June 29, 2011
MSCI Launches Socially Responsible Index Series
by Robert Kropp
The indexes add exclusions of controversial industry sectors to the best-in-class criteria used by
MSCI in its ESG index series.
Last week, when MSCI announced the launch of its
MSCI ESG Manager platform,
Managing Director Remy Briand noted that since the company's acquisition of RiskMetrics a year ago,
it has "been building out the new MSCI ESG (environmental, social, and corporate governance)
Research and Index businesses."
The expansion of ESG services offered by MSCI took
another step yesterday, when the company announced
the addition of 25 new indexes to the ESG index series it launched in September 2010.
new indexes include five MSCI Global Socially Responsible Indexes, the selection universe of which is
defined by the constituents of the ESG index series. The constituents of the ESG index series are
selected by MSCI based on their ESG performance.
In addition to the "best-in-class"
selection criteria used for the ESG indexes, the Global Socially Responsible Indexes will also
exclude companies in industry sectors that are often avoided by values-based investors. Sectors
that are excluded from the indexes include alcohol, firearms, gambling, military weapons, nuclear
power, tobacco, adult entertainment, and genetically modified organisms (GMOs).
"Further," MSCI stated, "These Indices aim to target sector weights that reflect the relative
sector weights of the underlying MSCI Global Investable Market Indices to limit the systematic risk
introduced by the ESG selection process." Sector weighting, according to Morningstar, divides
stocks into three super-sectors and 11 sectors, and is used to determine a fund's exposure to
downturns in each sector.
The new Global Socially Responsible Indexes include the MSCI
World Socially Responsible Index, as well as regional indexes that cover the US, Canada, Europe and
the Middle East, and the Pacific.
In addition to announcing the launch of the Socially
Responsible Indexes, MSCI also announced the addition of 11 new regional and country indexes to its
ESG index series. The company also launched nine new ESG indexes that exclude such controversial
weapons as cluster bombs, landmines, chemical, biological, and depleted uranium weapons.