Index maker and services provider MSCI has called for investors to do more to integrate ESG into investment processes to mitigate risk and identify investment opportunities globally, but also to contribute to the shift towards a sustainable global economy.
The call has come in a new framework document - The MSCI Principles of Sustainable Investing - that outlines steps investors "should undertake to improve practices for ESG integration across the investment value chain". Points include:
- Investment Strategy: Asset owners should integrate ESG considerations into their processes for establishing, monitoring and revising their overall investment strategy and asset allocation.
- Portfolio Management: Portfolio managers should incorporate ESG considerations throughout the entire portfolio management process, including security selection, portfolio construction, risk management, performance attribution and client reporting.
- Investment Research: Research analysts assessing companies and issuing investment recommendations to portfolio managers should integrate ESG considerations (including ESG company ratings) into their fundamental company analysis.
Henry Fernandez, chairman & CEO at MSCI, said: "The world is rapidly evolving due to dramatic environmental, social and governance shifts, including the effects and implications of climate change and the move to a low carbon economy, which will significantly impact the pricing of financial assets and the risk and return of investments, and lead to a large-scale re-allocation of capital over the next few decades. The need for a set of guidelines that will help all investment institutions around the world manage emerging opportunities and inherent risks associated with ESG considerations in pursuit of long-term, sustainable investment performance has never been greater. MSCI is fully committed to helping investors make better decisions for a better world, and these Principles of Sustainable Investing play a part towards achieving that mission."
Remy Briand, head of ESG at MSCI, adde: "Sustainable investing is a critically important part of the long-term investment process and our framework is designed to help investors understand approaches to effectively integrate ESG criteria as a core component of building a resilient portfolio. Through our research, tools and efforts to promote transparency, we seek to support investors in the critical quest to integrate ESG considerations in their portfolios."
By 30 April this year, MSCI intends to make public the ESG characteristics of all MSCI Equity Indexes and of the most commonly owned mutual funds.