Indexes play a crucial role when it comes to investing.
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Index Education - Ch3 Intro
A framework for index integrity
Index governance refers to the systems or procedures that provide oversight of the design, calculation, and maintenance of indexes.
We believe that a solid governance infrastructure is essential to protect the integrity of the index construction and maintenance process, and to address conflicts of interest. It helps us deliver indexes that are relevant and may be used as the basis for financial products.
Principles for consistency, independence and transparency
We have identified five key index governance principles:
- Expert-led decision-making committees. Their focus is to prevent decisions being made unilaterally and to ensure consistency with published methodologies and policies.
- Committees staffed by MSCI employees. Their goal is to retain editorial and operational independence.
- An announcement policy. This policy is designed to prevent selective disclosure of index related decisions. Actions are communicated to market participants in a timely manner.
- Publicly available, rules-based methodologies. They aim to provide transparency and avoid the implementation of undefined, ad-hoc index rebalancing or “stealth” methodology changes.
- A robust consultation process. This is designed to reflect broad views and maintain the evolution of the indexes with the evolution of views of market participants.
Committees that provide oversight
Our index governance framework is based on a committee structure. The committees are staffed by MSCI employees and each focuses on a specific area of oversight. From risk & regulatory compliance to new methodology and methodology developments.
The role of our internal committees is to ensure that decisions are not made unilaterally and that all sides of an issue are fully explored before decisions are made final. Their role is also to ensure that decisions are made in accordance with index methodologies and policies.
Our approach to index governance is built on transparency and independence. This is critical to objectivity, efficiency and avoiding conflicts of interest.
Index Education Audio Series
Our index audio series
Listen to the voice of index experts across MSCI.
new ep - AudioSeries3
Index Governance (03:07)
In this episode, we focus on the key aspects of index governance and MSCI’s approach to protecting the integrity of indexes.
Index Education - Ch3 Intro 2
To enable indexes to effectively be used as the basis for financial products, MSCI implements a governance process. It is designed to protect the integrity of the index construction and maintenance processes, while addressing any potential conflicts of interest.