Industry Updates

MSCI launches range of climate action indices

The indices will take a ‘best-in-class’ sector approach to climate

Theo Andrew

a white globe in the grass

MSCI has launched a new suite of climate action indices designed to track companies making progress toward reducing their emissions.

The 12 indices are split geographically with all investing in the 11 global industry classification standard (GICS) sectors.

The range includes 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, EAFE, EMU, India, Japan and will also be available to investors.

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 will select companies in each sector by recording their initial reduction targets, climate risk management and green revenues, excluding 50% of companies based on these metrics.

Speaking to ETF Stream, Christine Chardonnens, executive director for global ESG and climate indices at MSCI, said: “There is not a one size fits all approach to climate investing, there is a variety of views preferences and beliefs, some investors have decided to low carbon strategies, remove and reduce exposure to carbon intensive companies and sectors.

“However, there is also a group of investors that prefer participating and driving the transition of the real economy by staying invested in the companies that are carbon intensive like energy and carbon materials, provided those companies are showing a willingness to transition.

“After speaking to investors, it became clear we had a gap in our framework.”

Furthermore, the indices will help investors get exposure to the Glasgow Financial Alliance for Net Zero (GFANZ) recommendations.

Melissa McDonald, head of ESG and climate indices at MSCI, added: “At a time when the climate crisis must be tackled head-on, the decarbonization of investment portfolios is a critical first step.

“The indices help investors looking to fulfil 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.”

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