MSCI’s proposed global socially responsible indexes are being critiqued by not only MSCI clients but by the wider community as MSCI widens its consultation process for the proposal.
MSCI’s executive director, Michael Anderson (pictured), said the global index provider is consulting with different market participants (clients and non-clients) such as passive and active managers, asset owners and brokers.
“So far MSCI had consultation discussions with all these types of market participants,” he said. “MSCI is happy to speak with any market participant interested in sharing his feedback.”
MSCI is also actively soliciting feedback from its major clients.
The SRI index is part of a bigger proposal to create an “extensive lineup” of indexes that will incorporate ESG for the first time, including country and industry indexes and all will adopt the best-in-class methodology.
The global social responsible index aims to support the benchmarking and other index-related needs of investors who seek to invest in accordance with their values, such as religious beliefs, moral standards or ethical views.
Companies that are inconsistent with a specific values-based criteria will be excluded from the proposed index, instead it will specifically target companies with high ESG ratings relative to their sector peers.
“In the current methodology proposal, MSCI would apply a screening based on the company’s individual ESG rating in order to ensure high ESG quality as well as based on a ‘standard’ set of values-based criteria: alcohol, civilian firearms, gambling, military weapons, nuclear power, tobacco, adult entertainment and GMO,” said Anderson. “All the research information (ratings and values-based screens) used in the construction of the MSCI ESG Indices are developed and maintained in house my MSCI ESG Research.”
Anderson said the current proposed MSCI Global Socially Responsible Index would include 422 constituents, based on December 1, 2010, data.
MSCI launched the proposal, which propelled ESG factors into the mainstream, following its merger with RiskMetrics in June last year.
“The consultation was launched based on preliminary client interest in such an index,” said Anderson.
It is not definite at this stage if the consultation will lead to the creation of the MSCI globally socially responsible indices; a final decision will be announced March 4.