The launch this April of the MSCI ACWI Sustainable Impact Index along with the MSCI ESG Sustainable Impact Metrics has been designed and touted by MSCI inc (Ethical Investments).
The £5.1 bn ($7.5B) NYSE-listed firm, as allowing institutional investors to “measure their exposure “ to public companies whose products and service help to address major social and environmental challenges.
The new framework, which aligns with the Sustainable Development Goals (SDGs) that were adopted by the United Nations back in September 2015, has given the firm an opportunity to “offer tools to provide insight into what we define as Sustainable Impact” according to Linda-Eling Lee, Managing Director and Global Head of ESG Research for MCSI.
PhD-Harvard educated Eling Lee, who leads one of the largest teams of research analysts globally that identify risks and opportunities arising from material ESG (Environmental, Social and Governance) issues, revealed that the framework was developed after consulting over 25 of the world’s leading asset owners and managers (Ethical Investments).
“(They)” agreed that there is room for new impact-orientated thematic investment approaches in public equity markets,” she said. MSCI was well placed here as it serves 97 of the top 100 largest asset managers.
To date, impact investing has largely been limited to small-scale, private equity strategies. And, not until now had there been a tool that aims to “measure the extent to which exchange-listed companies are involved in solutions for a more sustainable society and environment”, she added.
Specifically and amongst key insights, MSCI grouped 17 SDG goals into five “actionable” impact themes, namely: (1) Basic Needs; (2) Empowerment; (3) Climate Change; (4) Natural Capital; and, (5) Governance (Ethical Investments).
By utilising the MSCI ESG Research Sustainable Impact Metrics database, a total of 987 companies in the MSCI ACWI Index (c.40% of companies in the index at March 31, 2016) were found to derive revenues from “sustainable impact” themes.
Among these, 339 companies derived “at least 20%” of their revenues sustainable impact themes and 123 secured the majority of their revenue from this theme. Enlarging the sample to small caps, 1,593 companies were identified in this index with revenues “tied to environmental impact” themes (Ethical Investments).
MSCI’s findings revealed that an US$1m investment into a sample portfolio replicating into a sample portfolio replicating the MSCI ACWI Index by 100% would have resulted in c.US$181,203 in annual revenues from “social impact” solutions as well as almost US$360,000 in annual revenues from “environmental impact’ solutions”.
(Ethical Performance Magazine, May 2016)
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