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MSCI ESG RESEARCH LLC
 
 
 
 
ESG Ratings 
Methodology 
 
 
 
 
 
 
 
MSCI ESG Research LLC 
April 2024

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ESG RATINGS METHODOLOGY
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Contents 
 
1 
Methodology overview .......................................................................................... 4 
1.1 
Objective .................................................................................................................. 4 
1.1.1 
Key features ...................................................................................................... 4 
2 
Data, ratings and scores ....................................................................................... 5 
2.1 
Rating & scores ........................................................................................................ 5 
2.1.1 
Interpreting Environmental and Social Key Issue Scores ............................... 6 
2.2 
Supplemental scores ............................................................................................... 7 
2.2.1 
Pillar Scores ...................................................................................................... 7 
2.2.2 
Theme Scores ................................................................................................... 7 
2.2.3 
Governance Key Issue Scores .......................................................................... 8 
2.2.4 
Governance Theme and Key Issue percentiles ............................................... 8 
2.3 
Pillar, Theme and Key Issue weights ...................................................................... 8 
3 
Methodological steps ......................................................................................... 10 
3.1 
ESG Key Issues ...................................................................................................... 10 
3.1.1 
Determining ESG Key Issues .......................................................................... 10 
3.1.2 
Setting ESG Key Issue weights ...................................................................... 13 
3.1.3 
Key Issue assessments .................................................................................. 14 
3.2 
Analyzing risk exposure ........................................................................................ 15 
3.2.1 
ESG Risk Exposure model .............................................................................. 15 
3.2.2 
Determining Exposure Scores ........................................................................ 17 
3.3 
Analyzing Risk Management ................................................................................. 17 
3.3.1 
Components of Risk Management assessment ........................................... 17 
3.3.2 
Controversies cases ....................................................................................... 18 
3.3.3 
Standardization and benchmarking ............................................................... 19 
3.3.4 
Variations in disclosure .................................................................................. 20 
3.3.5 
Determining Management Scores ................................................................. 21 
3.4 
Analyzing Governance ........................................................................................... 22

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3.4.1 
Key Metrics ..................................................................................................... 22 
3.4.2 
Controversies and events ............................................................................... 23 
3.4.3 
Standardization and benchmarking ............................................................... 23 
3.4.4 
Variations in disclosure .................................................................................. 23 
3.4.5 
Determining Governance Scores ................................................................... 24 
3.5 
Calculating Key Issue, Theme and Pillar Scores .................................................. 25 
3.5.1 
Determining Environmental and Social Key Issue Scores – risks ............... 25 
3.5.2 
Determining Environmental and Social Key Issue Scores – opportunities . 26 
3.5.3 
Calculating Environmental and Social Theme and Pillar Scores ................. 26 
3.5.4 
Calculating Governance Scores ..................................................................... 27 
3.6 
Determining final Ratings ...................................................................................... 32 
3.6.1 
Weighted Average Key Issue Score ............................................................... 32 
3.6.2 
Industry-Adjusted Score ................................................................................. 32 
3.6.3 
Committee review process ............................................................................ 33 
3.6.4 
ESG Rating....................................................................................................... 33 
Appendix 1: ESG Ratings Model hierarchy .................................................................. 34 
Appendix 2: Example of industry Key Issue selection ................................................. 35 
Appendix 3: Weight-setting framework ...................................................................... 36 
Appendix 4: ESG Rating Industries ............................................................................. 38 
Appendix 5: Normalizing the Weighted Average Score vs. industry peers .................. 43 
Industry peer set benchmark values ............................................................................... 43 
Exceptions to the 95th and 5th percentile boundaries .................................................. 43 
Industry minimum and maximum scores update frequency ........................................ 44 
Appendix 6: Home-Market selection .......................................................................... 46 
Determining Home-Market allocation ............................................................................ 46 
Ad hoc coverage additions .......................................................................................... 46 
Fixed income – governance reference entity ............................................................. 46 
2021 Home-Market allocation ..................................................................................... 47

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1 Methodology overview 
1.1 Objective 
MSCI ESG Ratings provide an opinion of companies’ management of financially relevant ESG risks 
and opportunities. Each rating takes into consideration the company’s exposure to potentially 
material ESG risks, the quality of management systems and governance structures to mitigate 
potential ESG risks, and where applicable, positioning to meet market demand for the provision of 
products and services that have a positive environmental or social contribution. For additional 
details on the definition of rating scales, refer to the “MSCI ESG and Climate Symbols and 
Definitions” document. 
1.1.1 
Key features 
• 
MSCI ESG Ratings are industry-relative measures and are determined at the company level. 
Ratings are on a global seven-band scale from AAA (the highest ESG Rating) to CCC (the 
lowest ESG Rating). 
• 
Each company is evaluated on a selection of two to seven Environmental and Social Key 
Issues (out of 33 total Key Issues, see Exhibit 1). The Environmental and Social Key Issues 
relevant for a given company are selected based on the company’s exposure to potentially 
material ESG risks, which are driven by industry-specific and market-specific factors. 
• 
All companies are evaluated on the Governance Pillar, which is comprised of six Key Issues 
in the Corporate Governance and Corporate Behavior Themes. The evaluation is based on 
the gap between best practice and each company’s governance practices. 
• 
Where applicable, the ESG Rating takes into consideration a company’s positioning to meet 
market demand for the provision of products and services that have a positive environmental 
or social contribution. 
• 
MSCI ESG Ratings take into consideration a company’s management measures relative to 
their aggregate ESG risks and opportunities. Management measures are generally evaluated 
through companies’ governance structures, policies and targets, quantitative performance 
metrics, and relevant controversies.

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2 Data, ratings and scores 
The core building blocks of the MSCI ESG Ratings methodology can be seen in the hierarchy shown 
in Exhibit 1. 
Exhibit 1: MSCI ESG Ratings Key Issue hierarchy 
3 Pillars 
10 Themes 
33 ESG Key Issues 
Environment 
Climate Change 
Carbon Emissions 
 
 
Climate Change Vulnerability 
 
 
Financing Environmental Impact 
 
 
Product Carbon Footprint 
 
Natural Capital 
Biodiversity & Land Use 
 
 
Raw Material Sourcing 
 
 
Water Stress 
 
Pollution & Waste 
Electronic Waste 
 
 
Packaging Material & Waste 
 
 
Toxic Emissions & Waste 
 
Environmental Opportunities 
Opportunities in Clean Tech 
 
 
Opportunities in Green Building 
 
 
Opportunities in Renewable Energy 
Social 
Human Capital 
Health & Safety 
 
 
Human Capital Development 
 
 
Labor Management 
 
 
Supply Chain Labor Standards 
 
Product Liability 
Chemical Safety 
 
 
Consumer Financial Protection 
 
 
Privacy & Data Security 
 
 
Product Safety & Quality 
 
 
Responsible Investment 
 
Stakeholder Opposition 
Community Relations 
 
 
Controversial Sourcing 
 
Social Opportunities 
Access to Finance 
 
 
Access to Health Care 
 
 
Opportunities in Nutrition & Health 
Governance 
Corporate Governance 
Board 
 
 
Pay 
 
 
Ownership & Control 
 
 
Accounting 
 
Corporate Behavior 
Business Ethics 
 
 
Tax Transparency 
 
2.1 Rating & scores 
The top-level assessment is the overall Company ESG Rating, an industry-relative seven-point letter 
rating scale from AAA to CCC. These assessments are not absolute but are explicitly intended to be 
interpreted relative to a company’s industry peers. The Company ESG Rating is derived from the final 
Industry-Adjusted Company Score, based on an assessment of the underlying data available at the 
last ESG Rating action date.

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Exhibit 2: The final Industry-Adjusted Company Score mapped to a letter rating   
Letter Rating 
Leader/Laggard 
Final Industry-Adjusted Company Score 
AAA 
Leader 
8.571* - 10.0 
AA 
Leader 
7.143 – 8.571 
A 
Average 
5.714 – 7.143 
BBB 
Average 
4.286 – 5.714 
BB 
Average 
2.857 – 4.286 
B 
Laggard 
1.429 – 2.857 
CCC 
Laggard 
0.0 – 1.429 
*Appearance of overlap in the score ranges is due to rounding error. The 0-to-10 scale is divided into seven equal parts, 
each corresponding to a letter rating. 
 
• 
Industry-Adjusted Company Score: This score is calculated by normalizing the Weighted 
Average Key Issue Score relative to the ESG Rating industry peer group, based on score 
ranges set by the benchmark values in the peer set. 
• 
Weighted Average Key Issue Score (WAKIS): This is calculated for each company based on 
the weighted average of the scores received on: 
o 
All the individual Environmental and Social Key Issues contributing to the rating of 
the company; and 
o 
The Governance Pillar Score. 
• 
The Governance Pillar Score is an absolute assessment of a company’s overall governance 
that uses a universally applied 0-10 scale. Starting with a 10, the Governance Pillar Score is 
based on the sum of deductions derived from Key Metrics included in the Corporate 
Governance (comprising Ownership & Control, Board, Pay and Accounting) and Corporate 
Behavior (comprising Business Ethics and Tax Transparency) Themes. 
• 
Key Issue Scores (Environmental and Social Themes): Each company receives a score on 
each selected Key Issue ranging from 0 to 10. In the Environmental and Social Pillars, the 
scores evaluate the company’s exposure to risks or opportunities and its ability to manage 
that exposure. These are calculated using the Key Issue Exposure Score and Key Issue 
Management Score. 
2.1.1 
Interpreting Environmental and Social Key Issue Scores 
Exhibit 3: Risk-based Key Issue Scores (0-10) 
10 
Companies with a key issue score of 10 on risk-based ESG key issues have 
very strong management measures relative to their exposure to the ESG 
risk. A company with very strong management measures may have robust 
governance structures, improvement targets, better performance on 
quantitative metrics relative to industry peers, and an absence of 
controversies. Companies with a key issue score of 10 do not have very 
high exposure to the ESG risk.

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5 
Companies with a key issue score of 5 on risk-based ESG key issues have 
moderate management measures relative to their exposure to the ESG risk.  
0 
Companies with a key issue score of 0 on risk-based ESG key issues have 
very poor management measures relative to their exposure to the ESG risk. 
Typically, companies with a key issue score of 0 also have very high 
exposure to the ESG risk. 
Exhibit 4: Opportunity-based Key Issue Scores (0-10) 
10 
Companies with a key issue score of 10 on opportunity-based ESG key 
issues have very strong positioning to meet market demand for the 
provision of products and services that have a positive environmental or 
social contribution. 
5 
Companies with a key issue score of 5 on opportunity-based ESG key 
issues have moderate positioning to meet market demand for the 
provision of products and services that have a positive environmental or 
social contribution.  
0 
Companies with a key issue score of 0 on opportunity-based ESG key 
issues do not have initiatives to meet market demand for the provision of 
products and services that have a positive environmental or social 
contribution. 
 
