30 March 2020
The Bloomberg Barclays MSCI Green Bond Index has been voted as best index for the fourth year running.
Market participants continue to value the way in which the index screens potential constituents for the green credentials of their bonds, and will exclude issues that do not follow up with impact reporting.
The index rules combine two components; fixed income and green bond criteria. Fixed Income criteria are implemented by Bloomberg Barclays, mirroring the Bloomberg Barclays Global Aggregate Bond Index criteria to ensure representativeness, predictability, and potential for investment.
Securities are also evaluated by MSCI's environmental, social and governance (ESG) research team, looking at four dimensions to determine whether a fixed-income security meets its green credentials. These eligibility criteria reflect themes articulated in the Green Bond Principles and require clarity about a bond's stated use of proceeds, process for green project evaluation and selection, process for management of proceeds, and commitment to ongoing reporting of the environmental performance of the use of proceeds.
In 2019, MSCI ESG Research enhanced its green criteria to reflect prevailing market views and developing standards through a client consultation. In response to this consultation, MSCI received views from some of the largest clients of the index, and from market bodies such as the International Capital Market Association (ICMA).
The index continues to evolve. It now considers green mortgage-backed securities to be eligible, if they have undergone renovations that have resulted in a minimum of 30% improvement in their energy efficiency.
Its 2019 consultation also discussed the proposed EU Green Bond Standard, specifically how its clients would like the methodology to evolve, given the increased regulatory focus on green bonds.