Sustainable Companies Attracted More Indexed Capital
Analysis of over 2,500 constituents of the MSCI ACWI Index found companies that most effectively managed their financially material sustainability risks attracted significantly larger indexed flows when assessed across MSCI’s Sustainability and Climate (S&C) Indexes. Specifically, companies with an MSCI ESG Rating of AAA received 15 times more indexed capital than those rated CCC, when normalized for market capitalization.1
Similarly, we found that companies within MSCI S&C Indexes that had a lower MSCI Implied Temperature Rise (ITR) were associated with higher indexed flows; again adjusted for company size. Companies with a 1.5°C aligned ITR attracted more than double the passive flows than companies with a misaligned ITR above 5.0°C.
We’ve previously pointed to long-term evidence about the financial benefits for companies that effectively manage their sustainability risks, including equity market outperformance, lower option-adjusted credit spreads and more stable revenues and cash flows. With over USD 1 trillion in assets under management (AUM) now benchmarked to MSCI’s S&C Indexes,2 these benchmarks are increasingly shaping real-world capital flows. It is therefore increasingly valuable for companies to understand how their sustainability profile compares to peers and to identify improvements that can help capture the potential financial benefits of index inclusion, from higher indexed flows to lower costs of borrowing.
The charts below show that companies with stronger MSCI ESG Ratings and lower ITR attracted more indexed investment (as measured by the passive free-float ratio) than their company size would suggest, demonstrating real-world benefits of stronger sustainability and climate profiles.
Data as of March 31, 2025. The chart shows the passive free-float ratio (total passive AUM divided by free-float market capitalization). The passive free-float ratio compares a company’s passive AUM across all S&C indexes a company is included in to the shares available for public investors, showing whether it attracts more or less passive investment than its size alone would suggest. Source: MSCI ESG Research
Data as of March 31, 2025. The ratio shown is total AUM divided by free-float market cap. ITR estimates how a company’s emissions pathway aligns with global climate targets (in degrees Celsius). A 1.5°C ITR is fully aligned with the Paris Agreement. Source: MSCI ESG Research
Subscribe todayto have insights delivered to your inbox.
Index Composition Viewer
Gain insight into index inclusion, passive AUM exposure and sustainability metrics with MSCI’s Index Composition Viewer.
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.
Insights on MSCI ESG Ratings and Business Performance
Do ESG ratings indicate better business performance? See what the data reveals about the connection between sustainability, operational stability and efficiency and long-term business performance.
1 MSCI ESG Ratings assess companies’ resilience to financially relevant sustainability risks and opportunities.
2 MSCI index–benchmarked assets include active funds, non-ETF indexed funds and ETFs as of Dec. 31, 2024, reported on or before March 31, 2025, using data from MSCI and third-party sources (Morningstar, Refinitiv, Bloomberg). Only primary ETF listings are counted.
The content of this page is for informational purposes only and is intended for institutional professionals with the analytical resources and tools necessary to interpret any performance information. Nothing herein is intended to recommend any product, tool or service. For all references to laws, rules or regulations, please note that the information is provided “as is” and does not constitute legal advice or any binding interpretation. Any approach to comply with regulatory or policy initiatives should be discussed with your own legal counsel and/or the relevant competent authority, as needed.