2.2 Supplemental scores 
Supplemental scores are also calculated that do not directly contribute to the overall ESG Rating, but 
provide users of ESG Ratings with additional or specific insights. 
2.2.1 
Pillar Scores 
Pillar Scores across the Environmental and Social Pillars are calculated based on the weighted 
average of Key Issue Scores underlying each Pillar, normalized by the total sum of weights 
underlying each Pillar. 
• 
The Environmental Score represents the weighted average of all Key Issues that fall under 
the Environmental Pillar. 
• 
The Social Score represents the weighted average of all Key Issues that fall under the Social 
Pillar. 
2.2.2 
Theme Scores 
Theme Scores across the Environmental and Social Pillars (8 out of 10 Themes) are calculated 
based on the weighted average of Key Issue Scores underlying each Theme, normalized by the total 
sum of weights underlying each Theme.  
In the Governance Pillar, for both the Corporate Governance and Corporate Behavior Themes, a 
Theme Score is calculated.

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Theme Scores range from 0 to 10, with lower scores indicating more severe risk. 
2.2.3 
Governance Key Issue Scores 
Each Key Issue represents a broad area of governance risk. For each Key Issue, an absolute score is 
provided. Key Issue Scores range from 0 to 10, with lower scores indicating more severe risk.  
2.2.4 
Governance Theme and Key Issue percentiles  
To complement the 0-10 Theme Score and Key Issue Scores, percentile rankings are calculated and 
published for each Theme and Key Issue. The percentiles assess a company’s relative performance 
against other companies, with percentile rankings ranging from 0 to 100. Two types of percentile 
rankings are published: 
• 
Home Market: percentile rankings calculated against the constituents of a particular Home 
Market,1 and  
• 
Global: percentile rankings calculated against the entire coverage universe. 
Percentile rankings may be interpreted as set out in Exhibit 5 below, to identify leaders and laggards. 
Exhibit 5: Interpreting percentile rankings 
Percentile Rankings 
Description 
96 - 100 
Best in class 
76 - 95 
Above average 
26 - 75 
Average 
6 - 25 
Below average 
0 - 5 
Worst in class 
 
2.3 Pillar, Theme and Key Issue weights 
The Key Issue weights used in the calculation of the Weighted Average Key Issue Score are 
published for the Environmental and Social Key Issues. 
For Governance, as weight-setting is undertaken at the Pillar level, and due to the nature of the 
deduction-based scoring model in the Governance Pillar, Key Issue weights are not available. 
In addition, weights are published for each of the three Pillars. 
• 
The Environmental Weight represents the sum of the weights of all Key Issues that fall under 
the Environmental Pillar. 
• 
The Social Weight represents the sum of the weights of all Key Issues that fall under the 
Social Pillar. 
• 
The Governance Weight is a standalone calculation and is floored at 33%. 
 
 
 
1 Home Markets are selected as set out in Appendix 6: Home-Market selection.

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Exhibit 6: Hierarchy of ESG Scores 
 
Raw Data: 
Company financial and sustainability disclosures, specialized government and academic data sets, media 
searches, etc. 
ESG Letter Rating 
(AAA-CCC) 
Final Industry 
Adjusted Score (0-10) 
Weighted Average Key 
Issue Score (0-10) 
Environmental Pillar 
Score (0-10) 
Social Pillar Score (0-
10) 
Governance Pillar 
Score (0-10) 
Environmental Key Issue 
Scores (0-10) 
Social Key Issue Scores 
(0-10) 
Governance Key Issue 
Scores (0-10) 
Exposure 
Scores 
Exposure 
Scores 
Key Metric Deductions 
Mgmt 
Scores 
Mgmt 
Scores 
Environmental and Social Pillar and Theme Scores derive from 
the weighted average of underlying Key Issue Scores 
 
Indicators: 
Business 
Segments; 
Geographic 
Segments; 
Co-specific 
indicators 
 
Indicators: 
Strategy 
Programs & 
Initiatives 
Performance 
Controversies 
 
Indicators: 
Business 
Segments; 
Geographic 
Segments; 
Co-specific 
indicators 
 
Indicators: 
Strategy 
Programs & 
Initiatives 
Performance 
Controversies 
Key Metrics: 
Ownership Characteristics; 
Board & Committee 
Composition; 
Pay Figures; 
Policies & Practices 
Business & Geographic 
Segments; Controversies 
Weighted average of underlying Pillar Scores 
Adjusted relative to industry peers, committee review process in certain predefined cases 
Preset Score-to-Letter-Rating matrix 
Each Pillar is organized into underlying Themes  
Deduction-based scoring 
model applied

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3 Methodological steps 
3.1 ESG Key Issues 
3.1.1 
Determining ESG Key Issues  
The research process begins with an in-depth assessment of the ESG risks and opportunities that 
are relevant to each industry. There are 27 Environmental and Social Key Issues, and industries are 
evaluated on a selection of two to seven of these key issues. Key Issue selection is based on an 
annual review of underlying data and review by analytical staff. This process is explained in more 
detail below. 
Universal Key Issues 
All companies in all industries are evaluated on the Key Issues under the Governance Pillar, with six 
governance Key Issues evaluated across two Themes: Corporate Governance and Corporate 
Behavior (See Section 3.4.5, Determining Governance Scores, for the slightly different treatment of 
supranationals and development banks). This is based on MSCI ESG Research’s view that 
governance is universally important and should be evaluated in an integrated way, regardless of 
industry.  
Setting industry Key Issues 
ESG Key Issues are selected for each of the 163 sub-industries defined by the Global Industry 
Classification Standard (GICS®).2 The Environmental and Social Key Issues vary between industries 
and are selected based on the extent to which the business activities of the companies in each 
industry generate large environmental- or social-related externalities. The steps are as follows: 
• 
For each company, reported business segments are mapped to a standard business activity. 
MSCI ESG Research uses the Standard Industrial Classification (SIC) system along with 
industry-specific adjustments to define business activities.  
• 
Each business activity is assessed on the level of externality generated for each ESG Key 
Issue to derive a Business Segment Exposure Score.  
• 
For instance, MSCI ESG Research measures the externality for the Health and Safety Key 
Issue based on the extent to which companies’ business segments are prone to injuries and 
fatalities. The data is based on industry statistics from the International Labour Organization 
(ILO) and health and safety authorities such as the Occupational Safety & Health 
Administration (OSHA).  
• 
For a company operating underground coal mines (SIC 1222), the average fatality rate per 
1,000 employees is 0.45; for a company operating surface coal mines (SIC 1221), the 
average fatality rate per 1,000 employees is 0.13. These metrics are converted into a 0-10 
score, based on the relative ranking of industry intensities. 
• 
Each company’s overall Business Exposure Score is the weighted average of the Segment 
Exposure Scores of a company’s business segments, weighted by the percentage of sales, 
 
2   GICS is the global industry classification standard jointly developed by MSCI and S&P Global Market Intelligence.

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percentage of assets or percentage of operations. This constitutes the company’s Business 
Segment Exposure score. 
• 
MSCI ESG Research ranks all 163 GICS sub-industries on each Key Issue based on the 
average ESG Business Segment Risk Exposure score of the underlying companies. 
The example shown in Appendix 2: Example of industry Key Issue selection illustrates how the 
carbon intensity of each GICS sub-industry is used to determine whether the Carbon Emissions Key 
Issue should be considered an industry Key Issue. 
Typically, MSCI ESG Research will propose changes to industry Key Issues based on the following: 
• 
The addition of an ESG Key Issue for a GICS sub-industry when the size of the externality 
(based on the average Business Exposure Score of the companies in that sub-industry) is at 
or exceeds the 80th percentile of all sub-industries and the average Business Exposure 
Segment Risk Exposure score is greater than or equal to 5.0. 
• 
The removal of an ESG Key Issue for a GICS sub-industry when the size of the externality 
(based on the average Business Exposure Score of the companies in that sub-industry) is at 
or below the 70th percentile of all sub-industries and the average Business Exposure Score is 
less than or equal to 3.3. 
In Q4 of each calendar year, MSCI ESG Research institutes a 30-day client consultation and comment 
period during which feedback is solicited on proposed changes to the industry Key Issues. 
Company-Specific Key Issues 
In some cases, a company may face a unique Environmental or Social Key Issue that is not shared 
by other companies in its industry. This can arise from several scenarios, ranging from companies 
with unique or diversified business models to subsets of companies within an industry that face a 
unique set of risks (see Exhibit 7). In these cases, a Company-Specific Key Issue is added to the 
analysis and the weights on the remaining Key Issues are reduced proportionally. 
In other cases, a company may not share a particular Environmental or Social Key Issue that other 
companies in its industry face. In such cases, the issue is removed from the analysis and the 
weights on the remaining Key Issues are increased proportionally. 
Exhibit 7a: Guideline for adding Company-Specific Key Issues 
Description 
Rule 
Key Issue Addition 
Examples 
Company sources 
significant revenue 
from secondary 
industry 
>20% revenue or 
earnings derived 
from secondary 
business line 
Most relevant key 
issue facing 
secondary 
business line 
Tiffany (Retail) >20% revenue 
from fine jewelry, add 
Controversial Sourcing 
Company has large 
footprint in 
secondary industry 
High absolute size of 
secondary business 
line relative to peers 
Most relevant key 
issue facing 
secondary 
business line 
Disney (movies & 
entertainment) among 
world’s largest toy 
manufacturers, add Supply-
Chain Labor Standards

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Description 
Rule 
Key Issue Addition 
Examples 
Company has a 
unique business 
model 
Exception-based, ESG 
Ratings Methodology 
Committee approval 
required 
Most relevant key 
issue 
Herbalife (personal 
products) sells weight 
supplements and is 
regulated by food safety 
bodies, add Product Safety & 
Quality 
Company faces a 
severe or very 
severe controversy 
on non-Key Issue 
Based on severity, 
status, and date of 
controversy 
Key Issue mapped 
to that controversy 
Sysco Corporation faces 
severe controversy in Labor 
Management  
 
Exhibit 7b: Examples of industry-based rules for adding Company-Specific Key Issues 
Description 
Rule 
Key Issue Addition 
Examples 
Utilities with 
significant hydro 
operations 
Based on % capacity, 
absolute capacity 
(megawatts [MW]), 
and geographic 
presence in 
biodiversity hotspots 
Biodiversity & 
Land Use 
Eletrobras has total hydro 
capacity > 35,000 MW, 
representing 85% of capacity, 
and operates in biodiversity 
hotspots in Brazil 
Casinos operating 
hotels in water-
stressed regions 
>20% revenue from 
hotels in water- 
stressed zones 
Water Stress 
Las Vegas Sands derives 
>20% from hotel operations 
located in highly water-
stressed areas 
Semiconductor 
companies reliant on 
outsourced 
manufacturing 
Reliance on 
outsourced 
production vs. in-
house production 
Supply-Chain 
Labor 
Samsung Electronics 
outsources most of its 
production and has 
significant brand recognition 
Note: This list of exceptions is not exhaustive but is intended as illustration only 
 
Analysis of the Company-Specific Key Issue contributes to the company’s overall rating but does not 
contribute to the ratings of industry peers that are not significantly affected by that particular Key 
Issue. All Company-Specific Key Issues are reviewed and approved by the ESG Ratings Methodology 
Committee. 
Companies in diversified industries such as industrial conglomerates, trading companies & 
distributors, diversified support services, diversified consumer services, specialty retail, and 
specialized real estate investment trusts are the most frequently evaluated on Company-Specific 
Key Issues. For these industries, analysis of each company’s business model is undertaken at the 
outset of industry research. 
Company Specific Key Issue adoption rate: 
As of March 22, 2024, approximately 21% of companies were evaluated on a Company-Specific Key 
Issue.

