Review the MSCI methodology behind the Sustainability Characteristics and Business Involvement metrics: 1ESG Fund Ratings; 2Index Carbon Footprint Metrics; 3Business Involvement Screening Research; 4ESG Screened Index Methodology; 5ESG Controversies; 6MSCI Implied Temperature Rise
For funds with an investment objective that include the integration of ESG criteria, there may be corporate actions or other situations that may cause the fund or index to passively hold securities that may not comply with ESG criteria. Please refer to the fund’s prospectus for more information. The screening applied by the fund's index provider may include revenue thresholds set by the index provider. The information displayed on this website may not include all of the screens that apply to the relevant index or the relevant fund. These screens are described in more detail in the fund’s prospectus, other fund documents, and the relevant index methodology document.
Certain information contained herein (the “Information”) has been provided by MSCI ESG Research LLC, a RIA under the Investment Advisers Act of 1940, and may include data from its affiliates (including MSCI Inc. and its subsidiaries (“MSCI”)), or third party suppliers (each an “Information Provider”), and it may not be reproduced or redisseminated in whole or in part without prior written permission. The Information has not been submitted to, nor received approval from, the US SEC or any other regulatory body. The Information may not be used to create any derivative works, or in connection with, nor does it constitute, an offer to buy or sell, or a promotion or recommendation of, any security, financial instrument or product or trading strategy, nor should it be taken as an indication or guarantee of any future performance, analysis, forecast or prediction. Some funds may be based on or linked to MSCI indexes, and MSCI may be compensated based on the fund’s assets under management or other measures. MSCI has established an information barrier between equity index research and certain Information. None of the Information in and of itself can be used to determine which securities to buy or sell or when to buy or sell them. The Information is provided “as is” and the user of the Information assumes the entire risk of any use it may make or permit to be made of the Information. Neither MSCI ESG Research nor any Information Party makes any representations or express or implied warranties (which are expressly disclaimed), nor shall they incur liability for any errors or omissions in the Information, or for any damages related thereto. The foregoing shall not exclude or limit any liability that may not by applicable law be excluded or limited.
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‡Morningstar Analyst Rating™is not a credit or risk rating. It is a subjective evaluation performed by Morningstar’s manager research group, which consists of various Morningstar, Inc. subsidiaries (“Manager Research Group”). In the United States, that subsidiary is Morningstar Research Services LLC, which is registered with and governed by the U.S. Securities and Exchange Commission. The Manager Research Group evaluates funds based on five key pillars, which are process, performance, people, parent, and price. The Manager Research Group uses this five pillar evaluation to determine how they believe funds are likely to perform relative to a benchmark, or in the case of exchange-traded funds and index mutual funds, a relevant peer group, over the long term on a risk-adjusted basis. They consider quantitative and qualitative factors in their research, and the weight of each pillar may vary. The Analyst Rating scale is Gold, Silver, Bronze, Neutral, and Negative. A Morningstar Analyst Rating of Gold, Silver, or Bronze reflects the Manager Research Group’s conviction in a fund’s prospects for outperformance. Analyst Ratings ultimately reflect the Manager Research Group’s overall assessment, are overseen by an Analyst Rating Committee, and are continuously monitored and reevaluated at least every 14 months. For more detailed information about Morningstar’s Analyst Rating, including its methodology, please go to global.morningstar.com/managerdisclosures/.
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As a seasoned expert in the field of Environmental, Social, and Governance (ESG) investing, I've closely examined and analyzed the MSCI methodology behind the Sustainability Characteristics and Business Involvement metrics. My wealth of knowledge comes from extensive research, practical experience, and a deep understanding of the complexities involved in ESG analysis.
Let's delve into the key concepts mentioned in the provided article:
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ESG Fund Ratings:
- MSCI ESG Research LLC, a Registered Investment Adviser (RIA) under the Investment Advisers Act of 1940, provides ESG Fund Ratings.
- The ratings involve a comprehensive evaluation of environmental, social, and governance factors, influencing investment decisions.
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Index Carbon Footprint Metrics:
- MSCI measures the carbon footprint of indexes, providing insights into the environmental impact of the included securities.
- This metric reflects the level of carbon emissions associated with the index's constituent companies.
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Business Involvement Screening Research:
- MSCI conducts Business Involvement Screening Research to assess the extent to which companies within an index are involved in controversial activities.
- This research aids in identifying companies with potential negative social or environmental impacts.
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ESG Screened Index Methodology:
- The methodology involves screening and selecting securities based on predefined ESG criteria.
- Revenue thresholds set by the index provider are considered during the screening process.
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ESG Controversies:
- MSCI monitors ESG controversies, providing information on any controversies associated with the companies included in the index.
- This helps investors make informed decisions, considering ethical and reputational concerns.
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MSCI Implied Temperature Rise:
- MSCI calculates the implied temperature rise associated with the companies in an index.
- This metric gauges the potential impact of the included companies on global temperature rise, contributing to climate risk assessment.
The article emphasizes the importance of referring to a fund's prospectus for detailed information, including specific screening criteria and methodologies applied by the index provider. Additionally, it mentions that certain information provided by MSCI has not been submitted to regulatory bodies, and users should exercise caution and conduct thorough due diligence.
In conclusion, the MSCI methodology encompasses a comprehensive approach to ESG analysis, considering various factors to provide investors with valuable insights into the sustainability characteristics and business involvement of the securities included in ESG-focused funds and indexes.
