We analyze the index-level carbon emissions of the MSCI ACWI, ACWI ESG and Socially Responsible Investing Indexes, in terms of both financed emissions and emissions intensities, to see what the trends are and what’s driving them.

Our previous research discussed a framework for investors to attribute changes in equity portfolios’ emissions to their primary drivers. We now adapt it to identify and analyze two approaches to tracking a multi-asset-class portfolio’s carbon footprint. 

How did our flagship climate and ESG indexes fare versus the broader market in the second quarter? And how much did constituent companies decarbonize since the quarter before? We delve into the specifics.

Several factors can drive the changes in a corporate-bond portfolio’s emissions. Our framework helps disentangle these variables and provides investors with greater clarity into their climate-aware strategies. 

Tracking a portfolio’s carbon footprint can be challenging given the multiple drivers of changes in emissions. Our framework attributes these changes to their primary drivers, including changes in issuers’ emissions, ownership and financing structure.

We present a framework that allows investors to understand to what extent changes in a portfolio’s carbon footprint are due to companies’ real-world decarbonization efforts, a portfolio manager’s investment decisions or changes in companies’ financing.

Our analysis of ESG factor performance in 2022 suggests that time horizons, as well as specific sectors and regions, may be significant in assessing the return characteristics of ESG portfolios. 

While the energy crisis has boosted the energy sector overall, individual company performance has varied markedly. Our analysis shows that businesses with above-average strategies to manage a low-carbon transition outperformed.

Could equity managers have maintained their energy exposure during the sector’s recent outperformance while also reducing carbon emissions? We find that they could have lowered emissions but with some trade-offs during our study period. 

There have been several dynamics that have influenced climate-index performance in the third quarter and first nine months of 2022. We examine the impact of macroeconomic and financial conditions on risk, return and sectors. 

In this article published in the Journal of Financial Data Science, coauthors from MSCI and MIT develop and describe a data-driven system using AI tools to capture market perception and, in turn, group companies into peer clusters.