New York-based index giant MSCI Inc. announced on Friday that it will start reporting the carbon footprint of its global indices to help institutional investors manage their carbon risk.
The firm will begin publicly reporting the carbon footprints of its global equity indices beginning with its flagship MSCI ACWI, MSCI world and MSCI emerging markets index families.
“Demand from institutional investors for the ability to analyze the carbon footprint of their portfolios relative to a benchmark will likely grow as they become more concerned about carbon risk,” says Remy Briand, managing director and global head of research with MSCI. “Having a standardized carbon footprint measure for our equity indices can help clients better understand their carbon risk at the portfolio level and define precise targets for reduction.”
MSCI has recently seen a surge in demand for data and indices that incorporate environmental, social and governance (ESG) factors, the firm says.
MSCI ESG Research measures three carbon-based metrics: emissions, as represented by the normalized carbon footprint per US$1 million invested in a portfolio tracking the index; carbon intensity, which measures the efficiency of a portfolio tracking the index in terms of total carbon emissions per unit of output; and a weighted average for carbon intensity.
“We are seeing a growing number of investors demanding greater transparency into carbon emissions within their equities portfolios to help monitor, manage and mitigate their exposure to carbon risk,” says Baer Pettit, managing director and global head of products at MSCI, in a statement. “As today’s announcement demonstrates, MSCI is committed lifting the lid on emissions data to help our clients better understand the environmental and economic impact of their high carbon holdings.”