Industry Updates

MSCI tightens metrics on Invesco’s Paris-Aligned ETF range

Two new climate objectives have been added to MSCI’s PAB methodology

Theo Andrew

ESG globe world

Invesco will see the metrics on its Paris-Aligned Benchmark ETF range tighten following an MSCI methodology update.

Following a client consultation last year, MSCI said it would be adding an index level implied temperature rise (ITR) objective and an emissions budget objective to its PAB index range.

In a shareholder notice, Invesco said five ETFs with combined total assets under management (AUM) of $770m will be impacted when the changes come into effect on 31 May.

The five ETFs are:

The indices new ITR will be set at 2°C, a metric that estimates the implied global temperature rise by the year 2100 if the whole economy had the same carbon budget over or undershoot level as the portfolio.

Meanwhile, the inclusion of an emission budget aims to ensure the projected aggregated emissions of the index constituents are lower than the estimated carbon budget.

This is aimed to be consistent with restricting global warming at or below 1.5°C.

Earlier this month, the European Securities and Markets Authority (ESMA) published its final ESG and sustainability fund naming guidelines.

ETFs using the term ESG of sustainable in their name must have at least 80% of their investments tied to environmental or social characteristics while also adhering to the PAB exclusion criteria.

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