MSCI Reports Strong Growth in ESG Investing

(3BL Media/Justmeans) – ESG investing is fast becoming a mainstream area within the investment industry. An increasing number of investors are now adopting the Principles for Responsible Investment (PRI), and choosing companies that score high on ESG performance. Investors inclined towards responsible investments operate on the belief that in the long run addressing ESG issues will preserve and boost their portfolio returns.

In sync with this trend, MSCI says it is experiencing increasingly strong demand for a combination of ESG and factor indices. The company has reported a $2.7 million or 24.7 percent increase in second-quarter ESG revenues to $13.7 million in its Q2 earnings presentation.

MSCI CEO Henry Fernandez, speaking on the earnings call, informed that the company has had another strong quarter, with its growth being driven by a combination of solid growth in its core products and a strong growth in newer investment areas such as ESG and Factors.

Highlighting the key growth drivers, the company said that its Index franchise continued to grow in the second quarter with 973 ETFs benchmarked to MSCI indexes. Of the 973 ETFs, 204 are based on Factors and 71 are related to ESG, which demonstrates the benefits of the company’s innovation and market leadership in these areas.

MSCI is working on new products to meet the strong demand for ESG and Factor indexes. One of the world's largest pension funds recently selected the MSCI Japan Empowering Woman Index and the MSCI Japan ESG Select Leaders Index as benchmarks for their ESG investment strategy. The Empowering Woman Index is constructed on the basis of a quality factor as well as factors attributed to those companies that are attracting, developing and promoting woman.

During the investor presentation, MSCI pointed out the integration of its index factor, real estate, and ESG content. The integration of this content represents currently about $56 million in run rate and has grown at a rate of nearly 49 percent compared to the previous year.

By integrating Index, ESG, Factor Content, MSCI is providing clients with a holistic view of the equity market opportunity that cuts across Market Cap Factor and ESG exposures.The company has signed two significant ESG deals in the quarter. One of the largest mutual fund managers in the US recently launched several US and international ESG index funds based on MSCI indices. Secondly, a large wealth manager in the US agreed to embed MSCI ESG content on their platform for over two million self-directed investment clients.