MSCI has launched its ratings service to measure the environmental, social and governance focus of portfolio holdings.
The ESG Fund Metrics will measure funds’ exposure to factors such as sustainable impact, values alignment and ESG risks, including carbon footprint.
According to the metrics, each fund will receive an overall score from zero to ten, which indicates the ability of holdings to manage various levels of risks.
It will also use a peer group percentile rank and individual ‘E’, ‘S’ and ‘G’ scores. The percentile ranking will be relative to all global funds receiving a score, as well as relative to the fund’s peer group.
Across the 21,000 funds that the firm analysed as of March 2016, bond funds tended to get a higher ESG rating than equity funds, with government bond funds exhibiting the highest ESG quality score.
MSCI ESG Research managing director Eric Moen says: “The development of Fund Metrics was based on client consultation, which included some of the world’s largest wealth managers who are looking for greater insight into the ESG attributes of their portfolios, reflecting growing attention to ESG among investors.”
The new service will be available from MSCI ESG Research and on third-party platforms through 2016.
Moen says: “The demand from clients who want to consider ESG criteria to align their investments with their values is continuously increasing. Fund Metrics is a natural extension of our ESG ratings and research, adding even more transparency as the sustainable investing movement gains momentum.”
In January, Morningstar also launched a ESG ratings for funds.
The Morningstar rating see investment funds ranked on how well they comply to ESG investing. The system uses Sustainanalytics, which ranks individual companies on their ESG position, and then applies that ranking to fund holdings.
The ranking was the industry’s first across all mutual funds and ETFs and will be asset weighted according to the fund’s allocation to each company.