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3.1.2 
Setting ESG Key Issue weights 
Once the Key Issues have been selected for a GICS sub-industry, MSCI ESG Research sets the 
weights that determine the contribution to the overall rating of: 
• 
Each Key Issue in the Environmental and Social Pillars; and 
• 
The Governance Pillar. 
Each Environmental and Social Key Issue typically comprises 5% to 30% of the total ESG Rating. The 
weights for these Key Issues are determined for each GICS sub-industry based on the sub-industry’s 
contribution to the negative externality associated with the Key Issue and the expected time horizon 
for the Key Issue to materialize, as illustrated conceptually in Exhibit 8, below.  
For the Governance Pillar, the weight is set at the Pillar level rather than at the key issue level. The 
Governance Pillar weight is determined for all sub-industries assuming a “High Contribution/Long 
Term” and “Medium Contribution/Long Term” assessment on Corporate Governance and Corporate 
Behavior, respectively.3 Additionally, the weight on the Governance Pillar is floored at a minimum 
value of 33%. 
Company-specific Key Issues and weights are permitted, subject to committee approval, for 
companies with diversified business models, facing controversies or based on predefined rules that 
apply to certain industries. 
Key Issues and weights undergo a formal review and feedback process at the end of each calendar 
year. 
Exhibit 8: Framework for setting Key Issue weights 
 
Short-term time 
frame for 
Risk/Opportunity 
to Materialize 
(<2 years) 
Long-term time 
frame for 
Risk/Opportunity 
to Materialize 
(5+ years) 
Industry is a major contributor to environmental or 
social impact 
Highest Weight 
 
Industry is a minor contributor to environmental or 
social impact 
 
Lowest Weight 
 
 
 
The framework is such that a Key Issue defined as “High-Impact” and “Short-Term” would be 
weighted three times higher than a Key Issue defined as “Low-Impact” and “Long-Term.” 
• 
Level of contribution to social or environmental externality: In the process outlined above, 
each GICS sub-industry is assigned a “High,” “Medium,” or “Low” impact for each Key Issue, 
based on MSCI ESG Research’s analysis of relevant data (e.g., average carbon emissions 
 
3 In cases where the Corporate Governance Score cannot be calculated for the Governance Reference Entity due to insufficient 
disclosure, the Governance Pillar Score is calculated solely by reference to the Corporate Behavior Key Issue.

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intensity). For Key Issues where the primary risk materializes via an event such as a 
controversy, MSCI ESG Research looks at the severity of the controversies to determine the 
level of contribution to the Environmental or Social externality. For instance, occurrence of 
severe/very severe controversies is viewed as having a high level of contribution to the 
concerned externality. Conversely, occurrence of minor controversies is viewed as having a 
low level of contribution to the concerned externality. Conversely, if many companies in an 
industry are observed to experience severe controversies in an area, then the level of 
contribution is determined to be High. At the same time, if many companies in an industry 
are observed to experience minor or no controversies in an area, then the level of 
contribution is determined to be Low. 
o 
Expected time horizon of risk/opportunity: The time horizon of each Key Issue 
(Short-Term, Medium-Term, Long-Term) is classified based on the type of risk or 
opportunity that each Key Issue presents to companies.  
o 
Each Key Issue is assigned a baseline time horizon (for example, depending on 
whether the risk is driven by pending regulations versus a slower time horizon issue, 
such as consumer demand shift).  
o 
In some cases, the time horizon of a single Key Issue can vary between industries 
(for example, Labor Management is defined as a Medium-Term issue when its 
relevance is to general worker productivity but is considered Short-Term in industries 
where labor disruptions and stoppages are very common). 
The final set of Key Issues and accompanying weights must be approved by the sector team leader 
and the ESG Methodology Committee before the research process progresses. Weights are set at 
the beginning of the calendar year and apply throughout that year. 
Please see Appendix 3: Weight-setting framework for further information on this process. 
3.1.3 
Key Issue assessments 
Depending on the nature of the Key Issue, one of three evaluation approaches is undertaken: 
• 
Risk Key Issues: A Risk Exposure Score and a Risk Management Score are combined such 
that a higher level of exposure requires a higher level of demonstrated management 
capability in order to achieve the same overall Key Issue Score. The ESG Risk Exposure 
Score is calculated referencing a granular breakdown of a company’s business: its core 
product or business segments, the locations of its assets or revenue, and other relevant 
measures such as outsourced production. See Section 3.2: Analyzing Risk Exposure and 
Section 3.3: Analyzing Risk Management. 
• 
Opportunities Key Issues: A Risk Exposure Score and a Risk Management Score are 
combined such that a higher level of exposure permits a wider range of outcomes, whereas 
a low level of exposure constrains the score closer to a value of 5 (out of 10). 
• 
Governance Key Issues: For each Key Issue, an absolute score is provided. Key Issue Scores 
range from 0 to 10, with lower scores indicating more severe risk. See Section 3.4: Analyzing 
Governance.

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3.2 Analyzing risk exposure 
In the Environmental and Social Pillars, each Key Issue model consists of two components: risk 
exposure and risk management.4 This distinction allows the model to adjust the strength of 
management systems required to achieve a given Key Issue Score: Companies facing higher risk 
exposure must have stronger management practices in place to mitigate their risks.  
Conversely, the model does not penalize companies with minimal risk management strategies if 
they face low or minimal exposure to the specific risk.  
For Key Issues that assess opportunities rather than risk, MSCI ESG Research evaluates each 
company’s exposure to assess the relevance of those particular business opportunities for a given 
company. 
3.2.1 
ESG Risk Exposure model 
MSCI ESG Research’s assessment of risk exposure may comprise three different areas of analysis, 
depending on the Key Issue: 
• 
Business Risk Exposure — analyzes the breakdown of a company’s business in terms of 
revenue, assets or operations. 
• 
Geographic Risk Exposure — analyzes the breakdown of a company’s geographic segments 
in terms of revenue, assets or operations. 
• 
Company-Level Risk Exposure factors — such as number of employees, size, reliance on 
government contracts or reliance on outsourced production. 
Business Exposure is a weighted average of the Business Segment Exposure Scores of a company’s 
business segments, adjusted for the proportion of total assets or revenue for which each segment 
accounts. The Business Segment Exposure score measures the extent of the externality generated 
by each business activity (for example, the carbon emissions generated per dollar of revenue by 
cement production).  
MSCI ESG Research uses the Standard Industrial Classification (SIC) system along with industry-
specific adjustments to define business activities. In some industries where SIC-based industries 
lack sufficient granularity for an accurate ESG risk assessment, MSCI ESG Research creates 
business activities that more accurately represent a company’s lines of business (see Exhibit 9). 
 
 
 
 
4 For Raw-Material Sourcing, risk exposure and risk management are assessed at a more granular material level (timber/paper, 
beef/dairy, seafood/aquaculture, palm oil, cotton, leather). For Corporate Governance (Ownership & Control, Board, Pay, Accounting) 
a different scoring approach is applied. See Section 3.5.4: Calculating Governance Scores, below

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Exhibit 9: Examples of MSCI’s business-segment mapping 
Official SIC Segment 
Additional MSCI Business Activities 
Justification 
1021 Copper Ores 
1031 Lead and Zinc 
Ores 
1041 Gold Ores 
1044 Silver Ores 
1061 Ferroalloy Ores 
1099 Misc. Metal 
Ores 
Each category segmented by Surface 
Mining vs. Underground Mining 
Varying land disturbance, 
accident rates 
1311 Crude 
Petroleum & Natural 
Gas 
Oil Extraction – Onshore: Conventional, 
Shale, Artic, Oil Sands – Mining, Oil Sands 
– In Situ, Oil Sands – Bitumen/SCO, Heavy 
Oil;  
Oil Extraction – Offshore: Shallow, 
Deepwater, Arctic 
Natural Gas Extraction – Onshore: 
Conventional, Shale, Arctic, coal-seam gas 
(CSG)/coalbed methane (CBM);  
Natural Gas Extraction – Offshore: 
Shallow, Deepwater, Arctic 
Varying land disturbance, 
carbon emissions, water 
intensity, accident rates 
3674 
Semiconductors 
Fab vs. Fabless 
Varying water intensity 
4911 Electric 
Services 
Power Generation: Hard Coal, Lignite, 
Liquid Fuel, Natural Gas, Nuclear, 
Hydroelectric, Renewables; 
Transmission; Distribution 
Varying land disturbance, 
carbon emissions, water 
intensity, toxic emissions 
6512 Operators of 
Buildings 
6552 Land Sub-
dividers & Developers 
6798 Real Estate 
Investment Trusts 
Each category segmented by: 
Residential: Single-Family, Multi-Family; 
Retail: Non-Shopping Mall, Shopping Mall; 
Healthcare: Inpatient, Outpatient; 
Office; Recreation; Restaurants; Food & 
Grocery Markets; Hotels & Residential 
Care; Warehousing; Other 
Varying energy intensity, 
green building incentives 
and regulations 
 
Geographic Exposure is a weighted average of the Geographic Segment Exposure Scores of the 
countries and regions in which a company operates. The methodology to calculate Geographic 
Segment Exposure Scores varies and is relevant only for certain Key Issues. Generally, each 
methodology relies on external data sets and assessments by MSCI ESG Research to differentiate 
countries on a variety of factors, including: 
• 
Regulatory (ex: stringency of regulations, differences in subsidies). 
• 
Natural (ex: physical hazards, resource availability)

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• 
Social and governance (ex: perceptions of corruption, frequency of employee fatalities)  
For certain Key Issues, additional factors are used to evaluate companies’ risk exposure, such as the 
number of employees, the volume of sensitive commodities sourced, and the percentage of sales 
from private label goods. 
Please see individual Key Issue methodology documents for a list of metrics and data sources used 
to assess the risk exposure of companies on each Key Issue. 
3.2.2 
Determining Exposure Scores 
In the Environmental and Social Pillars, Exposure Scores ranging from 0 to 10 are calculated for 
each Key Issue, indicating a company’s level of exposure to this specific Key Issue based on its 
unique mix of business and geographic segments. The 0-10 score is calculated in the following 
steps: 
1. Weighted average Business Exposure Score, based on 0-10 Business Exposure Scores for 
each business line weighted by percentage of assets, percentage of revenue or percentage 
of operations; 
2. Combined with company-specific factors, if applicable (e.g., size of workforce, percentage 
outsourced, etc.); and 
3. Multiplied by geographic multiplier, if applicable. The exposure score can increase/decrease 
by up to 50%, based on the geographic mix of assets or revenue. 
The final result is a 0-10 Exposure Score, where 0 indicates lowest exposure to this Key Issue, and 
10 indicates highest exposure to this Key Issue. 
3.3 Analyzing Risk Management 
3.3.1 
Components of Risk Management assessment 
In the Environmental and Social Pillars, MSCI ESG Research’s assessment of a company’s ability to 
manage its risk exposure on a Key Issue typically falls into three broad categories:  
• 
Strategy & Governance 
• 
Initiatives & Programs 
• 
Performance 
Although specific indicators differ across Key Issues, the Strategy & Governance section typically 
evaluates organizational capacity and company management’s level of commitment to address the 
key risks and opportunities, including such aspects as the level and extent of organizational 
responsibility for the specific risks/opportunities, strength and scope of policy commitments, and 
strength and scope of commitment to standards.  
The Initiatives section typically evaluates the strength and scope of the initiatives, programs and 
targets in place to improve performance on the Key Issue.  
The Performance section evaluates the company’s track record on managing the specific risk or 
opportunity. Performance involves collecting, standardizing and benchmarking a range of 
quantitative indicators where applicable, as well as an evaluation of qualitative indications of

