Screening metrics unveiled as world leaders convene at COP15 to develop a United Nations-backed framework to protect biological diversity this decade
MSCI Inc. (NYSE: MSCI), a leading provider of critical decision support tools and services for the global investment community, today announced the forthcoming launch of tools to help investors identify companies at risk of contributing to biodiversity loss and deforestation.
The new screening tools combine thousands of ESG and climate data points, overlayed with MSCI’s proprietary geolocation data that helps pinpoint a company’s operations. The tools, which MSCI aims to make available to investors in early 2023, include:
- MSCI Biodiversity-Sensitive Areas Screening Metrics, which enable investors to identify companies that have physical assets located in areas of high biodiversity relevance, such as healthy forests, deforestation fronts, or species-rich areas.
- MSCI Deforestation Screening Metrics, which indicate companies exposed to deforestation-related risks, including those that may directly or indirectly (via their supply chains) contribute to deforestation. This could be a result of direct operations in areas of risk, such as the tropics, or by the production or reliance on commodities considered key drivers of deforestation, including palm oil, soy, beef, and timber.
Nadia Laine, Executive Director, Head of ESG Products at MSCI, said: “We have spent decades developing data for global investors to measure risk and opportunities related to climate change and ESG factors. We have applied this experience to emerging issues around nature loss and deforestation. Global biodiversity challenges, such as the spread of invasive species, land-use change, and pollution, will have very tangible impacts on the way in which companies function in the near- and long-term future. MSCI aims to help institutional investors understand those risks on the portfolio level.”
MSCI announced the forthcoming launch of these tools during the 15th Conference of the Parties (COP 15) in Montreal, which is set to provide a framework with specific goals to protect biodiversity and the world’s natural capital by 2030. Emerging financial regulations – such as the European Union Biodiversity Strategy 2023, or recent EU legislation banning imported good connected to deforestation – are also bringing companies under more scrutiny for contributing to nature loss, presenting new financial risks for their investors.
MSCI ESG Research’s ESG and Climate Trends to Watch for 2023 report indicates that companies’ level of preparedness for these types of regulation is low, as less than 12% of food product companies had disclosed a deforestation policy as of October 2022. According to MSCI ESG Research data, 11% of constituents of the MSCI All Country World Index as of Nov. 30, 2022 have the potential for direct or indirect contribution to deforestation.
Sylvain Vanston, Executive Director, Climate Investment Research at MSCI ESG Research, said: “The biodiversity on our planet is declining at an alarming rate largely due to human activity, from habitat destruction, pollution, water stress to climate change-related pressures. This decline in the ability of nature to provide ecosystem services poses a major threat to the global economy. Important steps are being made with world leaders meeting at COP15 in Montreal, and the Taskforce on Nature-related Financial Disclosures is also aiming to redefine a standard reporting framework. However, for crucial action to be taken, capital markets participants need to have access to timely and robust data to make more informed investment decisions. Understanding risks related to deforestation and certain activities in sensitive regions is an important step in this direction.”
About MSCI Inc.
MSCI is a leading provider of critical decision support tools and services for the global investment community. With over 50 years of expertise in research, data, and technology, we power better investment decisions by enabling clients to understand and analyze key drivers of risk and return and confidently build more effective portfolios. We create industry-leading research-enhanced solutions that clients use to gain insight into and improve transparency across the investment process.
About MSCI ESG Research Products and Services
MSCI ESG Research products and services are provided by MSCI ESG Research LLC, and are designed to provide in-depth research, ratings and analysis of environmental, social and governance related business practices to companies worldwide. ESG ratings, data and analysis from MSCI ESG Research LLC. are also used in the construction of the MSCI ESG Indexes. MSCI ESG Research LLC is a Registered Investment Adviser under the Investment Advisers Act of 1940 and a subsidiary of MSCI Inc.
This press release contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements relate to future events or performance and involve risks that may cause actual results or performance differ materially and you should not place undue reliance on them. Risks that could affect results or performance are in MSCI’s Annual Report on Form 10-K for the most recent fiscal year ended on December 31 that is filed with the SEC. MSCI does not undertake to update any forward-looking statements. No information herein constitutes investment advice or should be relied on as such. MSCI grants no right or license to use its products or services without an appropriate license. MSCI MAKES NO EXPRESS OR IMPLIED WARRANTIES OF MERCHANTABILITY, FITNESS FOR A PARTICULAR PURPOSE OR OTHERWISE WITH RESPECT TO THE INFORMATION HEREIN AND DISCLAIMS ALL LIABILITY TO THE MAXIMUM EXTENT PERMITTED BY LAW.
MSCI ESG Research LLC is a Registered Investment Adviser under the Investment Advisers Act of 1940 and a subsidiary of MSCI Inc. Except with respect to any applicable products or services from MSCI ESG Research, neither MSCI nor any of its products or services recommends, endorses, approves or otherwise expresses any opinion regarding any issuer, securities, financial products or instruments or trading strategies and MSCI’s products or services are not intended to constitute investment advice or a recommendation to make (or refrain from making) any kind of investment decision and may not be relied on as such. Issuers mentioned or included in any MSCI ESG Research materials may include MSCI Inc., clients of MSCI or suppliers to MSCI, and may also purchase research or other products or services from MSCI ESG Research. MSCI ESG Research materials, including materials utilized in any MSCI ESG Indexes or other products, have not been submitted to, nor received approval from, the United States Securities and Exchange Commission or any other regulatory body.
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