An Introduction to MSCI ESG Indexes
There are various portfolio objectives within the realm of sustainable investing.
For example, some investors may want to build a portfolio that reflects their personal values. Others may see environmental, social, and governance (ESG) criteria as a tool for improving long-term returns, or as a way to create positive impact. A combination of all three of these motivations is also possible.
To support investors as they embark on their sustainable journey, our sponsor, MSCI, offers over 1,500 purpose-built ESG indexes. In this infographic, we’ll take a holistic view at what these indexes are designed to achieve.
An Extensive Suite of ESG & Climate Indexes
Below, we’ll summarize the four overarching objectives that MSCI’s ESG & climate indexes are designed to support.
Objective 1: Integrate a broad set of ESG issues
Investors with this objective believe that incorporating ESG criteria can improve their long-term risk-adjusted returns.
The MSCI ESG Leaders indexes are designed to support these investors by targeting companies that have the highest ESG-rated performance from each sector of the parent index.
For those who do not wish to deviate from the parent index, the MSCI ESG Universal indexes may be better suited. This family of indexes will adjust weights according to ESG performance to maintain the broadest possible universe.
Objective 2: Generate social or environmental benefits
A common challenge that impact investors face is measuring their non-financial results.
Consider an asset owner who wishes to support gender diversity through their portfolios. In order to gauge their success, they would need to regularly filter the entire investment universe for updates regarding corporate diversity and related initiatives.
In this scenario, linking their portfolios to an MSCI Women’s Leadership Index would negate much of this groundwork. Relative to a parent index, these indexes aim to include companies which lead their respective countries in terms of female representation.
Objective 3: Exclude controversial activities
Many institutional investors have mandates that require them to avoid certain sectors or industries. For example, approximately $14.6 trillion in institutional capital is in the process of divesting from fossil fuels.
To support these efforts, MSCI offers indexes that either:
- Exclude individual sectors such as fossil fuels, tobacco, or weapons;
- Exclude companies from a combination of these sectors; or
- Exclude companies that are not compatible with certain religious values.
Objective 4: Identify climate risks and opportunities
Climate change poses a number of wide-reaching risks and opportunities for investors, making it difficult to tailor a portfolio accordingly.
With MSCI’s climate indexes, asset owners gain the tools they need to build a more resilient portfolio. The MSCI Climate Change indexes, for example, reduce exposure to stranded assets, increase exposure to solution providers, and target a minimum 30% reduction in emissions.
An Index for Every Objective
Regardless of your motivation for pursuing sustainable investment, the need for an appropriate benchmark is something that everyone shares.
With an extensive suite of ESG indexes designed specifically for sustainability and climate change, MSCI aims to support asset owners as they build a more unique and personalized portfolio.
The History of U.S. Energy Independence
This infographic traces the history of U.S. energy independence, showing the events that have shaped oil demand and imports over 150 years.
The History of U.S. Energy Independence
Energy independence has long been a part of America’s political history and foreign policy, especially since the 1970s.
Despite long being a leader in energy production, the U.S. has often still relied on oil imports to meet its growing needs. This “energy dependence” left the country and American consumers vulnerable to supply disruptions and oil price shocks.
The above infographic from Surge Battery Metals traces the history of U.S. energy independence, highlighting key events that shaped the country’s import reliance for oil. This is part one of three infographics in the Energy Independence Series.
How the U.S. Became Energy Dependent
Oil was first commercially drilled in the U.S. in 1859, when Colonel Edwin Drake developed an oil well in Titusville, Pennsylvania.
Twenty years later in 1880, the U.S. was responsible for 85% of global crude oil production and refining. But over the next century, the country became increasingly dependent on oil imports.
Here are some key events that affected America’s oil dependence and foreign policy during that time according to the Council on Foreign Relations:
- 1908: Henry Ford invented the Model T, the world’s first mass-produced and affordable car.
- 1914-1918: The U.S. began importing small quantities of oil from Mexico to meet the demands of World War I and domestic consumption.
- 1942: In efforts to save gas and fuel for World War II, the Office of Defense Transportation implemented a national plan limiting driving speeds to 35 miles per hour.
- 1943: President Roosevelt provided financial support to Saudi Arabia and declared Saudi oil critical to U.S. security.
- 1950: With 40 million cars on the road, the U.S. became a net importer of oil bringing in around 500,000 barrels per day.
- 1970: Twentieth century U.S. oil production peaked and President Nixon eased oil import quotas, allowing an additional 100,000 barrels per day in imports.
The U.S. economy’s increasing reliance on oil imports made it vulnerable to supply disruptions. For example, in 1973, in response to the U.S.’ support for Israel, Arab members of the OPEC imposed an embargo on oil exports to Western nations, creating the first “oil shock”. Oil prices nearly quadrupled, and American consumers felt the shock through long lineups at gas stations along with high inflation. Combined with rising unemployment rates and flattening wages, the increase in prices led to a period of stagflation.
Despite the energy crisis, U.S. oil production fell for decades, while the country met its increasing energy needs with oil from abroad.
The Rise and Fall of U.S. Oil Imports
Here’s how U.S. net imports of crude oil and petroleum products has evolved since 1950 in comparison with consumption and production. All figures are in millions of barrels per day (bpd).
|Year||Consumption (bpd)||Production (bpd)||Net imports (bpd)|
Net oil imports quadrupled between 1960 and 1980, marking the two biggest decadal jumps. Given that production was falling while consumption was booming, it’s clear why the U.S. needed to rely on imports.
Imports peaked in 2005, with net imports accounting for a record 60% of domestic consumption. Both imports and consumption fell in the years that followed. In 2009, for the first time since 1970, U.S. oil production increased thanks to the shale boom. It ascended until 2019 to make the U.S. the world’s largest oil producer.
