As a listed entity, MSCI has prioritised its clients’ needs over requests for data by academics, researchers and non-governmental organisations (NGOs), says chairman and chief executive officer Henry Fernandez. “MSCI is a for-profit, commercially-focused company. So, we don’t have time for anything that needs a long engagement [or] takes a long time because we are looking to service our clients immediately.”
A new platform by the New York Stock Exchange-listed index provider aims to contribute more meaningfully to sustainability research.
In September, MSCI launched the MSCI Sustainability Institute, focusing on the role of capital markets in creating sustainable value and tackling global challenges like climate change.
According to MSCI, the institute will provide academic researchers and policymakers access to sustainability data, metrics and models that investors use to make decisions. It plans to collaborate with select academic institutions, including Stanford University’s Graduate School of Business, to host training designed to help researchers and students.
MSCI charges its commercial clients “a lot of money” to access its data, which Fernadez proudly calls his “intellectual property”.
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However, most researchers outside of the investing sector “don’t have the resources or the money to pay for that”, he adds. “So, why don’t we make it available to them under a contract, but either free of charge or at a very low fee, so that they can help the industry do research?”
Advancing the clean energy transition and addressing long-term risks demands that leaders across the capital markets ecosystem work together, says MSCI.
Speaking to The Edge Singapore, Fernandez says an example of relevant research is modelling asset allocation based on climate risk. “A big part of asset allocation and climate risk is at what speed do you do [it] when de-risking? If you go too fast, you underperform and get in trouble. If you go too slow, you underperform and get in trouble. So, what should be the ultimate pace of de-risking your portfolio from climate risk?”
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The institute will also encourage capital market participants to pilot new data and approaches for measurement that provide insights on emerging topics in sustainable finance and inform capital allocation decisions, says MSCI.
This includes a framework for investment in climate resilience developed by the New York-based Global Adaptation and Resilience Investment Working Group (GARI), with analytical backing from the institute and financial support from the Bezos Earth Fund and ClimateWorks Foundation.
In addition, the institute will curate a selection of academic studies investigating how sustainability factors interact with the value of financial assets.
Finally, the institute aims to offer a forum for debate, says MSCI, by bringing together leaders from across the capital markets ecosystem to exchange viewpoints on sustainability risks and opportunities. These are presented as articles on the institute’s website.
With the launch, MSCI aims to expand the “universe of tools available” to reduce the climate risk of the world’s portfolios, says Fernandez. “If we do that effectively, the world will move faster [and] more assets will get decarbonised.”
He also invites policymakers to the platform. “What is the optimal role of policymakers versus the private sector? If policymakers dictate what to do in the private sector, it will be a problem. But if they don’t help create the rules, that will be a problem, too. So, what is the right sort of combination of that?”
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Institute leaders
The institute is led by head and founding director Linda-Eling Lee, who most recently led global ESG and climate research at MSCI.
By design, the institute and MSCI ESG Research complement each other, says a spokesperson to The Edge Singapore. “Both advance our firm’s thought leadership on climate and ESG… MSCI ESG Research delivers insights designed to help investors inform and analyse asset allocation and portfolio construction decisions.”
MSCI has appointed two heads of research to replace Lee — 13- year MSCI veteran Laura Nishikawa, now head of ESG research, and Oliver Marchand, former CEO and co-founder of Carbon Delta, as head of climate research. MSCI acquired the Zurich-based climate change scenario analytics firm in 2019.
Hiromichi Mizuno, who joined MSCI in August as a special adviser to the CEO, will advise the MSCI Sustainability Institute. He will help build the institute’s advisory group, including leading investors, academics and other thought leaders.
From 2015 to 2020, Mizuno served as the executive managing director and chief investment officer of the Government Pension Investment Fund of Japan, the largest pension fund in the world, with approximately US$1.4 trillion ($1.88 trillion) in assets under management. Mizuno was also a special envoy of the UN Secretary-General on innovative finance and sustainable investments and director of the Tesla board.
Meanwhile, Rumi Mahmood is the institute’s research director for Europe, the Middle East and America (EMEA). Based in the UK, he directs the institute’s research into capital markets and applied finance and oversees collaborations with academia. He was previously head of ESG and climate fund research for MSCI ESG Research.
Mahmood’s counterpart in the US is Umar Ashfaq. Based in New York, he was previously a lead analyst for the transportation and logistics industries with MSCI ESG Research.
While the two research directors have specific remits to cover EMEA and the US, an MSCI spokesperson says the institute is keenly focused on Apac. “Among the institute’s inaugural initiatives is a collaboration with the Glasgow Financial Alliance for Net Zero (GFANZ) on research that will simulate the early phaseout of coal-fired power in 15 markets across the Apac region.”
The report, published on Nov 21 ahead of COP28, underscores that the region accounts for more than three-quarters (78%) of current global coal-power generation and virtually all (96%) of the planned expansion of coal-fired power plants globally.
These plants, if not decommissioned before the end of their useful lives, would add roughly 215 gigatons (Gt) of carbon emissions to the atmosphere between now and 2050 and consume more than 40% of the remaining global carbon budget for limiting global warming to 1.5°C.
All is not lost. According to the report, the 15 Apac markets analysed can potentially cut their emissions by between 39% and 95% between now and 2050 if the managed phase-out is successful. Together, the 15 markets could reduce their aggregate carbon emissions by roughly 160 Gt, with Mainland China (116 Gt), India (23.2 Gt) and Indonesia (5.9 Gt) as the biggest beneficiaries.
MSCI anticipates that the collaboration with GFANZ will be “the first in a series of collaborations” focused on the Apac region. “Linda recently returned from the region, where she attended the Principles for Responsible Investment’s Academic Network Conference [in Tokyo on Oct 4-5], which the institute had the pleasure of sponsoring. Much of her time there centred on engaging with academics from the region to introduce the institute’s work, which provides climate data and models used by investors to sustainability researchers without charge to help align analysis with action.”
Global challenges such as climate change cannot be solved by governments, corporations, NGOs or multilateral organisations alone, says Fernandez. “The most meaningful solutions all require some type of cross-sector collaboration. Through the MSCI Sustainability Institute, we will bring together a wide range of thinkers with complementary strengths and expertise and help them turn data-driven ideas into real-world influence and action.
Photos: MSCI, Samuel Isaac Chua/The Edge Singapore
