The market for labeled bonds brings together issuers that wish to raise capital to finance various environmental and social commitments and build rapport with sustainability investors. We examine the key developments so far in the calendar year.

Not every lender in U.S. commercial real estate is at risk over their exposure to the sector. We illustrate how the timing of loan originations and the property types of the collateral can make a difference for lenders.  

Today is the last part of a three-part series we've done for ESG now: we examine whether investors should care about incorporating environmental data into equity analysis. In previous episodes we discussed the social pillar and the governance pillar, now it’s on to the environmental pillar of our ESG ratings model. We look at the environmental pillar as a whole and the themes that build it and tell you whether companies that scored well on each theme performed better than their lower scoring peers.

Our analysis suggests that incorporating ESG and sustainability considerations into Islamic finance not only aligns with the ethical mandates of Sharia law but also has the potential to improve financial outcomes. 

To adhere to ESMA’s fund-naming guidelines, sustainability-minded fund managers may have to choose between fund name and preferred investment strategy. Our analysis shows that almost 11% of MSCI ACWI IMI constituents by weight could become ineligible investments for such funds.

The small-size premium has declined over the last five years, with market dynamics, deglobalization and inflationary pressures playing contributing roles — a trend that has continued into 2024. We analyze the small-cap space across regions. 

Global institutional investors in Chinese equities, either using fundamental or quantitative approaches, may find potential opportunities in sector rotation and in factors’ deviations from their long-term patterns.

Interest-rate uncertainty and restructured trade networks are drawing attention to export-oriented markets. MSCI’s equity models, using foreign-sensitivity exposures, have highlighted wide differences in exporter firms’ performance across regions.  

After the Federal Reserve recently cut rates and indicated that further reductions were likely, the equity market rallied. But sell-offs in August and September signaled investor concerns about an economic slowdown. What are potential outcomes to consider? 

Companies with high climate-change risk scores have consistently outperformed, underscoring the value of integrating carbon data into equity analysis. Incorporating environmental opportunities into portfolios has been less straightforward, though the outlook is more optimistic.  

Carbon-credit users typically outperform non-users in disclosing and reducing their emissions, setting targets and investing in low-carbon technologies, while integrity in carbon markets is also improving — key takeaways from MSCI’s Climate Week NYC event.  

Amid a sharp asset-price decline and weakened occupier demand, billions of dollars of loans tied to the U.S. office market are coming due. We chart the lenders behind the maturing loans and estimate the volume of debt that has been extended. 

Location and granularity may be the new mantra in assessing climate-related physical risk, while private assets and AI have a growing role in the decarbonization — key takeaways from MSCI’s Climate Week NYC event on “Financial Frontiers: Climate Strategies and Transition Frameworks.”

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.  

It’s climate week in The Big Apple! And the perfect time to take a look at different investment approaches to a low-carbon transition. We talk through financial risks and opportunities for companies, transition funds, and how the things are playing out in bond markets.

Using statistics based on past flood events to estimate the likelihood of future flooding is increasingly outdated. Forward-looking climate-scenario analysis to accurately estimate current and future flood risk is becoming key. 

Distributions and holding periods in private markets remain key considerations for assets owners. We examine the trends and also summarize the performance of major asset classes in Q2 2024. 

Chronic heat is causing stress on workers and driving the need for adaptations to current working conditions. Using geospatial intelligence, we assess the potential impact of heat at the asset level for U.S. constituents of the MSCI ACWI Investable Market Index. 

Have users of carbon credits reduced emissions faster or slower than non-users? Our latest report contradicts the notion that companies have used carbon credits as an alternative to investing in climate mitigation activities within their businesses. 

Sustainable investing for sovereign bonds may come with a caveat: Green bonds tend to have longer duration profiles than non-labeled equivalents. What does it mean for fixed-income investors with a climate mandate? 

Flooding is one the costliest of all natural hazards and climate change is raising the stakes. In this episode, we discuss the need for precise asset locations and forward-looking climate models to figure out your risk exposure.

