MSCI adds climate action indexes

Selects companies based on SBTi targets, green revenues, climate risk management and track record

MSCI has launched a suite of climate indexes for equity investors looking to reduce emissions.

The MSCI Climate Action Indexes will select and rank companies based on four main indicators, Christine Chardonnens, executive director, global ESG and climate indices at MSCI, told ESG Clarity.

These are carbon intensity, Science-Based Targets Initiative (SBTi)-approved targets or a similar credible track record, green revenues, and the strength of their climate risk management.

The carbon intensity reflects the current state of the company and the forward-looking indicators (SBTi-approved target, credible track record, green revenues and climate risk management) are used to assess the steps companies take to reduce their emissions, Chardonnens added.

The investible companies are then ranked by these criteria, selecting the top half for inclusion in the index.

The indexes also use MSCI ESG Business Involvement Screening Research and MSCI Climate Change Metrics to identify and remove controversial companies.

MSCI said the indexes are designed for equity investors who are looking for broad sector coverage and are seeking to drive the low-carbon transition in the real economy by investing in companies making progress towards emission reduction targets. 

Melissa McDonald, head of ESG and climate indexes at MSCI, said: “The MSCI Climate Action Indexes helps 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.”

The suite comprises 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.