Last year saw MSCI launch the MSCI Climate Change Indexes, designed to identify low-carbon investment opportunities and help investors build more carbon-resilient portfolios.
These indexes build on MSCI's existing low-carbon and environmental indexes, but specifically aim to reduce exposure to 'stranded assets', increase exposure to low-carbon solution providers but with no exclusions based on climate change criteria.
One of these new indexes, the MSCI ACWI Climate Change Index, has outperformed its parent index, the MSCI ACWI, for five of the past six years. Data prior to the launch of MSCI ACWI Climate Change in June 2019 was back-tested. This outperformance of its parent index was also achieved by the MSCI World Climate Change Index, using the same back-testing criteria.
“We believe climate change will become the most important investment risk factor over the long term and MSCI is committed to creating solutions to support investors’ decision-making,” said Remy Briand, head of ESG at MSCI. "Institutional investors should be able to analyse the exposure of their portfolios to climate risk and opportunities, manage it through index solutions while also being able to report on their climate strategy.”
MSCI also launched two further climate change indexes, MSCI Provisional Climate Change EU Climate Transition index and MSCI Provisional Climate Change EU Paris-Aligned last year. They are designed to be aligned with guidelines for the EU Climate Transition benchmark (CTB) and the EU Paris-aligned benchmark (PAB), respectively, as defined by the EU Commission's Technical Expert Group (TEG) on Sustainable Finance.
In an active year, the index provider also purchased Carbon Delta, a data analysis and modelling company, which will support MSCI's climate scenario analysis and forward-looking assessment of transition and physical risks.
Since 2014, approximately $270 billion of allocated investments are tracking or benchmarked to MSCI's ESG equity and fixed income indexes.