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performance. As part of the qualitative indication of a company’s performance on an ESG Key Issue, 
MSCI ESG Research incorporates information on controversies in which a company has been 
implicated.  
3.3.2 
Controversies cases 
MSCI ESG Research has a dedicated team of ESG analytical personnel who identify and assess on 
an ongoing basis the severity of controversy cases that involve companies in the ratings universe.  
A controversy case is defined as an instance or ongoing situation in which company operations 
and/or products allegedly have a negative environmental, social and/or governance impact. Cases 
include alleged company violations of existing laws and/or regulations to which they are subject; or 
an alleged company action or event that violates commonly accepted international norms, including 
but not limited to norms represented by global conventions such as the United Nations (UN) Global 
Compact.  
A case is typically a single event such as a spill, accident or regulatory action, or a set of closely 
linked events or allegations such as health and safety fines at the same facility, multiple allegations 
of anticompetitive behavior related to the same product line, multiple community protests at the 
same company location or multiple individual lawsuits alleging the same type of discrimination. 
Each controversy case is assessed for the severity of its impact on society or the environment and 
consequently rated Very Severe (reserved for “worst of the worst” cases), Severe, Moderate or Minor.  
To reach these assessments, each case is analyzed along two dimensions.  
• 
The nature of harm, on a scale ranging from Very Serious to Minimal harm. 
• 
The scale of impact, on a scale ranging from Extremely Widespread to Low impact. 
These assessments are combined in the matrix below to reach an initial determination of severity, 
with multiple possible scenarios able to yield the same severity assessment through various 
combinations of scale of impact and nature of harm. 
Exhibit 10: Assessment of controversies 
 
Very Serious 
Nature of 
Harm 
Serious 
Nature of 
Harm 
Medium 
Nature of 
Harm 
Minimal 
Nature of 
Harm 
Extremely Widespread 
Scale of Impact 
Very Severe 
Severe 
Severe 
Moderate 
Extensive  
Scale of Impact 
Very Severe 
Severe 
Moderate 
Moderate 
Limited  
Scale of Impact 
Severe 
Moderate 
Minor 
Minor 
Low  
Scale of Impact 
Moderate 
Moderate 
Minor 
Minor

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Exacerbating circumstances:  
While the initial severity assessment is determined by a controversy case’s placement on the matrix, 
certain circumstances may warrant a final assessment that is more severe. The following rules allow 
for such adjustments. 
• 
The ESG controversy negatively impacts the most vulnerable demographics. The definition 
of vulnerable demographics is limited to national, ethnic, racial and religious groups 
(including indigenous people) currently subject to serious, systemic and prolonged human 
rights violations as defined by international bodies and standards such as UN Convention on 
the Prevention and Punishment of the Crime of Genocide or the United Nations Declaration 
on the Rights of Indigenous Peoples, and investigated by the International Criminal Court 
and/or international human rights advocacy groups, such as Amnesty International and 
Human Rights Watch.   
• 
The ESG controversy negatively impacts the most vulnerable ecosystems. MSCI ESG 
Research defines vulnerable ecosystems as those included on the United Nations 
Educational, Scientific and Cultural Organization (UNESCO) World Heritage List. 
• 
When there are allegations that the company or company’s representatives or employees are 
involved in activities constituting deliberate action with regard to social or environmental 
harm. These may include deliberate obstruction of investigations, attempts to cover up the 
event or activity or the punishment or termination of employees voicing their concerns or 
participating in protests against the company.  
• 
Cases that meet the criteria for exacerbating circumstances may have a final assessment 
that is more severe than the initial severity assessment derived from the nature and scale of 
impact alone. As events unfold or additional information becomes available, the severity of a 
given case may be reassessed as warranted. 
Selective incorporation of controversies into the ESG Rating Model 
While every controversy case may signal reputational risk, not every controversy is judged to pose 
material risks; therefore, not every controversy affects the company’s overall rating.  
MSCI ESG Ratings typically assess whether the controversy case indicates structural problems with 
a company’s risk management capabilities. In the ESG Rating methodology, a controversy case that 
is deemed by ESG analytical personnel to indicate structural problems that could pose future 
material risks for the company triggers a larger deduction from the Key Issue Score than a 
controversy case that is deemed to be an important indicator of recent performance but not a clear 
signal of future material risk. Conversely, if a case is brought to the ESG Ratings Methodology 
Committee as per predefined criteria, ESG analytical personnel can propose to exclude a controversy 
case from the risk management assessment when a controversy case has been addressed by a 
company’s management practices and deemed unlikely to pose future material risk to the company. 
3.3.3 
Standardization and benchmarking 
A key component of the analytical process is to standardize the data that ESG data experts collect 
with an aim to accurately gauge companies’ risk management capabilities. 
Example: ESG data experts collect historical data on health and safety rates, which are often 
not comparable in terms of the units reported or the scope covered (e.g., statistics cover

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contractors versus employees only, or joint ventures versus wholly owned subsidiaries only). 
ESG data experts normalize data across companies that report differently with an aim to 
allow uniform industry benchmarking.  
Analyzing the targets that companies commit to on a Key Issue, such as targets on reducing 
water consumption in response to operational risks arising from Water Stress, is another 
example of where ESG analytical personnel compare the strength of companies’ 
commitments. 
While the indicators used to score companies on each Key Issue are standardized across industries 
that face the same Key Issue, which facilitates comparisons across industries on each Key Issue, 
ESG analytical personnel delve into industry-specific or region-specific information where possible 
when scoring the indicators with a goal to capture the risks and opportunities companies face in 
each industry.  
Example: Biodiversity & Land Use Key Issue metric: “To what extent do companies minimize 
disturbances from operations?”  
In MSCI ESG Research’s Oil & Gas research, ESG data experts collect data on the total 
barrels of oil spilled and the intensity of the spills (barrels spilled per USD sales); ESG 
analytical personnel rank the results on oil spills, which are then translated into 0-10 scores 
for this metric in the Key Issue model. 
3.3.4 
Variations in disclosure 
While the ESG Rating model and analysis process encompasses in-depth analysis of industry-
specific data and Key Issues, MSCI ESG Research’s ratings methodology has also been designed to 
accommodate large variations in norms of disclosure, including low to almost no ESG disclosure 
among companies that are smaller in market capitalization, operate in less environmentally intensive 
industries, and/or in regions newly aware of ESG Key Issues, without overly penalizing lack of 
disclosure.  
The structure of the model is such that half of the contribution of Environmental and Social Key 
Issues to the overall ESG Rating comes from an assessment of a company’s Risk Exposure. 
Because company-level inputs required for MSCI ESG Research’s assessment of Risk Exposure 
come from standard financial disclosure, typically, no modification in the model is necessary to 
accommodate companies with lower ESG disclosure.  
For the Risk Management assessment, where analysis is more reliant on ESG-specific company 
disclosure, MSCI ESG Research has identified, through testing, a set of baseline indicators that meet 
the dual criteria of being most often disclosed and most likely to differentiate companies from 
industry peers on Risk Management capabilities on each Key Issue.  
Where there is no company disclosure on an indicator falling into the Performance category of Risk 
Management, the ESG Ratings analytical approach does not assume that the company’s 
performance category is “worst.” Instead, the methodology assigns a performance level that is 
below average in the industry context. 
Example: In the Health & Safety Key Issue, data experts collect extensive data points on 
injury and fatality rates that can be used to discern performance trends. Analysis of this data 
is used to calculate a score for the indicator: “Rate the company’s performance on the above 
metrics (injury and fatality statistics), in the context of its industry peers?”

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A score of 0 indicates worst performance in the industry context, while a score of 10 
indicates best performance in the industry context. When lack of disclosure on injury or 
fatality rates prevents a rigorous performance analysis, the model assigns a score of 3 out of 
10. 
Where there is no company disclosure on an indicator falling into the Initiatives category of Risk 
Management on a Key Issue, the ESG Ratings analytical approach depends on where the company 
has the bulk of its operations and whether risk management initiatives for the Key Issue in question 
are common. 
Example: In the Biodiversity & Land Use Key Issue, ESG analytical personnel assess 
companies’ efforts to minimize disturbances from their operations. For companies that 
operate primarily in highly regulated markets but lack disclosure on minimizing 
environmental disturbance, MSCI ESG Research assumes they met at least a basic standard, 
leading to a score of 3 out of 10.  
The existence of mitigation efforts is not assumed for companies mainly operating in markets with 
limited environmental protections and enforcement. 
Example: In contrast, in the case of Supply Chain Labor Standards Key Issue, MSCI ESG 
Research assumes that the lack of disclosure of an explicit Code of Conduct for suppliers 
indicates that the company may not have such a policy in place, thereby raising the risks of 
poor labor standards in its supply chain that can lead to operational disruptions and 
reputational damage. 
When a company’s lack of disclosure on specific Key Issues leads to uncertainty in assessing its 
performance relative to peers, the ESG Ratings company report explicitly points out this uncertainty 
in assessing the company’s performance. 
In certain cases, MSCI ESG Research uses estimates when a company-disclosed figure is not 
available. Estimates are typically derived from industry averages, regional criteria and extrapolation 
from company disclosures to derive more granular values. 
3.3.5 
Determining Management Scores 
In the Environmental and Social Pillars, management scores ranging from 0 to 10 are calculated for 
each Key Issue, indicating a company’s strategy, programs and proven track record on this Key 
Issue. The 0-10 score is calculated in the following steps: 
• 
Each underlying indicator collected is transformed into a 0-10 score, where 10 indicates best 
practice and 0 indicates a lack of management. 
• 
Scores are equally weighted within each management category. For example, if three 
indicators are assessed to determine a company’s Strategy, then these three indicators are 
equally weighted in determining a Strategy Score. 
• 
Category-level scores are equally weighted to determine an overall management score, 
before taking Controversies into account. For most Key Issues, Management Score is 
determined as a simple average of practices (typically comprising indicators related to 
strategy, policies, programs, initiatives and targets) and performance (including indicators 
related to performance trends vis-à-vis prior years and vis-à-vis industry peers).