This report describes the methodology of the MSCI Carbon Project Ratings and finds that of the more than 4,000 projects assessed, fewer than 10% are rated in the AAA-A band. There are, however, some encouraging signs of a trend to increasing integrity. 

We examine the state of the real estate debt market, including hot-button topics, such as central bank rate setting and low-occupancy office buildings, while not losing focus on other market drivers and other market segments.

Since the introduction of the U.S. Inflation Reduction Act, there has been an influx of investments from companies upstream from the power-generation value chain. Understanding these energy-transition trends could be key in identifying opportunities. 

Private-credit funds are in the spotlight because of their growth — and the opaque credit risk of the loans they hold. We use a signal of nonperformance to examine the trends in defaults for the asset class. 

To understand the financial risks from flooding, knowing an asset’s location is important, but so too is its elevation. Using the MSCI GeoSpatial Asset Intelligence dataset we explore the impact of getting it wrong. 

We look at trends in flows and assets under management for small-cap funds across all domiciles since December 2018. Beginning in 2021, net flows have been positive, although the trends for actively managed and index funds have differed. 

The 2024 proxy season has come and gone. In recent years, environmental and social proposals were abundant and saw record high support among shareholders. But what about this year? In this episode we take you through our findings from the 2024 proxy season, what they mean for sustainable investing, and where the future is liking headed.

Expanding opportunity and a supportive policy environment suggest transition funds may continue to grow. While no one can be certain, understanding the market can help investors determine the best way forward, and how they can work to stand out.  

Some sovereign-bond investors seeking to support climate mitigation might be interested in the idea of increasing their exposure to issuers with lower carbon emissions. Would this have been a good approach? 

Implied volatility, based on at-the-money options, rose in early September in several regional markets. Put-option premiums, below their five-year median, suggest protection against rising volatility could potentially still be attained at lower cost.  

Getting a read on leverage in private-equity portfolio companies is key for institutional investors who want to better understand risk and return drivers. We examined trends over the past decade, comparing buyout companies to public small caps. 

We propose a risk-based framework to aid asset allocators, including wealth managers, in better understanding active ETFs as an investment category and to help discern between genuinely active strategies and enhanced indexing. 

Climate scenario analysis is increasingly becoming a global supervisory expectation for financial institutions. We illustrate how financial-impact analysis can be conducted using proxies derived from the MSCI GeoSpatial Asset Intelligence dataset. 

A key aspect of controlling climate change is the energy transition. We bring in experts from MSCI ESG Research and Cohen & Steers to see what progress has been made and to discuss the associated risks and opportunities.

Assessing the widespread exposure and varying characteristics of coastal, fluvial and pluvial flooding is imperative for financial institutions to understand and manage the potential financial impacts of different flood types. 

Over the last 30 years, high geopolitical risk has been associated with lower equity returns and higher forecast volatilities. We show that measures of geopolitical risk have provided useful information beyond conventional measures of uncertainty. 

Antimicrobial resistance is getting worse. Set to impact healthcare, agriculture and insurance, it’s a phenomenon worth paying attention to. On this episode, we take a look at whether there’s an investment case for fighting back against the superbugs. 

We explore the crucial role of capital expenditure in meeting climate targets and show why investors need to look beyond just emissions trends to forecast a company’s dedication to a sustainable future. 

Excess returns in private markets are often attributed to the extra compensation for carrying liquidity risk, but is this perception of risk warranted? We analyzed various buyout-allocation targets to find evidence for the concern.  

Bond investors evaluating their decarbonization targets may want to consider different scenarios for projected carbon emissions of companies in their portfolios. We assessed three scenarios’ impact on portfolios aiming for different decarbonization levels by 2030. 

After the Bank of Japan’s rate hike on July 31, equity market volatility rose sharply. Emerging and EAFE markets were less volatile than the U.S., but their volatility spreads veered in opposite directions, with the EM/U.S. spread hitting a record low. 