As of 2021, the U.S. was a net exporter of refined petroleum products and hydrocarbon liquids but remained a net importer of crude oil.
The New Era of Energy
Oil and fossil fuels have long played a central role in the global energy mix. The U.S.’ reliance on other countries for oil made it energy-dependent, exposing American gas consumers to geopolitical shocks and volatile oil prices.
Today, the global energy shift away from fossil fuels towards cleaner sources of generation offers a new opportunity to use lessons from the past. By securing the raw materials needed to enable the energy transition, the U.S. can build a clean energy future independent of foreign sources.
In the next part of the Energy Independence Series sponsored by Surge Battery Metals, we will explore the New Era of Energy and the role of electric vehicles and renewables in the ongoing energy transition.
Ranked: Emissions per Capita of the Top 30 U.S. Investor-Owned Utilities
Roughly 25% of all GHG emissions come from electricity production. See how the top 30 IOUs rank by emissions per capita.
Emissions per Capita of the Top 30 U.S. Investor-Owned Utilities
Approximately 25% of all U.S. greenhouse gas emissions (GHG) come from electricity generation.
Subsequently, this means investor-owned utilities (IOUs) will have a crucial role to play around carbon reduction initiatives. This is particularly true for the top 30 IOUs, where almost 75% of utility customers get their electricity from.
This infographic from the National Public Utilities Council ranks the largest IOUs by emissions per capita. By accounting for the varying customer bases they serve, we get a more accurate look at their green energy practices. Here’s how they line up.
Per Capita Rankings
The emissions per capita rankings for the top 30 investor-owned utilities have large disparities from one another.
Totals range from a high of 25.8 tons of CO2 per customer annually to a low of 0.5 tons.
|Utility||Emissions Per Capita (CO2 tons per year)||Total Emissions (M)|
|Berkshire Hathaway Energy||14.0||57.2|
|American Electric Power||9.2||50.9|
|Florida Power and Light||8.0||41.0|
|Portland General Electric||7.6||6.9|
|Pacific Gas and Electric||0.5||2.6|
|Next Era Energy Resources||0||1.1|
PNM Resources data is from 2019, all other data is as of 2020
Let’s start by looking at the higher scoring IOUs.
TransAlta emits 25.8 tons of CO2 emissions per customer, the largest of any utility on a per capita basis. Altogether, the company’s 630,000 customers emit 16.3 million metric tons. On a recent earnings call, its management discussed clear intent to phase out coal and grow their renewables mix by doubling their renewables fleet. And so far it appears they’ve been making good on their promise, having shut down the Canadian Highvale coal mine recently.
Vistra had the highest total emissions at 97 million tons of CO2 per year and is almost exclusively a coal and gas generator. However, the company announced plans for 60% reductions in CO2 emissions by 2030 and is striving to be carbon neutral by 2050. As the highest total emitter, this transition would make a noticeable impact on total utility emissions if successful.
Currently, based on their 4.3 million customers, Vistra sees per capita emissions of 22.4 tons a year. The utility is a key electricity provider for Texas, ad here’s how their electricity mix compares to that of the state as a whole:
|Energy Source||Vistra||State of Texas|
Despite their ambitious green energy pledges, for now only 1% of Vistra’s electricity comes from renewables compared to 24% for Texas, where wind energy is prospering.
Based on those scores, the average customer from some of the highest emitting utility groups emit about the same as a customer from each of the bottom seven, who clearly have greener energy practices. Let’s take a closer look at emissions for some of the bottom scoring entities.
Utilities With The Greenest Energy Practices
Groups with the lowest carbon emission scores are in many ways leaders on the path towards a greener future.
Exelon emits only 3.8 tons of CO2 emissions per capita annually and is one of the top clean power generators across the Americas. In the last decade they’ve reduced their GHG emissions by 18 million metric tons, and have recently teamed up with the state of Illinois through the Clean Energy Jobs Act. Through this, Exelon will receive $700 million in subsidies as it phases out coal and gas plants to meet 2030 and 2045 targets.
Consolidated Edison serves nearly 4 million customers with a large chunk coming from New York state. Altogether, they emit 1.6 tons of CO2 emissions per capita from their electricity generation.
The utility group is making notable strides towards a sustainable future by expanding its renewable projects and testing higher capacity limits. In addition, they are often praised for their financial management and carry the title of dividend aristocrat, having increased their dividend for 47 years and counting. In fact, this is the longest out of any utility company in the S&P 500.
A Sustainable Tomorrow
Altogether, utilities will have a pivotal role to play in decarbonization efforts. This is particularly true for the top 30 U.S. IOUs, who serve millions of Americans.
Ultimately, this means a unique moment for utilities is emerging. As the transition toward cleaner energy continues and various groups push to achieve their goals, all eyes will be on utilities to deliver.
The National Public Utilities Council is the go-to resource to learn how utilities can lead in the path towards decarbonization.
Misc2 weeks ago
The Top 10 Largest Nuclear Explosions, Visualized
Energy3 weeks ago
Mapped: Solar and Wind Power by Country
Politics2 weeks ago
Mapped: The State of Global Democracy in 2022
Energy2 weeks ago
Visualizing U.S. Crude Oil and Petroleum Product Imports in 2021
Markets3 days ago
Made in America: Goods Exports by State
Technology3 weeks ago
Synthetic Biology: The $3.6 Trillion Science Changing Life as We Know It
Markets4 weeks ago
Why Investors Tuned Out Netflix
Markets1 week ago
Visualizing China’s $18 Trillion Economy in One Chart