Citing the rise in demand for socially responsible investments, MSCI is expanding its coverage of environmental, social and governance (ESG) factors to the portfolios of mutual funds and exchange-traded funds (ETFs).
MSCI ESG Research on Tuesday announced it is expanding its research coverage to measure the ESG characteristics of the portfolio holdings of 21,000 mutual funds and ETFs. Each fund will receive an overall ESG quality score, a peer group percentile rank, and individual environmental, social and governance scores.
The overall ESG score aims to reflect the ability of a fund’s underlying holdings to manage medium- to long-term risks and opportunities. As well, MSCI will rank funds based on various factors such as impact on sustainability, values alignment, and ESG risks, including carbon footprint.
MSCI says that the new coverage comes in response to demand from investors. “The development of Fund Metrics was based on client consultation, which included some of the world’s largest wealth managers who are looking for greater insight into the ESG attributes of their portfolios, reflecting growing attention to ESG among investors,” says Eric Moen, managing director of MSCI ESG Research, in a statement.
“The demand from clients who want to consider ESG criteria to align their investments with their values is continuously increasing,” he adds. “Fund Metrics is a natural extension of our ESG ratings and research, adding even more transparency as the sustainable investing movement gains momentum.”
“We are delighted to see that MSCI ESG Research now provides tools designed to assist with fund due diligence and monitoring on ESG and impact characteristics,” adds Anna Snider, head of due diligence for Merrill Lynch Global Wealth and Investment Management CIO Office.
The new metrics will be made available from MSCI ESG Research directly, and through third-party platforms, starting this year.