Investors looking to identify leaders and laggards in the auto industry may need to look beyond pure CO2 reductions or even company-declared EV targets and focus more on how companies are managing the tradeoff between emissions and economics.  

Integrating sustainability and climate risk and impact into bond and private-debt analysis is becoming an increasingly important aspect of portfolio construction. This paper discusses a range of metrics that could guide investors in making these assessments.

What’s the state of climate expertise on the boards of the companies in your portfolio? We provide a regional analysis and offer a framework to help investors make their own assessments. 

We periodically put out this report called the net-zero tracker, and it examines the progress by the world’s listed companies toward curbing climate risk. This episode is a dive into the most important bits of that report.

We discuss best practices in sustainability due diligence observed among global banks and offer guidance on how banks can apply MSCI ESG Ratings and data to help manage financially material sustainability risks.  

The concept of tax alpha can help a wealth manager explain a client’s after-tax performance. In a new article in the Journal of Wealth Management, we propose two frameworks for the after-tax calculation used to measure tax alpha. 

For wealth managers and financial advisers seeking customized solutions to meet growing client demand, rules-based management approaches for model portfolios may offer opportunities to improve on traditional management approaches.    

We consider a scenario in which corporate-bond issuers meet their projected levels of emissions reductions — and what it could mean for the fixed-income portfolios of investors with a climate mandate. 

The second quarter provided glimmers of hope that the downturn in global commercial real estate is nearing its end. We discuss our latest findings on deal activity and pricing. 

Sector investing offers a strategic approach for investors looking to gain exposure to distinctive segments of the economy — especially in the U.S. We sat down with experts from within MSCI, as well as with Vanguard’s, Andrey Kotlyarenko, to explore the ins and outs.

A patent cliff in blockbuster drugs threatens many biotech companies but has also spurred new R&D into drugs and innovative treatments. The MSCI Biotech Advance Indexes are designed to reflect the performance of companies leading this innovation. 

The ICVCM’s recent decision to reject renewable-energy projects from its high-integrity label reinforces MSCI’s own integrity analysis of this project type. What could this mean for the future of renewable energy in the carbon-credit market?

The social pillar has often been maligned as the ignored step sibling of the ESG acronym. In its essence, the social pillar is a measurement of how a company, its employees, its products, and the community it operates in are supported and often challenged. For this episode, we show you why that all matters for measuring a company’s market performance.

Private equity outperformed public equity from 2014 to 2023. But discussing performance without considering risk does not provide a full picture for informed asset allocation. We look at three measures of risk-adjusted returns.

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. 

Real estate has been rocked by a rapid rise in interest rates that has stymied deal activity and put downward pressure on asset values. If the Fed lowers rates, will it raise investors’ spirits? Or is this a case of “be careful what you wish for?” 

Our analysis of the professionally managed real-estate universe provides a deeper understanding of the relative size of property markets across the world. For the first time, this annual report also details the property-type composition of the market. 

We examine a scenario for how a sudden disruption in credit markets could affect portfolios, especially given indications of the market’s fragility.  

With stubborn inflation, a plunging Japanese yen and unpredictable elections around the globe, 2024 has proven challenging for fixed-income investors — and for central banks. We sat down with MSCI’s global head of fixed-income solutions research, Afsaneh Mastouri, to talk about the state of fixed-income markets, and what the rest of the year may hold.

We found a strong historical correlation between a company’s MSCI ESG Rating and its cost of capital in both equity and debt markets. Firms assessed as the most resilient to financially material sustainability-related risks financed themselves more cheaply. 

Our analysis of data spanning the last 18 years indicates that systematic options strategies linked to the MSCI EAFE and MSCI Emerging Markets Indexes have consistently exhibited lower risk and lower drawdowns compared to their parent indexes.  

It’s early days for sustainability-linked bonds, where issuers see their interest rates rise after missing sustainability targets. But instead of throwing in the towel after some initial setbacks, we talk about companies that have doubled down on their sustainability commitments.

