Enhancements to MSCI’s Fund ESG Ratings
Research Paper
March 24, 2023
Preview
Institutional investors that have a fiduciary duty to consider significant investment risks now often analyze the ESG characteristics of their funds' investment profiles. Assessments of funds' ESG characteristics can be an important input to the fund selection process, but to be useful for decision-making, assessments need to provide meaningful differentiation and a meaningful reflection of funds' ESG exposures.
Changes to MSCI's Fund ESG Ratings methodology aim to raise the requirements for a fund to be assessed as "AA" or "AAA" rated, improve stability in Fund ESG Ratings and add transparency through simpler attribution analysis. This means the distribution of the fund ratings will shift, and approximately 31,000 funds in our universe will see one-time downgrades as a result.
The methodology changes were driven by consultations with clients, based on market feedback and are not, as has been reported, linked to regulatory developments in the EU or elsewhere.
MSCI's Fund ESG Ratings universe and methodology
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