Hero 2 - Financial Relevance
Why sustainability data is financially relevant
Driving stronger outcomes with actionable insights from MSCI.
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Intro - Financial Relevance
How can sustainability data improve risk management and be additive to an investment process?
Our extensive datasets and analytical tools support investors to manage risks, identify opportunities and enable them to work towards their financial goals. Sustainability data can enable investors to go beyond traditional financial metrics and offer even deeper insights to strengthen decision-making processes, more effectively manage risks and create long-term value for stakeholders.
Tabs - Financial Relevance
Security analysis
Security analysis
Portfolio construction
Index construction
Security assessment for fixed income instruments
Transition management
How can I use MSCI’s data to enhance my fundamental analysis?
We provide insight into company operations and performance beyond traditional financial statements so investors can compare companies across industries, focusing on key performance indicators.
Our research-based models are designed to help identify the metrics most closely linked to better corporate fundamentals, lower risk and equity market outperformance across regions and sectors over the past 12 years.
Cumulative performance of highest- vs. lowest-rated ESG quintiles in MSCI ACWI Index
Explore our research and solutions
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MSCI ESG Ratings in Global Equity Markets: A Long-Term Performance Review
Controlling for sectors, regions and company size, we assessed the financial performance of MSCI ESG Ratings in global and developed markets and found that companies with higher ratings outperformed their lower-rated counterparts over the long term.
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Which Sustainability Issues Mattered Most?
Sustainability data can signal stock-market torpedoes — or long-term winners. Our research reveals the key environmental, social and governance indicators that helped investors avoid sharp drawdowns and capture outperformance.
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Sustainable investing powered by insight
MSCI’s sustainability data, models, ratings and metrics enable you to better manage risk and identify opportunity.
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The MSCI Principles of Sustainable Investing
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How can I incorporate supplemental data into portfolio construction?
Sustainability data provides insights into companies typically not accessible as part of the quantitative portfolio management process, which focuses on metrics such as valuation, momentum and quality.
The low correlation of sustainability data with existing, well-known signals and characteristics is an opportunity for investors to extract new, independent information and help build better portfolios. The exhibits below illustrate how statistical methods such as factor models can accomplish the extraction of new information, and then used to analyze risk and returns of portfolios. For example, new risk and return-related information can be found in a company’s management of social risks, and looking at carbon efficiency can bring insights on earnings growth.
Cumulative factor return of MSCI Social pillar score by region
Faster earnings growth associated with more carbon efficient companies
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Social Risks and Opportunities for Corporates: Long-Term Performance in Global Equity Markets
What goes into an analysis of financially material social risks and opportunities? And what does it mean for a company’s market performance? Our analysis found that scoring on social-risk themes was a key indicator of performance.
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The social pillar has often been maligned as the ignored step sibling of the ESG acronym.
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Sustainable investing powered by insight
MSCI’s sustainability data, models, ratings and metrics enable you to better manage risk and identify opportunity.
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The MSCI Principles of Sustainable Investing
Download
How can I use data as part of benchmarking and asset allocation?
Indexes are integral to portfolio performance benchmarking, product creation, index-based investing and a range of other asset management use cases.
Asset owners use sustainability indexes to manage sustainability-related risks and opportunities in their asset allocation and portfolios either by replacing their existing policy benchmark with a sustainability index or by investing in sustainability index-based mandates.
MSCI offers sustainability indexes, used by both asset owners and asset managers, with up to 12 years of live track record, which has shown an outperformance over their market cap benchmark, even after controlling for industry, sectors and style factors.
Active performance of MSCI Sustainability Indexes versus MSCI ACWI
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Understanding MSCI Climate Indexes
The MSCI Climate Indexes fall into one of three categories — reduce fossil-fuel exposure, finance the transition and align with net-zero policies — designed to reflect investors’ broad range of climate-related preferences.
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Sustainability and Climate in Focus
The social pillar has often been maligned as the ignored step sibling of the ESG acronym.
Explore more -
Sustainable investing powered by insight
MSCI’s sustainability data, models, ratings and metrics enable you to better manage risk and identify opportunity.
Learn more -
The MSCI Principles of Sustainable Investing
Download
How can I use data to improve and supplement credit analysis for corporate and sovereign bonds?
Investors can leverage quantitative and qualitative data to help assess creditworthiness, identify risks and make informed investment decisions as part of their corporate and sovereign bond credit analysis.
Higher MSCI ESG Ratings were associated historically with lower financing costs for both equity and corporate bonds, and significant rating changes signaled directional shifts in a company’s future cost of capital.
Companies with the highest ESG ratings had, on average, a lower cost of capital than those with the lowest ratings. This relationship holds when looking at the individual components of the cost of capital, with top-rated companies exhibiting lower costs of equity and debt.
Cost of capital across MSCI ESG Rating quintiles
Cost of capital after a substantial MSCI ESG Rating change
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MSCI ESG Ratings and Cost of Capital
We found a strong historical correlation between a company’s MSCI ESG Rating and its cost of capital in both equity and debt markets.
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The social pillar has often been maligned as the ignored step sibling of the ESG acronym.
Listen to the episode -
MSCI ESG Ratings in Global Equity Markets: A Long-Term Performance Review
Controlling for sectors, regions and company size, we assessed the financial performance of MSCI ESG Ratings in global and developed markets and found that companies with higher ratings outperformed their lower-rated counterparts over the long term.
Explore more -
The MSCI Principles of Sustainable Investing
Download
How can I use data to identify and manage risks and opportunities in the context of the transition and a changing climate?
Physical risks—from extreme weather events to water stress and supply-chain disruptions—are already impacting asset values and economic stability. Meanwhile, the transition to a low-carbon economy is reshaping capital flows and industrial strategies. Investors who integrate both physical and transition risks can make more informed, forward-looking decisions, ensuring they mitigate downside risks while seizing new investment opportunities. By leveraging granular, geospatial, and forward-looking sustainability data, investors can better assess exposure, resilience, and market positioning in an increasingly interconnected global economy.
Faster earnings growth associated with more green revenue
Cumulative factor return of MSCI LCT Score in MSCI ACWI Index
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The Climate Transition Is Increasingly About Opportunity
Climate-friendly policies and regulations and the massive reallocation of capital needed in the coming years to ensure a successful shift to a net-zero economy should continue to expand the range of opportunities for both companies and investors.
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Which Sustainability Issues Mattered Most?
Sustainability data can signal stock-market torpedoes — or long-term winners. Our research reveals the key environmental, social and governance indicators that helped investors avoid sharp drawdowns and capture outperformance.
Read more -
Bringing clarity to climate investing
MSCI can help you understand, monitor and manage the risk and return of climate exposures with our integrated data, analytical tools, indexes and research insights.
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The MSCI Principles of Sustainable Investing
Download
CTA - Financial Relevance
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