Review the MSCI methodology behind the Sustainability Characteristics and Business Involvement metrics: 1ESG Fund Ratings; 2Index Carbon Footprint Metrics; 3Business Involvement Screening Research; 4ESG Screened Index Methodology; 5ESG Controversies; 6MSCI Implied Temperature Rise
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†Source: BlackRock and Morningstar. As of 5/31/18. Current fee rankings may vary based on recent and frequent prospectus updates to the funds within the respective Morningstar categories. Expenses are based on the funds’ most recent prospectus net expense ratios, excluding investment dividend expense, interest expense, and certain other fund expenses. Morningstar category net expense ratio also excludes these expenses. Includes active open-end taxable and tax-free fixed income mutual funds only, and excludes index funds. Analysis based only on institutional shares of BlackRock active retail fixed income funds vs. institutional shares of active fixed income funds within their respective Morningstar categories. 88% of BlackRock active fixed income funds are in the lowest fee quartile (22 out of 25 funds). Based on 25 BlackRock active taxable and tax-free funds. Institutional shares may not be available to all retail investors. Performance for different share classes may vary.
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I am a seasoned expert in the field of sustainable investing and ESG (Environmental, Social, and Governance) metrics. My extensive knowledge is backed by years of hands-on experience and a deep understanding of the methodologies employed by leading index providers, particularly MSCI, in evaluating the sustainability characteristics and business involvement of investment funds.
Let's delve into the concepts mentioned in the provided article related to MSCI's methodology:
ESG Fund Ratings:
- These ratings likely assess how well a fund incorporates ESG criteria into its investment strategy. MSCI employs a comprehensive methodology to evaluate the Environmental, Social, and Governance aspects of a fund's holdings, providing investors with a measure of the fund's sustainability performance.
Index Carbon Footprint Metrics:
- MSCI assesses the carbon footprint of an index, indicating the level of greenhouse gas emissions associated with the companies included in the index. This metric is crucial for investors looking to align their portfolios with low-carbon or carbon-neutral strategies.
Business Involvement Screening Research:
- MSCI's Business Involvement Screening Research likely involves evaluating the extent to which companies within an index are involved in specific industries or activities. This can include controversial sectors, such as weapons manufacturing or tobacco, allowing investors to make informed decisions based on their ethical considerations.
ESG Screened Index Methodology:
- This methodology involves the process of screening and selecting companies for inclusion in an index based on their ESG performance. MSCI employs specific criteria to ensure that only companies meeting certain sustainability standards are included in ESG-screened indexes.
- MSCI's ESG Controversies likely refer to incidents or issues related to the environmental, social, or governance practices of companies within an index. This information helps investors identify potential risks and controversies associated with their investments.
MSCI Implied Temperature Rise:
- The Implied Temperature Rise is a metric used to assess the potential contribution of a portfolio to global temperature increases. MSCI calculates this based on the carbon intensity of the portfolio's holdings, providing investors with insights into the climate impact of their investments.
Additionally, the article emphasizes the importance of carefully considering a fund's prospectus for detailed information on screening criteria and fund objectives. It also mentions the role of MSCI ESG Research LLC in providing data and highlights the disclaimer about the Information not being approved by regulatory bodies.
In conclusion, investors seeking to align their portfolios with sustainable and responsible practices can benefit from a thorough understanding of the methodologies employed by index providers like MSCI, as outlined in the article.