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MSCI SFDR PAI Attribution Framework

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MSCI SFDR PAI Attribution Framework

Nov 4, 2024

The MSCI SFDR Adverse Impact Metrics Methodology serves as a guide for investors in understanding the complexities of Principal Adverse Impact (PAI) indicators. With the increasing practice of reporting on PAIs, there is a need to provide clear explanations for the year-on-year changes observed in portfolio PAIs.

We present attribution frameworks for 16 mandatory PAIs. The frameworks are designed to help investors pinpoint how variations in underlying variables influence the evolution of portfolio PAIs. The frameworks allow users to understand whether year-on-year changes are within the influence of the portfolio manager or driven by factors outside their control. They also offer a tool through which investors can assess and adjust their strategies to meet the objectives of sustainable investing.

The exhibit below provides an illustration of an attribution framework, using PAI 8 (emissions to water) as an example.

Attribution tree of portfolio water emissions

Attribution tree of portfolio water emissions

Source: MSCI ESG Research


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Research authors

  • Xinxin Wang, Executive Director, MSCI Research

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