Leading index provider to the exchange-traded fund industry MSCI has launched the MSCI ESG Universal Indexes, designed to enable pension funds, endowments and other institutional asset owners to better focus on environmental, social and governance issues in their investment decision-making processes. The index suite covers global, developed global US, European and emerging markets exposure.

Diana Tidd, MSCI’s Global Head of Index.

To target high ESG performers, the MSCI ESG Universal Index moves away from a free float market cap weighting and tilts toward companies that demonstrate both a robust ESG profile and a positive ESG trend.

By focusing on weighting companies rather than excluding them, the index maintains characteristics similar to the broad equity market, and is thus suited to comply with the investing requirements of large institutional investors.

Companies found to be in violation of international norms (for example, facing severe controversies related to human rights, labour rights or the environment) and those involved in controversial weapons (for example, landmines, cluster munitions, depleted uranium, and biological and chemical weapons) will be excluded however to limit exposure to companies deemed to have abnormally high ESG risks.

“The MSCI ESG Universal Indexes offer the world’s largest asset owners a scalable way to integrate ESG into their investment decision-making processes,” said Diana Tidd, MSCI’s Global Head of Index. “Asset owners can use the MSCI ESG Universal Indexes to facilitate asset allocation or to help implement investment strategies in accordance with their ESG goals.”

The MSCI ESG Universal Index family comprises five indexes:

MSCI ACWI ESG Universal Index
MSCI World ESG Universal Index
MSCI Europe ESG Universal Index
MSCI EM (Emerging Markets) ESG Universal Index
MSCI USA ESG Universal Index

MSCI has over 700 ESG indexes with more than $56bn in assets dedicated to investments benchmarked to them.