Board expertise is one lens through which investors can scrutinize companies’ efforts to manage the risks and opportunities of AI, but just how expert in AI are these directors? We use GPT-4 to find out. 

Good governance is foundational to effective capital markets, promoting accountability, transparency and sound decision-making aligned with investor interests. But how do those potential benefits translate into market performance? Well today, we answer that question for you! We answer the question: does governance even matter.

Climate-conscious investors often ask themselves: Are the companies I invest in planning ahead by setting emissions-reduction targets? And, how are these companies performing against those targets?  We look at one way to help answer these questions. 

Ultra-low interest rates provided a massive boon to commercial real estate for years. With higher rates now in effect, what might be the impact on cross-border investors, who have been a key influence on market liquidity and pricing? 

The MSCI Resilient Future Indexes capture eight environmental-opportunity subthemes to help investors broadly identify business activities with the potential to make positive contributions toward achieving a resilient future. 

Private-market investors experienced a sustained slump in distributions across buyout and venture capital and, to a lesser extent, private credit. We look at the recent apparent recovery in private-market cash-flow activity and what that could mean for limited partners. 

The emissions intensity of the sectors that compose the small- and large-cap universes differs, helping to explain why small caps’ emissions intensity has exceeded that of their larger-cap peers. 

Chief Research Officer, Ashley Lester and team assess the evolution of the five key themes affecting investors in 2024. What does the landscape look like for the second half of the year? 

Good governance is foundational to effective capital markets, promoting accountability, transparency and sound decision-making aligned with investor interests. But how do those potential benefits translate into market performance? 

Our panel of experts, led by chief research officer, Ashley Lester, takes stock of global markets as we enter the back half of 2024. Ashley and team examine the short- and long-term issues affecting investors, including the ever changing geopolitical landscape, the continued impact of AI and the role of private markets in the carbon transition.

Currency relationships have been in flux since early 2022. We analyze how these changes have impacted global equities and outline the economic and political events that could influence fixed-income performance over the balance of 2024. 

Indexes can provide vital benchmarks for investors navigating private markets, a significant but relatively opaque investment ecosystem. We explain the hallmarks of building a foundational dataset and creating indexes that are reliable and robust. 

The Federal Reserve is signaling only one rate cut this year, compared to signaling three in March, so rates appear bound to remain higher for longer. Against this backdrop, we updated our macroeconomic scenarios to reflect the latest market data. 

We segmented India’s public equity market to study patterns in its factor, thematic and industry exposures. And to assess how the current market profile could change, we also analyzed private firms that may be in the pipeline to become public. 

Data from over 4,000 issuers, spanning nearly a decade revealed that companies with better MSCI ESG Ratings tended to have a lower cost of capital. It’s big news for investors and another step towards understanding the relationship between sustainability and financial performance. 

A drop in commercial-property prices has led to concern about the loan losses of U.S. lenders. We analyze the collateral for the loans by property type and location to identify what has hurt — or boosted — loan books.  

Developing countries have increasingly looked to carbon markets for conservation finance. But the biodiversity financing gap remains wide. Could Japan’s expansion of its Joint Credit Mechanism into nature-based projects help address this problem?  

Post-election U.K. market surprises seem unlikely, but both major political parties’ manifestos are placing AI and energy in the spotlight. 

There is often a misconception among investors that when it comes to investments in renewables, there is a trade-off between climate impact and financial returns. We crunch the numbers to see if this holds true.  

Our demand for electricity is growing for the first time in decades. Nuclear energy is being proffered as the answer to our voracious energy-appetites. But are investors capable of propping up an industry with so much complexity and risk? This episode provides an answer.

Performance of the MSCI ACWI ESG and Climate Indexes was a mixed bag over the first five months of 2024, but exposures to momentum, information technology and the Magnificent Seven were important contributors to positive returns.  

Investors with climate objectives may rely on temperature-alignment metrics to set goals and track progress. We compare the MSCI Implied Temperature Rise with the metrics from the Science Based Targets initiative to assess their correlation.