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An Introduction to MSCI ESG Indexes



The following content is sponsored by MSCI

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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.

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Tracked: The U.S. Utilities ESG Report Card

This graphic acts as an ESG report card that tracks the ESG metrics reported by different utilities in the U.S.—what gets left out?



NPUC Utilities ESG Report Card Share

Tracked: The U.S. Utilities ESG Report Card

As emissions reductions and sustainable practices become more important for electrical utilities, environmental, social, and governance (ESG) reporting is coming under increased scrutiny.

Once seen as optional by most companies, ESG reports and sustainability plans have become commonplace in the power industry. In addition to reporting what’s needed by regulatory state laws, many utilities utilize reporting frameworks like the Edison Electric Institute’s (EEI) ESG Initiative or the Global Reporting Initiative (GRI) Standards.

But inconsistent regulations, mixed definitions, and perceived importance levels have led some utilities to report significantly more environmental metrics than others.

How do U.S. utilities’ ESG reports stack up? This infographic from the National Public Utilities Council tracks the ESG metrics reported by 50 different U.S. based investor-owned utilities (IOUs).

What’s Consistent Across ESG Reports

To complete the assessment of U.S. utilities, ESG reports, sustainability plans, and company websites were examined. A metric was considered tracked if it had concrete numbers provided, so vague wording or non-detailed projections weren’t included.

Of the 50 IOU parent companies analyzed, 46 have headquarters in the U.S. while four are foreign-owned, but all are regulated by the states in which they operate.

For a few of the most agreed-upon and regulated measures, U.S. utilities tracked them almost across the board. These included direct scope 1 emissions from generated electricity, the utility’s current fuel mix, and water and waste treatment.

Another commonly reported metric was scope 2 emissions, which include electricity emissions purchased by the utility companies for company consumption. However, a majority of the reporting utilities labeled all purchased electricity emissions as scope 2, even though purchased electricity for downstream consumers are traditionally considered scope 3 or value-chain emissions:

  • Scope 1: Direct (owned) emissions.
  • Scope 2: Indirect electricity emissions from internal electricity consumption. Includes purchased power for internal company usage (heat, electrical).
  • Scope 3: Indirect value-chain emissions, including purchased goods/services (including electricity for non-internal use), business travel, and waste.

ESG Inconsistencies, Confusion, and Unimportance

Even putting aside mixed definitions and labeling, there were many inconsistencies and question marks arising from utility ESG reports.

For example, some utilities reported scope 3 emissions as business travel only, without including other value chain emissions. Others included future energy mixes that weren’t separated by fuel and instead grouped into “renewable” and “non-renewable.”

The biggest discrepancies, however, were between what each utility is required to report, as well as what they choose to. That means that metrics like internal energy consumption didn’t need to be reported by the vast majority.

Likewise, some companies didn’t need to report waste generation or emissions because of “minimal hazardous waste generation” that fell under a certain threshold. Other metrics like internal vehicle electrification were only checked if the company decided to make a detailed commitment and unveil its plans.

As pressure for the electricity sector to decarbonize continues to increase at the federal level, however, many of these inconsistencies are roadblocks to clear and direct measurements and reduction strategies.

National Public Utilities Council is the go-to resource for all things decarbonization in the utilities industry. Learn more.

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Four Ways to Energize a Post-Pandemic Workforce

The pandemic has put the workforce through the wringer. This year-long survey highlights the four biggest back-to-work priorities and challenges that must be addressed.



Four Ways to Energize a Post-Pandemic Workforce

The pandemic has put the workforce through the wringer, and shifted priorities for both employees and employers alike.

But as the world starts to look towards future growth and economic recovery, it’s important to recognize that each segment of the workforce has their own diverse needs.

Drawing from a year-long survey of 1,000+ full-time employees, PwC highlights the four biggest back-to-work priorities and challenges that employers must address to retain and recharge the workforce. We’ll also dive into some demographic gaps that emerge.

1. Physical Safety Remains #1

Almost half (48%) of employees felt that they were forced to sacrifice personal safety in order to remain employed throughout the pandemic. Women felt these effects even more strongly—60% said that feeling physically unsafe due to COVID-19 was distracting to their work.

Luckily, things took a turn for the better over the course of the year.

  • In June 2020: Only 33% of employees felt safe working on-site based on the modifications their company made
  • By May 2021: 73% of employees would feel comfortable attending a 10-person meeting in a conference room

Even with rising confidence to return to work safely, employers must do all they can to put their employees’ health first and bring this share back up to 100%.

2. Mental Health on the Mind

Shared feelings of isolation during the pandemic translated into a growing call for mental health support from employees.

Yet, while 84% of CFOs thought their company had successfully addressed employee wellness, only 31% of employees felt the same. Remote workers and women felt even more disconnected:

  • 27%: Remote workers
  • 26%: Women aged 18-34
  • 22%: Women aged 35-44

This stark difference in perceptions suggests that leaders may not be rolling out enough support for these intangible impacts of COVID-19—or they aren’t thoroughly communicating all the resources available.

3. Time Matters Most—Even Above Pay

With lines between work and play being blurred in remote working environments, employees are beginning to value their free time more than a rise in salary. In fact, 54% expressed that receiving an extra week of paid time off would enrich their life the most in 2021.

Younger generations in particular feel strongly about this flexibility. A significant share are willing to swap the opportunity for a higher pay grade for the ability to work virtually from almost anywhere:

  • 45%: Gen Z
  • 47%: Millennial
  • 38%: Gen X
  • 14%: Baby Boomers

Similar trade-offs were expressed with the offer of more non-monetary perks, such as: the opportunity to learn new skills, unlimited sick time, flexible work hours, and remote work options.

4. See Me, Hear Me

Above all, employees feel the desire to be included and their concerns heard. Only 35% think that their company has effectively created an inclusive work environment for them and their colleagues, and this gap deepens with specific concerns around workload.

 Women (Aged 35-44)All surveyed employees
% that say an unmanageable
workload impacts their productivity
% that feel unable to ask for help
managing work stress

Women especially face extra barriers compared to their counterparts, and seek more personalized support for their workplace struggles.

Working Together To Get Back to Normal

The pandemic turned the world upside down. This also means that “normal” no longer resembles what it used to be, and the days of one-size-fits-all solutions are over.

To attract the brightest talent and drive growth, employers must understand what the diverse workforce needs—and step up to empower them.

Find out how PwC is reimagining work in 2021 and beyond.

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