June 21, 2019 / News

MSCI launches climate indices

By Joe McGrath, ESG Clarity

The range is designed for investors looking to benefit from the transition to a low carbon economy

MSCI launches climate indices

Index provider MSCI has launched a range for investors seeking to measure investment opportunities associated with the transition to a low carbon economy.

The MSCI Climate Change indices are designed for those looking to integrate climate risk considerations into their global equity investment processes.

Securities on the indices are reweighted based on a “Low Carbon transition score” calculated by MSCI. This score measures how the transition to a low carbon economy is likely to affect the business practices of each company and how well equipped each business is to seize opportunities in alternative energy and clean tech.

“The devastating impacts of climate change will be felt beyond the traditional horizons of most sectors and it is critical that the investment industry collaborates to enable the transition to a low carbon economy, before climate change becomes a defining issue for financial stability,” said Remy Briand, head of ESG at MSCI.

“While there are transition risks associated with taking early action, there is a growing body of evidence to show that earlier action will ultimately mean a less costly adjustment.”

This new climate change index range will increase exposure to companies that are explicitly seeking to develop solutions to address climate change. These indices will also be underweighted to companies with the potential for stranded assets.

“At MSCI, we continue to develop our climate change solutions using next generation data, analysis and tools to help with the 1.5-degree alignment,” Briand added.

“As climate research continues to evolve, we will ensure the MSCI Climate Change Indexes reflect the latest developments.”