Industry Updates

MSCI launches two climate indices suites amid new EU standards

Tom Eckett

a large iceberg in the water with Perito Moreno Glacier in the background

MSCI has launched two series of provisional climate indices in response to the European Union’s move to introduce new standards on climate change.

The decision to launch the MSCI Provisional Climate Change EU Climate Transition indices and MSCI Provisional Climate Change EU Paris-Aligned indices suites follows the EU Technical Expert Group’s “Final Report on Climate Benchmarks and Benchmarks’ ESG Disclosures” in September.

The EU Commission report agreed the publication of two types of climate benchmarks; the EU Climate Transition benchmark (CTB) and the EU Paris-aligned benchmark (PAB).

MSCI’s indices are designed to meet the minimum standards for these two benchmarks which have four main objectives:

  1. Allow a significant level of comparability of climate benchmarks methodologies while leaving benchmarks’ administrators with an important level of flexibility in designing their methodologies

  2. Provide investors with an appropriate tool that is aligned with their investment strategy

  3. Increase transparency on investors’ impact, specifically with regard to climate change and the energy transition

  4. Disincentivise greenwashing

The two types of benchmarks enable investors not only to hedge against climate transition risks but also look to direct their investments towards opportunities related to the energy transition.

If the final requirements in the final report do not materially change, MSCI is planning to transition the methodologies of its existing climate change indices to the MSCI Provisional Climate Change EU Climate Transition indices methodology by 30 April 2020.

Both indices suites will look to reduce carbon intensity and exclude controversial weapons and companies breaching global standards.

The MSCI Provisional Climate Change EU Paris-Aligned indices will exclude carbon intensive companies.

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Stephane Mattatia, head of index products, EMEA, at MSCI, commented: “MSCI is committed to the continued development of our climate change solutions using next generation data, analysis and tools to reflect industry and regulatory developments.

“These two new index series will allow investors to better grasp the characteristics and associated implications of the new benchmark types defined by the EU Technical Expert Group.”

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