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Powering better investments to build a more sustainable future

The world is rapidly changing requiring new approaches to investing that take long-term sustainability into account. We believe ESG and climate factors will significantly impact the risk and return profile of investments and lead to a large-scale re-allocation of capital. Learn more about the MSCI Principles for Sustainable Investing.

Holding long term investments requires understanding, identifying and managing financial risks and opportunities. Long term investors must regularly and rigorously assess the resilience of their asset allocation, portfolio construction and risk management decision-making processes.

Our rapidly changing world also presents investment opportunities on an unprecedented scale. For asset owners looking to integrate ESG considerations into their investment processes, ESG benchmarks may be essential tools.

Investors can use an ESG equity or fixed income policy benchmark1, also known as a strategic benchmark, to set a strategic asset allocation, define their reference portfolio, measure performance, and define the eligible universe of investable securities for both the total portfolio and individual allocations.

But how can this be achieved? We developed a six-step framework designed to support institutional investors seeking to integrate ESG & climate into their portfolio construction and benchmarks.


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ESG Framework for Asset Owners - How can you put ESG to work?

 

How can you put ESG to work?

Watch the video.


ESG Framework Video

In this video we explain how our six-step process can support asset owners looking to effectively integrate ESG & climate into their investment processes – to help them better manage risk and take advantage of the sustainable opportunities in financial markets.

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ESG Framework for Asset Owners - Take the first step towards ESG integration

 

Take the first step towards ESG integration

Many asset owners realize that they cannot ignore integrating ESG and climate considerations into how they work and how they invest. As the world changes quickly, and significantly, new investment approaches are required to meet the needs of the times

Effective ESG integration requires careful deliberation, widespread internal acceptance and potentially great disruption with the goal of achieving positive long-term benefits.

Get in touch to learn more about integrating ESG into portfolios and benchmarks.


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ESG Framework footnotes end

1A policy benchmark aims to reflect the investment objectives and strategy of an asset owner and typically incorporates many dimensions such as risk tolerance, liability profile, and eligible asset classes. It will generally deviate from the underlying market benchmarks to reflect the specific investment strategy of the asset owner.

2MSCI Research Insight, Better Together: Policy Benchmarks, Active Equity and ESG. Rao, A. Giese, G. Subramanian, R. and Nagy, Z. January 2021.

3MSCI ESG Ratings are provided by MSCI ESG Research LLC. MSCI ESG Indexes utilize information from, but are not provided by, MSCI ESG Research LLC. MSCI Equity Indexes are products of MSCI Inc. and are administered by MSCI Limited (UK).

4Source: Giese, G., L.-E. Lee, D. Melas, Z. Nagy, and L. Nishikawa (2019). “Foundations of ESG Investing: How ESG Affects Equity Valuation, Risk and Performance.” Journal of Portfolio Management.

5As of May 2020. One year, stock-level performance attribution showed the active return when hypothetically excluding a company from the index one date prior to the corporate incident. There are frequently material differences between backtested or simulated performance results and actual results subsequently achieved by any investment strategy. Past performance — whether actual, backtested or simulated — is no indication or guarantee of future performance. None of the information or analysis herein is intended to constitute investment advice or a recommendation to make (or refrain from making) any kind of investment decision or asset allocation and should not be relied on as such.

6Approximately $294 bn allocated to investments tracking or benchmarked to MSCI ESG equity and fixed income indexes since 2014. Based on publicly available information or press releases published from 2014 to date. Some of the examples listed have not publicly disclosed allocations and are not included in this total.