MSCI index carbon footprint metrics

Weighted Average Carbon Intensity

• What is the exposure to carbon intensive companies?
  Since companies with higher carbon intensity are likely to face more exposure to carbon related market and regulatory risks, this metric indicates a portfolio’s exposure to potential climate change-related risks relative to other portfolios or a benchmark. Agnostic to ownership share, it also facilitates comparison with non-equity asset classes.

* Carbon Intensity is the measure used in the construction of the MSCI Global Low Carbon Indexes

MSCI Weighted Average Carbon Intensity (Tons CO2/$M Sales)

A portfolio’s Weighted Average Carbon Intensity is achieved by calculating the carbon intensity (Scope 1 + 2 Emissions / $M Sales) for each portfolio company and calculating the weighted average by portfolio weight.

At the company level, the carbon intensity (Scope 1 + 2 Emissions / $M Sales) represents the company's most recently reported or estimated Scope 1 + Scope 2 greenhouse gas emissions normalized by sales in USD, which allows for comparison between companies of different sizes. MSCI ESG Research collects company-specific direct (Scope 1) and indirect (Scope 2) greenhouse gas emissions data from company public documents and the Carbon Disclosure Project (CDP).

If a company does not report GHG emissions, then MSCI ESG Research uses a proprietary methodology to estimate Scope 1 and Scope 2 GHG emissions. The data is updated on an annual basis. Scope 1 emissions are those from sources owned or controlled by the company, typically direct combustion of fuel as in a furnace or vehicle. Scope 2 emissions are those caused by the generation of electricity purchased by the company. Scope 3 emissions include an array of indirect emissions resulting from activities such as business travel, distribution of products by third parties, and downstream use of a company's products (i.e. by customers). Most reports of Scope 3 emissions include only some portion of these.

MSCI reports the carbon footprint of its flagship global indexes for investors who are looking to understand, measure and manage carbon risk.

MSCI measures carbon emissions and intensity associated with companies in the indexes, drawing on carbon expertise and research provided by MSCI ESG Research.

Based on the carbon emission data, MSCI calculates Index Weighted Average Carbon Emission Intensity ratio which will help to understand the exposure to carbon intensive companies for its investors.

Download the MSCI Carbon Footprint Index Ratio Methodology.

MSCI measures carbon emissions and intensity associated with companies in the indexes, drawing on carbon expertise and research provided by MSCI ESG Research.

MSCI ESG CarbonMetrics evaluates approximately 8,500 companies, including all constituents of the MSCI ACWI Investible Market Indexes.  When reported carbon emissions data is not available, Scope 1 & 2 carbon emissions are estimated using MSCI ESG Research’s proprietary carbon estimation model.  Using MSCI ESG CarbonMetrics, MSCI provides a variety of metrics for assessing the carbon characteristics of an index or investment portfolio.  Based on both reported and estimated Scope 1 & 2 carbon emissions, MSCI measures the carbon responsibility, efficiency, and exposure attributed to the MSCI Indexes.

Institutional investors are increasingly looking to understand, measure and manage carbon risk in their portfolios.

MSCI’s suite of market, low carbon and ESG indexes are designed to offer informative benchmark comparisons for performance analysis and enable clients to identify portfolios with carbon footprints that may stand out.

MSCI offers a range of data and tools designed to help investors with every phase of their carbon strategy. In addition to carbon emissions data and footprint analysis, MSCI ESG Research offers tools for assessing, measuring and ultimately managing exposure to other areas of potential carbon risks or opportunities, from stranded assets related to fossil fuel reserves to clean technology investments.  MSCI ESG Carbon Portfolio Analytics reports provide integrated portfolio carbon risk assessments as they include a carbon footprint, as well as analysis of an extensive set of carbon risk management and exposure metrics, sourced from sophisticated in-house research.

• Carbon Footprinting 101 - A Practical Guide to Understanding and Applying Carbon Metrics
• MSCI ESG Carbon Portfolio Analytics Factsheet
• Press Release - MSCI Reports Carbon Footprint of Indexes
• Beyond Divestment: Using Low Carbon Indexes Research Insight