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MSCI sees surge in ESG product demand

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MSCI, a provider of research-based indexes and analytics, has reported a surge in demand for Environmental, Social and Governance (ESG) data and indexes.

As of July 2015, equity ETF assets tracking MSCI ESG Indexes grew nearly 30 per cent to USD1.8 billion during 2015. Since December 2013, assets have more than doubled, rising by 140 per cent, with 22 new ESG ETFs tracking MSCI indexes. So far in 2015, ten of the 11 ESG ETF’s launched have been based on MSCI indexes, accounting for 96 per cent of the total flows in the category.
 
ETFs tracking the MSCI Low Carbon Indexes accounted for nearly 80 per cent of the total equity ETF assets of carbon themed ETFs since their launch in September 2014, bringing low carbon ETF assets to more than USD460 million as of July 2015.
 
Baer Pettit, Managing Director and Global Head of Products, says: “We’re actively addressing the challenges of integrating ESG factors into benchmarks, whether to meet the needs of investors who believe ESG data can enhance investment decisions or those who simply want to align their portfolios with their values. The principle that holds all of this together is investors’ belief that they can capture the market exposure they want, through an investment vehicle that aims to replicate a transparent, rules-based index.”
 
In the last 12 months, ETF providers and pension funds around the world are increasingly looking to MSCI when taking ESG into consideration in their investment portfolios, including:
 
Merrill Lynch launched new reporting tools using MSCI ESG Research that allow its more than 14,000 financial advisors to view ESG metrics on select individual SMAs and fund managers as well as their new Sustainable Impact Multi-Asset portfolios.
 
UBS launched the world’s first ESG Fixed Income ETF, the Barclays MSCI US Liquid Corporates Sustainable UCITS ETF.
 
The UK’s Environment Agency Pension Fund (EAPF) selected the MSCI World Low Carbon Target Index as the benchmark for its £ 280 million global passive equities portfolio.
 
The Fourth Swedish National Pension Fund (AP4), a fund with assets of GBP24 billion under management, and Fonds de Réserve pour les Retraites (FRR), each benchmarked investments of up to EUR1 billion to MSCI’s Global Low Carbon Leaders Indexes at launch. Amundi, a large global fund manager, also selected the same indexes as their benchmarks.
 
AMF Pension Fund, with USD 65 billion in assets, benchmarked performance for its USD15 billion equity assets against the MSCI ACWI ESG and the MSCI Emerging Markets ESG Indexes.
 
The UN Joint Staff Pension Fund seeded two low carbon ETFs managed by SSGA and iShares that track the MSCI ACWI Low Carbon Target Index.

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