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• 
A controversy deduction ranging from 0 to -5.0 points is subtracted from the overall 
Management Score, based on the severity and type of controversies facing the company on 
a particular Key Issue: 
Exhibit 11: Controversy deductions from Management Scores 
 
Structural Non-Structural 
Very 
Severe 
-5.0 
-3.0 
Severe 
-2.5 
-1.7 
Moderate 
-1.3 
-0.8 
Minor 
-0.4 
-0.0 
 
3.4 Analyzing Governance 
The methodology used to evaluate a company’s performance on the Governance Pillar is different 
from the one used to assess performance on the Environmental and Social Pillars. Environmental 
and social risks are typically industry-specific (certain Key Issues only matter for certain types of 
companies) and a company’s risk management strategy is evaluated in the context of its exposure 
to the environmental or social risk under consideration.  
In contrast, the two Themes under the Governance Pillar, Corporate Governance and Corporate 
Behavior, are relevant to all companies. While some governance risks are universal, others may differ 
based on ownership structure, the dynamics between key stakeholders, and cultural aspects, as well 
as the evolution of investor protections in the relevant market.  
Because Corporate Governance and Corporate Behavior are universally relevant and closely 
intertwined, governance is assessed through an approach that quantifies the gap between a 
company’s governance practices and what is considered best practice, and identifies the 
governance risks faced by its investors.  
A deduction-based scoring model is applied, whereby each company starts with a perfect 10 score 
and scoring deductions are applied based on the assessment of the Key Metrics.  
3.4.1 
Key Metrics  
Key Metrics are the foundational unit of the corporate governance scoring model. Each Governance 
Key Metric evaluates a specific aspect of a company’s corporate governance risk profile. A Key 
Metric may signify the presence of a certain type of ownership structure or governance risk factor, or 
the absence of a policy or practice that is seen as mitigating pertinent governance risks. 
Key Metric flags are pass/fail evaluations that help users of ESG Ratings understand which Key 
Metrics are influencing a company’s Theme Score or Key Issue Scores. In data feeds and in MSCI’s 
Screener tool, these flags are presented as 0 or 1 values, with 1 indicating that the Key Metric is 
flagged. 
While some Key Metrics will be flagged for very few companies, others will be flagged for many 
companies. This allows the scoring model to isolate both leaders and laggards and present a score 
distribution across the full 0-10 range.

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For each Key Metric, MSCI ESG Research also calculates a points value that is used in the 
calculation of the Key Issue and Theme Scores. The Key Metric Points are converted into a Score 
Contribution, which is published.  
3.4.2 
Controversies and events 
A controversy case is defined as an instance or ongoing situation in which company operations 
and/or products allegedly have a negative environmental, social and/or governance impact.  
Other cases may not be classed as being controversial but may provide relevant insights into a 
company’s governance risk profile. Examples of such events might be breaches or waivers of debt 
covenants, the ability to meet continuing obligations in relation to a listing of securities, or goodwill 
write-downs that might raise concerns over the quality of past board decisions. 
Certain Key Metrics are controversy- or event-based. Some of these Key Metrics apply score 
deductions that vary based on the severity of the controversy evaluation or based on certain 
thresholds being met by the event. 
3.4.3 
Standardization and benchmarking 
A key component of the analytical process is to standardize the data that data experts collect with 
an aim of gauging companies’ governance risks. 
Example: The independence of directors is assessed based on a standardized set of 
evaluation criteria that are applied globally. While these standards may differ from those 
applied in a given market, this approach offers more comparability across boards. 
Peer-based Key Metrics use standardized data to generate rules-based peer groups for comparison 
and evaluation. 
Example: The evaluation of CEO Pay uses a standardized methodology for calculating total 
pay figures and a standardized set of rules for peer group construction, both of which are set 
out in the individual Key Issue methodology document devoted to the Pay Key Issue. 
3.4.4 
Variations in disclosure 
Disclosure practices vary depending on jurisdictions of incorporation or regulation, securities listings 
and other factors. MSCI ESG Research assesses instances of nondisclosure based on the 
significance of that disclosure to the scoring model and based on the significance of that disclosure 
to an understanding of the company’s corporate governance risk profile. Specifically: 
• 
Board members: If the company’s board members are not disclosed, no Corporate 
Governance Theme Score is published. This reflects the importance of an assessment of the 
board to the scoring model. 
• 
Governance policies and practices: If the company has not disclosed whether a given policy 
exists or whether the board has adopted a given practice, MSCI ESG Research assumes that 
the policy or practice does not exist and/or has not been adopted. 
Example: If a company has not disclosed whether it has adopted a clawback policy 
that applies to its short- and long-term incentive pay, this nondisclosure will be 
interpreted as the absence of a clawback policy. The company would therefore be 
flagged under the Clawbacks & Malus Key Metric.

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• 
Quantitative data: If the company has not disclosed quantitative data used to calculate a Key 
Metric’s score, MSCI ESG Research may apply a mid-range score deduction based on the 
potential range of score deductions under that Key Metric. 
Example: The Auditor Tenure Key Metric provides a variable score based on the 
disclosed tenure of the company’s auditor. Where the auditor’s tenure is not 
disclosed, a default nondisclosure deduction is applied. The value of this deduction 
is set at 50% of the deduction that would apply for an auditor having served for 
longer than 20 years.  
• 
Jurisdictional defaults: Some items are scored based on mandatory rules within the 
company’s jurisdiction of incorporation and/or relating to the company’s securities listings. 
Example: In markets outside the U.S., the “Shareholder Rights to Convene a Special 
Meeting” Key Metric is based on the minimum standard set out in the applicable 
company law, unless there is explicit evidence in the governing documents of a more 
permissive threshold being applied. 
3.4.5 
Determining Governance Scores 
Key Metrics 
Key Metrics are the foundational unit of the governance assessment. Each Key Metric evaluates a 
specific aspect of a company’s governance risk profile and provides a simple pass/fail evaluation. 
When the metric result is a “fail” evaluation, the Key Metric is “flagged.”  
Some Key Metrics are relevant only to companies with specific governance characteristics 
stemming from ownership type, management structure or other factors.  
Key Metric Points 
For each Key Metric, MSCI ESG Research calculates a points value that is used in the calculation of 
the Key Issue and Theme Scores. The Key Metric Points are converted into a Score Contribution, 
which is published. A higher Score Contribution generally signals more-significant governance risk. 
Key Issues 
Each Key Metric is assigned a Category and organized into Key Issues. Each Key Issue represents a 
broad area of governance risk. For each Key Issue, an absolute score is provided. Key Issue Scores 
range from 0 to 10, with lower scores indicating more severe risk.  
Corporate Governance and Corporate Behavior Theme Scores 
The Key Metric points across all Key Issues are used to calculate the Theme Scores. Theme Scores 
range from 0 to 10, with lower scores indicating more severe risk.  
Governance Pillar Score 
The Governance Pillar Score is an absolute assessment of a company’s overall governance that 
uses a universally applied 0-10 scale. A similar approach is taken to the calculation of the Theme 
Scores, except that the Key Metric points assigned across all Key Issues in all Themes are used to 
calculate the Pillar Score.

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Supranationals and development banks 
For supranationals and development banks, the Governance Pillar is comprised of the Corporate 
Behavior Theme Score (70% weight) and a Government Support Score (30% weight). The 
Government Support Score is based on the weighted average of member countries’ Political 
Governance Risk Factor Scores, which are an input in MSCI ESG Government Ratings. 
3.5 Calculating Key Issue, Theme and Pillar Scores 
3.5.1 
Determining Environmental and Social Key Issue Scores – risks 
For Key Issues that assess risks, the Risk Exposure Score and Risk Management Score are 
combined such that a higher level of exposure requires a higher level of demonstrated management 
capability in order to achieve the same overall Key Issue Score (see Exhibit 12). The scoring model 
has the following additional features: 
• 
In order to avoid situations in which a company would receive a very high overall Key Issue 
Score solely as a result of low exposure to that Key Issue, the model requires a minimum 
management threshold in order to achieve an overall Key Issue Score greater than 5 (see 
zone where Exposure score is 0-2 in Exhibit 12).  
• 
Furthermore, at very high levels of exposure, the maximum possible Key Issue Score a 
company can achieve is lower than 10, indicating that regardless of a company’s actions or 
programs to mitigate risk, a certain level of risk persists. 
Exhibit 12: Combining Exposure and Management – risk Key Issues 
 
 
𝑲𝑲𝑲𝑲𝑲𝑲 𝑰𝑰𝑰𝑰𝑰𝑰𝑰𝑰𝑰𝑰 𝑺𝑺𝑺𝑺𝑺𝑺𝑺𝑺𝑺𝑺= 𝟕𝟕−(𝑴𝑴𝑴𝑴𝑴𝑴(𝒆𝒆𝒆𝒆𝒆𝒆𝒆𝒆𝒆𝒆𝒆𝒆𝒆𝒆𝒆𝒆, 𝟐𝟐) −𝒎𝒎𝒎𝒎𝒎𝒎𝒎𝒎𝒎𝒎𝒎𝒎𝒎𝒎𝒎𝒎𝒎𝒎𝒎𝒎) 
(Constrained 0-10, rounded to one decimal) 
 
0
1
2
3
4
5
6
7
8
9
10
0
1
2
3
4
5
6
7
8
9
10
Management Score
Exposure Score

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3.5.2 
Determining Environmental and Social Key Issue Scores – opportunities 
For Key Issues that measure opportunity (Opportunities in Clean Tech, Opportunities in Green 
Building, Opportunities in Renewable Energy, Opportunities in Nutrition & Health, Access to Finance, 
Access to Health Care, Access to Communications), the model for combining the Exposure Score 
and Management Score differs. Exposure indicates the relevance of this opportunity to a given 
company based on its current business and geographic segments. A high level of exposure permits 
a wider range of outcomes, whereas a low level of exposure constrains the score closer to a value of 
5 (see Exhibit 13 below). 
Exhibit 13: Combining Exposure and Management – opportunities Key Issues 
 
 
The reasoning is that, at higher levels of exposure, companies have more to gain from exploiting the 
opportunity, but they also have more to lose from a competitive standpoint if they fail to capitalize 
on the opportunity. At low levels of exposure, MSCI ESG Research judges the immediate 
opportunities the company faces to be less material; however, strong management systems, product 
innovation or R&D programs may indicate a stronger capacity to take advantage of future 
opportunities and a competitive advantage for the firm. 
𝑲𝑲𝑲𝑲𝑲𝑲 𝑰𝑰𝑰𝑰𝑰𝑰𝑰𝑰𝑰𝑰 𝑺𝑺𝑺𝑺𝑺𝑺𝑺𝑺𝑺𝑺= ቀ𝟎𝟎. 𝟓𝟓+ 𝒆𝒆𝒆𝒆𝒆𝒆𝒆𝒆𝒆𝒆𝒆𝒆𝒆𝒆𝒆𝒆
𝟐𝟐𝟐𝟐
ቁ∗𝒎𝒎𝒎𝒎𝒎𝒎𝒎𝒎𝒎𝒎𝒎𝒎𝒎𝒎𝒎𝒎𝒎𝒎𝒎𝒎+ ቀ𝟎𝟎. 𝟓𝟓−𝒆𝒆𝒆𝒆𝒆𝒆𝒆𝒆𝒆𝒆𝒆𝒆𝒆𝒆𝒆𝒆
𝟐𝟐𝟐𝟐
ቁ∗𝟓𝟓. 𝟎𝟎 
(Constrained 0-10, rounded to one decimal) 
 
3.5.3 
Calculating Environmental and Social Theme and Pillar Scores 
Theme Scores across the Environmental and Social Pillars (8 out of 10 Themes) are calculated 
based on the weighted average of Key Issue Scores underlying each Theme, normalized by the total 
sum of weights underlying each Theme. In the absence of a weighted Key Issue under the Climate 
Change, Natural Capital and Human Capital Themes, the Theme Score is populated using an 
unweighted Key Issue Score underlying each Theme, even if this score is not considered (weighted)

