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MSCI Widens Climate Change Index Offerings

Tom Burroughes, Group Editor, June 24, 2019

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The index provider is tapping into the trend of "Green" investing.

Market benchmark organisation MSCI has expanded its suite of indexes to capture sectors that are deemed to help slow or prevent harmful climate change.

The group, aka Morgan Stanley Capital International, has brought out new MSCI Climate Change Indexes. The indexes re-weight securities based on MSCI’s Low Carbon transition score. The score measures a company’s exposure to low carbon transition risk, carbon emissions and fossil fuel reserves, and its exposure to opportunities, including alternative energy and clean technology.

They can be used as a standalone index or as an overlay to an overall ESG strategy, MSCI said.

The indexes aim to increase exposure to those companies providing solutions to address climate change, with twice the exposure to clean technology companies when compared with the underlying benchmark.

As shown by this news service (see example here), there is growing interest in and investor appetite for money-making ideas that are deemed to help rather than hurt the environment. One question that has been raised is to what extent the “passive” approach used in index-tracking funds can fully achieve the kind of environmental effects cheerleaders for “green” investing claim are needed.

EDF, the French utility company, has adopted the MSCI Climate Change Indexes as part of the company’s €28.1 billion ($31.8 billion) dedicated assets fund for secure financing of long-term nuclear commitments (nuclear plant decommissioning expenses and long-term storage expenses for radioactive waste).

The Indexes also help to reduce exposure to stranded assets with 50 per cent lower exposure to thermal coal and four times less exposure to companies with carbon intensive products than the underlying index.

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