MSCI has launched a new suite of climate action indices designed to track companies making progress toward reducing their emissions.
The 12 indices consist of companies that are taking measurable steps to cut their emissions, selecting from across the economy using the 11 Global Industry Classification Standard (GICS) sectors.
They include the MSCI ACWI Climate Action index, MSCI World Climate Action index, MSCI Emerging Markets Climate Action index, MSCI USA Climate Action index and MSCI Europe Climate Action index.
However, global ex-US, global ex-Canada, Asia ex-Japan, Europe, Australasia, and the Middle East (EAFE), European Economic and Monetary Union (EMU), India, Japan and will also be available to investors.
Each index is constructed from an MSCI parent index providing broad exposure to large and mid-cap stocks within the respective universe.
MSCI’s Climate Action methodology first screens out issuers involved in severe environment, social and governance (ESG)-related controversies, companies with very high carbon emission profiles, and those manufacturing controversial weapons, tobacco, thermal coal mining, oil sands, and nuclear weapons.
The remaining companies are then assessed relative to their sector peers based on their emissions intensity, emissions reduction commitments, climate risk management, and revenue from greener businesses.
The indices select 50% of the number of companies from each GICS sector, choosing those with the most favourable climate action profiles based on the above assessment.
MSCI said the range was “complete the gap in their index offering” and sits alongside the MSCI Low Carbon Target indices and the MSCI Climate Paris Aligned indices.
It added that the indices are aimed at equity investors who want sector-balanced, broad market exposure while utilising a bottom-up stock selection approach based on both current and forward-looking climate indicators.
The indices may be used as performance benchmarks for actively managed climate-conscious portfolios or may serve as underlying references for new investment products such as exchange traded funds (ETFs).
“At a time when the climate crisis must be tackled head-on, the decarbonisation of investment portfolios is a critical first step,” said Melissa McDonald, head of ESG and Climate Indices at MSCI.
She added, “The MSCI Climate Action Indices help investors looking to fulfill that aim by gaining exposure to the companies that are making meaningful progress towards net zero in the real economy and addressing the systemic risks of climate change.
“This launch demonstrates our ongoing commitment to ensure that investors have the information and tools they need to develop portfolios that meet their net-zero commitments, integrate climate considerations, and fulfill their investment objectives.”