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in the overall ESG Rating.5 For the remaining Environmental and Social Themes (Pollution & Waste, 
Environmental Opportunities, Product Liability, Social Opportunities, and Stakeholder Opposition), 
Theme Scores are only calculated if one or more of the underlying Key Issues is weighted. 
Pillar scores across the Environmental and Social Pillars are similarly calculated based on the 
weighted average of Key Issue Scores underlying each Pillar, normalized by the total sum of weights 
underlying each Pillar.  
See Appendix 1: ESG Ratings Model hierarchy for more information. 
3.5.4 
Calculating Governance Scores 
Each of the Governance Pillar Scores, the Theme Scores and the Key Issue Scores are independently 
calculated based on a deduction-based approach in which points are deducted from a perfect 10 
based on the triggering of Key Metrics across the underlying Key Issues.  
Governance model structure  
The Governance model structure is shown in Exhibit 14 below. The Key Metrics for Corporate 
Governance are grouped into four Key Issues: Ownership & Control, Board, Pay and Accounting. 
Similarly, the Key Metrics for Corporate Behavior are grouped into two Key Issues: Business Ethics 
and Tax Transparency. 
Exhibit 14: Governance model structure 
 
 
Governance scoring process 
In the Corporate Governance Theme, input data is collected and reviewed by MSCI ESG Research 
ESG data experts and ESG analytical personnel on an ongoing basis. While the annual update from 
 
5 Carbon Emissions, Water Stress, and Human Capital Development Key Issue Scores are calculated for certain companies even if 
these Key Issues carry no weight in the overall ESG Rating. These scores will inform the Climate Change (for the entire ESG Ratings 
coverage universe), Natural Capital (for the MSCI ACWI Index universe), and Human Capital (for the entire ESG Ratings coverage 
universe) Theme Scores, respectively, if no other Key Issues are weighted within these themes.

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the shareholder meeting documents and annual report is typically the most significant update, ESG 
data experts also process data such as voting results, director changes, material ownership changes 
and governance controversies and events throughout the year.  
Upon publication of the data changes, the underlying Key Metrics that drive the overall assessments 
and scores are automatically updated. 
Governance scoring steps  
1. Each Key Metric is evaluated with a points value, ranging from 0 to the maximum possible 
points value for that Key Metric. The calculation of the overarching Theme and Key Issue 
Scores is based on these points values,6 which vary with Key Metric type, specifically: 
a. Some Key Metrics assess quantitative data or a range of possible assessment 
outcomes to determine the applicable points value within a defined range. 
b. Other Key Metrics, when flagged, always result in the allocation of a stated points 
value – that is, they output either zero or a defined points value allocated to that Key 
Metric, with no variation in between. 
2. Each Key Issue’s points value is calculated as the sum of the Key Metric points values under 
that Key Issue (after application of any category-based caps). 
3. The Theme points value is calculated as the sum of all Key Issue points values.7 
4. The Governance Pillar points value is calculated as the sum of the Theme points values. 
5. The 0-10 Governance Pillar Score is calculated by applying a score conversion formula (see 
Exhibit 15 below) to the Pillar points value. Negative 0-10 scores are not permitted; therefore, 
where the Pillar points value is above the Maximum Value, a 0.0 score is assigned.  
6. The 0-10 Theme Scores are calculated by applying the score conversion formula set against 
the Theme points value. Negative 0-10 scores are not permitted; therefore, where the Theme 
points value exceeds the Maximum Value,8 a 0.0 score is assigned. 
7. The 0-10 Key Issue Scores are calculated similarly to, but independent of, the 0-10 Theme 
Scores, using the Key Issue points values, the score conversion formula and referencing the 
Maximum Value for the respective Key Issue. Negative 0-10 Scores are not permitted; 
therefore, where the Key Issue points value exceeds the Maximum Value, a 0.0 Score is 
assigned. 
8. The Theme points and Key Issue points are compared against global and Home Market 
peers to calculate percentile ranks. 
 
6 Points are internal to MSCI and are not themselves published. 
7 Allegations of securities violations and executive misconduct contribute to the points value of the Business Ethics Controversies 
Key Metric of the Business Ethics Key Issue, which contributes to the Corporate Behavior Theme and Governance Pillar Score. To 
avoid duplication in the Corporate Behavior and Corporate Governance Themes, the points values for the Executive Misconduct and 
Securities Violations Key Metrics are not reflected in the Corporate Governance Theme Score and thus also not in the Governance 
Pillar Score, however these points values are reflected in the Board Key Issue Score. 
8 The Maximum Value is reviewed upon major methodology changes and is based on the 99.5th percentile of the respective points 
values as at the time of the introduction of the 0-10 Key Issue scores, in January 2018.

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9. For each Key Metric, the Score Contribution against the Theme Score is calculated. A more 
negative Score Contribution generally signals more significant governance risk. 
The scoring calculation process is illustrated in Exhibit 15. 
Exhibit 15: Governance Pillar scoring calculations 
 
 
Exhibit 16: Conversion formula for 0-10 Score  
0-10 Score 
0-10 Score Conversion Formula 
Pillar 
10 - (10 * (Pillar Points/Pillar Maximum Value)) 
Theme 
10 - (10 * (Theme Points/Theme Maximum Value)) 
Key Issue 
10 - (10 * (Key Issue Points/Key Issue Maximum Value)) 
 
Maximum value 
The purpose of the Maximum Value in the Score Conversion formula above is to provide a more 
normalized score distribution and to avoid the long tail of poorly performing companies taking up a 
large part of the 0-10 score scale. The Maximum Values are obtained as the 99.5th percentile of the

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range of the relevant points value across the entire coverage universe, as of the last annual 
calibration date.9 These are shown in Exhibit 17. 
Exhibit 17: Maximum Value10 
 
 
Key Metric score contributions (deductions) 
To help users of ESG Ratings understand the impact of an individual Key Metric on a company’s 
overall 0-10 Theme Score, MSCI ESG Research calculates and disclose each Key Metric’s individual 
deduction from the company’s initial perfect 10 score.11   
Each Key Metric’s deduction is expressed as a negative number calculated to the first decimal place. 
A Key Metric’s deduction is calculated using the following inputs: 
• 
Key Metric points: the number of points provided by that Key Metric, based on an evaluation 
of the company’s governance practices. 
• 
Theme points: the sum of all points from all Key Metrics. 
• 
Theme Score: the company’s 0-10 Theme Score. 
Using these inputs, the Score Contribution (deduction) attributable to a given Key Metric is 
calculated as: 
• 
Corporate Governance: (Key Metric Points/Theme Points) * (10 - Theme Score) * -1. 
 
9 The sum of the Theme Maximum Values is not equal to the Governance Pillar Maximum Value by design. This is because 
winsorization is applied independently to the unique distribution of each set of points values. 
10 The sum of the individual Key Issue Maximum Values does not sum to the Maximum Value used for the overall Theme Score. This 
is intentional and reflects the differing distributions of the points values for the individual Key Issues and is intended to provide a 
better alignment of the Key Issue scores with the overall Theme Score. 
11 Individual Key Issue-Level Key Metric Score Contribution — each Key Metric’s deduction from each Key Issue’s initial perfect 10 
score — is neither calculated nor published. However, for the Corporate Governance Key Metrics, and except for companies with a 
Theme or Key Issue Score of 0.0, these deductions can be approximated by multiplying the Theme Score contribution by the 
appropriate multiplier: Ownership & Control: 3.42; Board: 1.72; Pay: 4.55; Accounting: 5.88.  
Individual Pillar Key Metric Score Contribution — each Key Metric’s deduction from each Key Issue’s initial perfect 10 score — is 
neither calculated nor published. However, the contribution of each Theme and Key Issue to the Pillar score is presented in the ESG 
Ratings drill-down. The Governance Pillar-level deductions can be approximated by applying the following multipliers to the Theme-
level deductions: For Corporate Governance: 0.78 x the Corporate Governance Theme-level deduction; For Corporate Behavior: 0.39 
x the Corporate Behavior Theme-level deduction.

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• 
Corporate Behavior: Key Metric Score Deduction = -10 * (Key Metric Points/Theme 
Maximum Value). 
The worked example in Exhibit 18, below, demonstrates how a score deduction is derived from the 
Oversight for Ethics Issues Key Metric in the Corporate Behavior Theme. 
Exhibit 18: Worked example 
Oversight for Ethics Issues 
Points 
Conversion 
Deduction from 
Theme Score 
C-suite or executive committee 
0 
0 
0 
Board-level committee 
0 
0 
0 
Special task force or risk officer 
3.5 
-10 × (3.5/50) 
-0.7 
Corporate social responsibility/sustainability 
team 
3.5 
-10 × (3.5/50) 
-0.7 
Minimum practices expected based on 
domestic industry norms 
5 
-10 × (5/50) 
-1.0 
No evidence 
7 
-10 × (7/50) 
-1.4 
 
Relationship between Governance Pillar, Theme and Key Issue Scores 
The Governance Pillar Score is not directly derived from the 0-10 Corporate Governance and 0-10 
Corporate Behavior Scores, but from the conversion of the Governance Pillar Points (being the sum 
of the Corporate Governance points and Corporate Behavior points) to a 0-10 score using the score 
conversion formula. This holistic approach prevents strengths in one Theme from offsetting 
deficiencies in another.  
Thus, it is possible for a company to have a lower Governance Pillar Score than either its Corporate 
Behavior or Corporate Governance Theme Score. This also holds true at the Theme level, where the 
Corporate Governance Theme Score can be less than all four of the underlying Key Issue Scores 
(Board, Pay, Ownership, and Accounting).  
This is demonstrated in Exhibit 19, where the hypothetical company’s Governance Pillar Score (0.4) 
is less than its Corporate Behavior Score (4.3) and Corporate Governance Score (0.6). The sum of 
the Corporate Behavior Raw Score (28.5) and the Corporate Governance Raw Score (94) results in a 
Governance Pillar Raw Score (122.5) that is closer to the Maximum Value (128) than either of the 
underlying Themes are to their respective Maximum Values (50 and 100, respectively).

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Exhibit 19: Example calculation of the Governance Pillar Score 
 
Percentile rank calculations 
In calculating the percentile ranking for a Theme or Key Issue, the company with the lowest points 
value will be assigned a percentile rank of 100, while the company with the highest points value will 
be assigned a percentile rank of 0. Companies with the same points values are assigned the same 
percentile ranks. Percentiles are always presented as integers (i.e., rounded to the nearest decimal 
place). 
3.6 Determining final Ratings 
To arrive at a final ESG Rating from the selected Key Issue and Pillar scores, several steps are 
undertaken. 
3.6.1 
Weighted Average Key Issue Score  
The Weighted Average Key Issue Score is calculated as the weighted average of the Governance 
Pillar Score and the individual Environmental and Social Key Issue Scores. 
3.6.2 
Industry-Adjusted Score 
The Weighted Average Key Issue Score is then normalized relative to ESG Rating Industry peers. A 
benchmark peer set (comprising all companies rated by MSCI ESG Research within an ESG Industry 
— please see Appendix 4: ESG Rating Industries for details on the peer set) is used to calculate 
industry-relative ratings to ensure that companies’ relative ratings do not change when other 
companies are added to or removed from the peer set. See Appendix 5: Normalizing the Weighted 
Average Score vs. industry peers for details of the normalization process used in the calculation for 
the Industry-Adjusted Score.

