MSCI, a leading provider of critical decision support tools and services for the global investment community, has broadened the coverage provided by MSCI ESG Research by unveiling ratings in the equity and fixed income universe according to likely exposure to long-term ESG risks and opportunities.
Each fund or ETF scores a rating on a scale from AAA (leader) to CCC (laggard). The rating is based first on the weighted average score of the holdings of the fund or ETF. MSCI then assess the ESG momentum to gain insight into the fund’s ESG track record. This is designed to indicate a fund’s exposure to holdings with a positive rating trend or worsening trend year on year. Finally, MSCI reviews the ESG tail risk to understand the fund’s exposure to holdings with worst-of-class ESG Fund Ratings of B and CCC.
Remy Briand, MSCI Head of ESG said: “It is designed to provide investors with greater transparency to better understand the ESG characteristics of fund and ETF components of their portfolios. As the number of ESG funds proliferate and ESG-orientated investment options and ESG strategies are being adopted by wealth and fund managers, we strive to provide the tools and solutions to help these investors better understand ESG risks.”
The ratings are designed to offer investors greater insights into the ESG characteristics of funds and ETFs as well as provide key additional information that may be used as part of clients’ ESG fund research, product selection, portfolio construction and portfolio reporting processes across asset classes. Specifically, they may be used by wealth and fund managers seeking to:
– Screen for funds to align with client values
– Offer reporting on the sustainability of client investments
– Measure the positive impacts arising from investments
– Complement manager due diligence
More than 200 additional metrics provide insights across multiple diverse dimensions, such as carbon footprint, water exposure or governance risks. These can be used by investors seeking to align a portfolio to personal or organizational values or identify a report on a measurable social or environmental impact.
“Through the MSCI ESG Fund Ratings we are providing our clients with an intuitive rating to assist their risk management and investment decision processes and to power better investment decisions,” adds Briand.