESG & Analytics
MSCI ESG & Analytics enables investors to gain deeper insight beyond traditional financial factors that may affect long-term value creation. Investors can interrogate ESG data and indexes in MSCI's Analytics Systems to support portfolio construction, risk and performance attribution, and monitoring and reporting. Integrate ESG and climate insights into your portfolio construction and risk management using industry leading Multi-Asset Class risk and performance analytics systems.
Learn more about our ESG and Analytics solutions.
MSCI ESG Indexes
MSCI ESG Indexes are designed for use by investors seeking to reduce exposure to systematic and stock-specific risks and set benchmarks for integrating ESG into active and passive portfolios. Our 1,500+ equity and fixed income ESG and climate Indexes are designed to help institutional investors more effectively benchmark ESG and climate investment performance and manage, measure and report on ESG mandates.
Learn more about our ESG Indexes and Climate Indexes.
7 MSCI ESG Ratings 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).
Learn more
Discover more about our principles, transparency and leadership.
Our Principles for Sustainable Investing
In January 2020, we published The MSCI Principles for Sustainable Investing urging all investors globally to integrate ESG and climate factors into their investment processes.
ESG Transparency
MSCI strives to bring greater ESG and climate transparency to financial markets and support the evolving complex needs of the investment community.
We have launched several publicly available transparency tools showcasing MSCI ESG and climate metrics for tens of thousands of funds, companies and indexes, helping to drive awareness, educate the market and raise ESG disclosure standards.
- ESG Ratings search tool: MSCI ESG Research published the ESG Ratings for 2,800 companies
- MSCI ESG Industry Materiality Map: MSCI ESG Research published a tool to explore ESG Key Issues by GICS® sub-industry or sector and their contribution to companies' overall ESG Ratings
- ESG Fund Ratings search tool: MSCI ESG Research published the ESG Ratings for 32,000 funds and ETFs
- Index Profile search tool: MSCI published ESG metrics for all equity, fixed income and blended indexes regulated by the EU, going beyond the requirements of the EU Benchmark Regulation (BMR) relating to ESG indexes only
Recognition
Voted 'Best Firm for SRI research' and 'Best Firm for Corporate Governance research', our award-winning, 'gold standard' ESG ratings and climate data and research is developed in-house and is integrated across our index, analytics and real estate solutions.8, 9
Learn More8 The Extel and SRI Connect Independent Research in Responsible Investment (IRRI) Survey - 2015, 2016, 2017 and 2018/19
9 We are recognized as a 'Gold Standard data provider' by the Deep Data Delivery Standard: http://www.deepdata.ai/
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We examined 10 ESG challenges we felt would leave an impression on the investment landscape throughout the new decade.
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