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3.6.3 
Committee review process 
In certain predefined situations, prior to publication of the ESG Rating, additional committee review 
steps are initiated, as described in the “ESG Ratings Process” document. 
These steps include review by the ESG Ratings Methodology Committee and, in certain cases, by the 
ESG Assessment Committee. The ESG Ratings Methodology Committee presides over company-
specific assessments, while the ESG Assessment Committee addresses escalations from the ESG 
Ratings Methodology Committee and other critical methodology application cases, such as cases 
resulting from a significant market event.  
Depending on the outcome of the committee review process, the respective committees may 
approve the modification of a company’s Industry Adjusted Score.  
3.6.4 
ESG Rating 
Each company’s final Industry-Adjusted Score corresponds to a rating between the highest ESG 
Rating (AAA) and the lowest ESG Rating (CCC). The final Industry-Adjusted Company Score is 
mapped to a letter rating as shown in Exhibit 2, above. 
These assessments of company performance are not absolute but are explicitly intended to be 
relative to the standards and performance of a company’s industry peers. These letter ratings are 
relative within each ESG Industry.

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RESEARCH INSIGHTS
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Appendix 1: ESG Ratings Model hierarchy 
 
 
ESG Rating

ESG RATINGS METHODOLOGY
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Appendix 2: Example of industry Key Issue selection 
 
Notes: Bar length denotes minimum and maximum business segment exposure scores within a GICS sub-industry. Certain GICS sub-industries (25th percentile and 
below) are not shown in the chart; n = 9,868 companies; Scope includes ESG Ratings coverage as of Nov 16, 2022. 
Sources: IERS' Comprehensive Environmental Data Archive (CEDA) data - direct GHG emissions intensity; Eurostat – Air Emissions Accounts by Activity; Refinitiv; IEA 
(2020), Projected Costs of Generating Electricity 2020; UNECE, Life Cycle Assessment of Electricity Generation Options; GHG emissions intensities compiled by MSCI 
ESG Research; company disclosures

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Appendix 3: Weight-setting framework  
 
TYPE OF RISK/ 
OPPORTUNITY 
 
TIME HORIZON 
 
 
Short 
Med 
Long 
Operational Event 
Acute Event Risk: 
Sudden operational 
event could limit 
company’s ability to 
grow (e.g., exploit new 
reserves, expand to 
new territories), cause 
significant liabilities, 
disrupt key business 
units, or threaten 
overall business model 
Emerging Event Risk: 
Operational event 
could threaten ability to 
grow or license to 
operate, but will likely 
manifest over 
extended time frame 
(e.g., mounting 
community opposition 
to a project; major 
investigations, 
settlements, or 
prosecution) 
Long-Term Event Risk: 
Longer-term physical 
impacts of climate 
change could cause 
operational disruptions 
in the long run. 
Regulatory 
Pressure 
Imminent Regulatory 
Change: Regulatory 
change is pending or 
imminent in key 
markets. 
Emerging Regulatory 
Pressure: Issue 
receives increasing 
scrutiny from 
mainstream 
stakeholders; pressure 
on regulators is 
mounting but no 
pending regulatory 
change yet. 
Growing Stakeholder 
Awareness: Issue 
receives scrutiny from 
specialized or niche 
stakeholders, 
increasing coverage in 
media and growing 
presence in public eye. 
Resource Scarcity/ 
Supply Constraint 
Short-Term Supply 
Constraint: Acute 
supply constraint is 
present or imminent, 
likely to cause 
disruption or 
significant cost 
increase for 
companies. 
Medium-Term Supply 
Constraint: Supply 
constraint is forecast, 
could cause disruption 
or significant cost 
increase in 2- to 5-year 
period. 
Long-Term Resource 
Scarcity: Key 
resource/input is 
constrained, which 
may lead to cost 
increase or operational 
disruption in 5+ years.

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TYPE OF RISK/ 
OPPORTUNITY 
 
TIME HORIZON 
 
 
Short 
Med 
Long 
Demand Shift 
Acute Demand Shift: 
Ongoing demand shift 
between substitute 
products/services, old 
product/service 
becoming obsolete. 
Demonstrated Demand 
Shift: Growing demand 
in “new” area 
evidenced by 
differential growth 
rates and notable shift 
in market share 
between substitutes. 
 
Incentive-Based 
Demand Shift: Demand 
shift over 2- to 5-year 
period will be led by 
government incentives. 
Forecast Demand 
Shift: Underlying social 
or environmental 
pressures (e.g., obese 
population, climate 
change) are likely to 
cause change in 
demand and consumer 
preference over time. 
 
Competitor Response: 
Major industry 
player(s) undertake 
strategic response to 
environmental or social 
trends, increasing 
competitive pressure.

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Appendix 4: ESG Rating Industries 
ESG Rating Industries are based on GICS sub-industries, where applicable, which MSCI ESG 
Research groups to form peer sets in which companies face relatively similar Key Issues. As a result, 
each ESG Rating Industry can be mapped to a GICS sub-industry, a GICS Industry or several GICS 
sub-industries.12   
Companies are assigned to ESG Rating Industries based on the company’s GICS classification (if 
available) or based on MSCI ESG Research’s determination if no GICS classification is available (e.g., 
private or unlisted companies). 
• 
Key Issues and Key Issue Weights are determined at the GICS sub-industry level. 
• 
Industry-adjusted scores and ESG letter ratings are relative within each ESG Rating Industry. 
• 
Percentiles, quartiles, averages and score distributions on reports are calculated relative to 
the ESG Rating Industry. 
 
ESG Rating Industry 
GICS 
Sub-industry 
ENERGY 
 
 
Energy Equipment & Services 
10101010 
Oil & Gas Drilling 
 
10101020 
Oil & Gas Equipment & Services 
Integrated Oil & Gas 
10102010 
Integrated Oil & Gas 
Oil & Gas Exploration & 
Production 
10102020 
Oil & Gas Exploration & Production 
Oil & Gas Refining, Marketing, 
Transportation & Storage 
10102030 
Oil & Gas Refining & Marketing 
 
10102040 
Oil & Gas Storage & Transportation 
MATERIALS 
 
 
Metals and Mining - Non-
Precious Metals 
10102050 
Coal & Consumable Fuels 
 
15104010 
Aluminum 
 
15104020 
Diversified Metals & Mining 
 
15104025 
Copper 
Commodity & Diversified 
Chemicals 
15101010 
Commodity Chemicals 
 
15101020 
Diversified Chemicals 
Specialty Chemicals 
15101030 
Fertilizers & Agricultural Chemicals 
 
15101040 
Industrial Gases 
 
15101050 
Specialty Chemicals 
Construction Materials 
15102010 
Construction Materials 
Containers & Packaging 
15103010 
Metal, Glass & Plastic Containers 
 
15103020 
Paper & Plastic Packaging Products & 
Materials 
 
12 With the exception of supranationals and development banks, which are not covered in the GICS framework.

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ESG Rating Industry 
GICS 
Sub-industry 
Metals and Mining - Precious 
Metals 
15104030 
Gold 
 
15104040 
Precious Metals & Minerals 
 
15104045 
Silver 
Steel 
15104050 
Steel 
Paper & Forest Products 
15105010 
Forest Products 
 
15105020 
Paper Products 
 
60108040 
Timber REITs 
INDUSTRIALS 
 
 
Aerospace & Defense 
20101010 
Aerospace & Defense 
Building Products 
20102010 
Building Products 
Construction & Engineering 
20103010 
Construction & Engineering 
Electrical Equipment 
20104010 
Electrical Components & Equipment 
 
20104020 
Heavy Electrical Equipment 
Industrial Conglomerates 
20105010 
Industrial Conglomerates 
Construction & Farm Machinery 
& Heavy Trucks 
20106010 
Construction Machinery & Heavy 
Transportation Equipment 
 
20106015 
Agricultural & Farm Machinery 
Industrial Machinery 
20106020 
Industrial Machinery & Supplies & Components 
Trading Companies & 
Distributors 
20107010 
Trading Companies & Distributors 
Commercial Services & 
Supplies 
20201010 
Commercial Printing 
 
20201050 
Environmental & Facilities Services 
 
20201060 
Office Services & Supplies 
 
20201070 
Diversified Support Services 
 
20201080 
Security & Alarm Services 
Professional Services 
20202010 
Human Resource & Employment Services 
 
20202020 
Research & Consulting Services 
 
20202030 
Data Processing & Outsourced Services 
Air Freight & Logistics 
20301010 
Air Freight & Logistics 
Airlines 
20302010 
Passenger Airlines 
Marine Transport 
20303010 
Marine Transportation 
Road & Rail Transport 
20304010 
Rail Transportation 
 
20304030 
Cargo Ground Transportation 
 
20304040 
Passenger Ground Transportation 
Transportation Infrastructure 
20305010 
Airport Services 
 
20305020 
Highways & Railtracks 
 
20305030 
Marine Ports & Services 
CONSUMER DISCRETIONARY 
 
 
Auto Components 
25101010 
Automotive Parts & Equipment 
 
25101020 
Tires & Rubber 
Automobiles 
25102010 
Automobile Manufacturers

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ESG Rating Industry 
GICS 
Sub-industry 
 
25102020 
Motorcycle Manufacturers 
Household Durables 
25201010 
Consumer Electronics 
 
25201020 
Home Furnishings 
 
25201040 
Household Appliances 
 
25201050 
Housewares & Specialties 
Leisure Products 
25202010 
Leisure Products 
Textiles, Apparel & Luxury 
Goods 
25203010 
Apparel, Accessories & Luxury Goods 
 
25203020 
Footwear 
 
25203030 
Textiles 
Casinos & Gaming 
25301010 
Casinos & Gaming 
Hotels & Travel 
25301020 
Hotels, Resorts & Cruise Lines 
 
25301030 
Leisure Facilities 
Restaurants 
25301040 
Restaurants 
Diversified Consumer Services 
25302010 
Education Services 
 
25302020 
Specialized Consumer Services 
Retail - Consumer Discretionary 
25501010 
Distributors 
 
25503030 
Broadline Retail 
 
25504010 
Apparel Retail 
 
25504020 
Computer & Electronics Retail 
 
25504030 
Home Improvement Retail 
 
25504040 
Other Specialty Retail 
 
25504050 
Automotive Retail 
 
25504060 
Home furnishing Retail 
CONSUMER STAPLES 
 
 
Retail - Food & Staples 
30101020 
Food Distributors 
 
30101030 
Food Retail 
 
30101040 
Consumer Staples Merchandise Retail 
Beverages 
30201010 
Brewers 
 
30201020 
Distillers & Vintners 
 
30201030 
Soft Drinks & Non-alcoholic Beverages 
Food Products 
30202010 
Agricultural Products & Services 
 
30202030 
Packaged Foods & Meats 
Tobacco 
30203010 
Tobacco 
Household & Personal Products 
30301010 
Household Products 
 
30302010 
Personal Care Products 
HEALTHCARE 
 
 
Health Care Equipment & 
Supplies 
35101010 
Health Care Equipment 
 
35101020 
Health Care Supplies 
 
35203010 
Life Sciences Tools & Services 
Health Care Providers & 
Services 
35102010 
Health Care Distributors 
 
35102015 
Health Care Services

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ESG Rating Industry 
GICS 
Sub-industry 
 
35102020 
Health Care Facilities 
 
35102030 
Managed Health Care 
 
30101010 
Drug Retail 
Health Care Technology 
35103010 
Health Care Technology 
Biotechnology 
35201010 
Biotechnology 
Pharmaceuticals 
35202010 
Pharmaceuticals 
FINANCIALS 
 
 
Banks 
40101010 
Diversified Banks 
 
40101015 
Regional Banks 
Diversified Financials 
40201020 
Diversified Financial Services 
 
40201030 
Multi-Sector Holdings 
 
40201040 
Specialized Finance 
 
40201050 
Commercial & Residential Mortgage Finance 
 
40201060 
Transaction & Payment Processing Services 
 
40203040 
Financial Exchanges & Data 
Consumer Finance 
40202010 
Consumer Finance 
Asset Management & Custody 
Banks 
40203010 
Asset Management & Custody Banks 
 
40204010 
Mortgage REITs 
Investment Banking & 
Brokerage 
40203020 
Investment Banking & Brokerage 
 
40203030 
Diversified Capital Markets 
Life & Health Insurance 
40301020 
Life & Health Insurance 
Property & Casualty Insurance 
40301040 
Property & Casualty Insurance 
Multi-Line Insurance & 
Brokerage 
40301010 
Insurance Brokers 
 
40301030 
Multi-line Insurance 
 
40301050 
Reinsurance 
INFORMATION TECHNOLOGY 
 
 
Software & Services 
45102010 
IT Consulting & Other Services 
 
45102030 
Internet Services & Infrastructure 
 
45103010 
Application Software 
 
45103020 
Systems Software 
 
60108050 
Data Center REITs 
Technology Hardware, Storage 
& Peripherals 
45201020 
Communications Equipment 
 
45202030 
Technology Hardware, Storage & Peripherals 
Electronic Equipment, 
Instruments & Components 
45203010 
Electronic Equipment & Instruments 
 
45203015 
Electronic Components 
 
45203020 
Electronic Manufacturing Services 
 
45203030 
Technology Distributors 
Semiconductors & 
Semiconductor Equipment 
45301010 
Semiconductor Materials & Equipment

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ESG Rating Industry 
GICS 
Sub-industry 
 
45301020 
Semiconductors 
COMMUNICATION SERVICES 
 
 
Telecommunication Services 
50101010 
Alternative Carriers 
 
50101020 
Integrated Telecommunication Services 
 
50102010 
Wireless Telecommunication Services 
 
60108030 
Telecom Tower REITs 
Media & Entertainment 
50201010 
Advertising 
 
50201020 
Broadcasting 
 
50201030 
Cable & Satellite 
 
50201040 
Publishing 
 
50202010 
Movies & Entertainment 
 
50202020 
Interactive Home Entertainment 
Interactive Media & Services 
50203010 
Interactive Media & Services 
UTILITIES 
 
 
Utilities 
55101010 
Electric Utilities 
 
55102010 
Gas Utilities 
 
55103010 
Multi-Utilities 
 
55104010 
Water Utilities 
 
55105010 
Independent Power Producers & Energy 
Traders 
 
55105020 
Renewable Electricity 
REAL ESTATE 
 
 
Real Estate Development & 
Diversified Activities 
25201030 
Homebuilding 
 
60201010 
Diversified Real Estate Activities 
 
60201030 
Real Estate Development 
Real Estate Management & 
Services 
60101010 
Diversified REITs 
 
60102510 
Industrial REITs 
 
60103010 
Hotel & Resort REITs 
 
60104010 
Office REITs 
 
60105010 
Health Care REITs 
 
60106010 
Multi-Family Residential REITs 
 
60106020 
Single-Family Residential REITs 
 
60107010 
Retail REITs 
 
60108010 
Other Specialized REITs 
 
60108020 
Self-Storage REITs 
 
60201020 
Real Estate Operating Companies 
 
60201040 
Real Estate Services

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Appendix 5: Normalizing the Weighted Average Score vs. 
industry peers 
As set out in section 3.6 above, each company receives a Preliminary Industry-Adjusted Score 
(IAS), where the WAKIS is normalized based on score ranges set by the benchmark values in the 
peer set.  
Industry peer set benchmark values 
The following criteria in setting the industry top and bottom benchmark values applied starting 
November 2020:  
• 
The top benchmark value (“industry maximum score”) falls between the 95th and 100th 
percentile of modeled WAKIS within an ESG Rating Industry. 
• 
The bottom benchmark value (“industry minimum score”) falls between the 0th and 5th 
percentile of modeled WAKIS within an ESG Rating Industry.  
Percentiles were calculated based on the full universe of companies with ESG Ratings (10,052 
companies) as of March 13, 2024. The MSCI ESG Ratings coverage universe continually expands to 
include new companies, which are often companies with low disclosures. Sometimes, such 
companies can distort the bottom benchmark value by lowering it, thereby leading to upgrades for 
the rest of the companies in the industry. For such industries, this problem is mitigated by excluding 
recent coverage additions (companies with less than two years of ratings history) while determining 
the bottom five percentile range for the WAKIS. 
These values are set at the beginning of a year based on the distribution of the WAKIS of an industry 
until that point in time. However, the distribution of the WAKIS in an industry is expected to change 
during the year with new disclosures and improvements in the ESG performance of companies, 
resulting in unidirectional movement of rating changes in an industry. Consequently, the industry 
maximum and minimum scores for each ESG Rating Industry were selected within the 
aforementioned percentile ranges to meet the following objectives: 
1. Minimize unidirectional changes in ESG Ratings.  
2. Ensure that the selected industry minimum and maximum scores with respect to its current 
industry minimum and maximum scores are moving in the direction of the underlying score 
distribution. 
Exceptions to the 95th and 5th percentile boundaries 
If adherence to these boundaries results in strong unidirectional modeled rating changes 
(upgrade/downgrade ratio beyond 0.7 to 1.3) thereby working against objective 1 or 2 above, the 
range can be extended to the 90th and 10th percentile of modeled WAKIS for the industry minimum 
and maximum values, respectively. However, the range of the industry minimum and maximum 
values will only be extended to the 10th and 90th percentiles if the resulting ESG Rating distribution 
entails less unidirectional movement than would otherwise be achieved by keeping the minimum 
and maximum values constant.

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Industry minimum and maximum scores update frequency 
The benchmark values are reviewed at least once a year. They are updated within a year if either of 
the following conditions are met: 
• 
If there is a drift in the WAKI score distribution: the mean WAKIS and/or either of the tails are 
changing by ≥0.2 since the last review. 
• 
If either of the min-max boundaries are breached: The current industry maximum score being 
less than 90th percentile and/or the current industry minimum score being greater than the 
10th percentile of the latest distribution of WAKIS (i.e., beyond a 5% buffer around the 
aforementioned ranges).  
The resulting industry minimum and maximum scores can be accessed in the drill-down section of 
each company’s ESG Rating report.  
The adjusted score of 10 is defined at or above the industry maximum score, and the adjusted score 
of 0 is defined at or below the industry minimum score. The remaining companies’ scores are 
linearly interpolated based on these values using the following formula: 
ind_adj_score= 
10*(weighted_avg_score-industry_min_score)/(industry_max_score-industry_min_score) 
(constrained 0-10, rounded to one decimal) 
 
MSCI ESG Research reviews these benchmark values on an annual basis to reflect changes to 
underlying company data, methodology updates and fluctuations in industry peer sets.  
The relation between the Weighted Average Score and the Industry Adjusted Score is shown in 
Exhibit 20, below. For instance, if the score distribution in an industry is such that the industry 
minimum and maximum scores are 2.9 and 8.1, respectively (on a scale of 0-10), these are given a 
score of 0 and 10 respectively in the Industry Adjusted Scale (IAS). 
Exhibit 20: Relation between Weighted Average Score and IAS 
 
 
Additional steps designed to ensure that the letter ratings provide a consistent and reliable signal: 
• 
Industries with a narrow range of scores may have their ranges extended: 
o 
If the bottom benchmark value is greater than 4, the industry minimum is truncated 
at 4. This could result in no companies in that industry receiving a CCC rating.

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o 
If the top benchmark value is less than 6, the industry maximum is truncated at 6. 
This could result in no companies receiving an AAA rating.  
• 
Methodology changes are modeled in advance to limit rating volatility: 
o 
For example, in constructing the rating ranges for 2021, new Governance Pillar 
scores using the updated methodology and sources were simulated in calculating 
the minimum and maximum values.

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Appendix 6: Home-Market selection 
The Theme and Key Issue Percentile Ranks are calculated for a company relative to all other 
companies within its Home Market. The allocation of a company’s peers for assessing executive pay 
also references a company’s Home Market. 
Companies are classified into countries as set out in the MSCI Country Classification Standard, with 
Home Markets reviewed annually in October and any changes effective starting Jan. 1.13  
Determining Home-Market allocation 
Countries with 30 or more companies in governance coverage as of Oct. 1 each year will be 
allocated their own Home Market for the following calendar year. A Home Market will be deemed to 
have insufficient companies when it falls to 25 companies in governance coverage or, subject to 
review by the Corporate Governance Methodology Committee, where it has fewer than 30 
companies for two successive years. 
Countries with insufficient companies will be allocated a Home Market for the following calendar 
year that is formed based on: 
• 
MSCI’s Markets Classification (Developed, Emerging, Frontier); and 
• 
Geographical Regions (EMEA, Asia Pacific, Americas). 
If for any combination of Market Classification and Region, there are still not at least 30 companies, 
pairings may be combined to form an aggregated grouping that makes the minimum size criterion 
for Home Markets. 
If the combination of Markets Classification and Geographical Region results in insufficient 
companies for a Home Market for any of the pairings, the Home Market will be formed based on the 
Market Classification only. 
Ad hoc coverage additions 
Companies added to coverage outside of the Annual Review will be assigned one of the Home 
Markets effective at the time of the coverage addition based on the company’s MSCI Country 
Classification. 
If an equity issuer has no MSCI Country Classification, and the country of incorporation and the 
country of the primary listing of the security are the same, then that country is used.  
Fixed income – governance reference entity 
The corporate governance assessment for Fixed Income Issuers is based on the Governance 
Reference Entity. Where the Governance Reference Entity has an equity listing, the Home Market of 
the equity issuer is used. If the Governance Reference Entity does not have an equity listing, then a 
home market of “N/A” is assigned. 
 
13 https://www.msci.com/eqb/methodology/meth_docs/MSCI_GIMIMethodology_May2021.pdf at Appendix III.

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2021 Home-Market allocation 
Following the annual review of Home Markets, for 2021 Kuwait was added to Other EMEA Emerging 
following the MSCI Market Classification Review where it was reclassified as Emerging Markets. 
For 2020, one additional Home Market was added, with Chile moved from Other Americas Emerging 
to Chile. For 2019, two additional Home Markets were added — Saudi Arabia and Poland. Saudi 
Arabia was previously allocated to Frontier, while Poland was previously allocated to Other EMEA 
Emerging. In addition, Argentina was moved from Frontier to Other Americas Emerging. 
Exhibit 21: Home-Market classification 
Home Market 
Classification 
Developed Americas 
 
Canada 
Canada 
United States 
USA 
 
 
Developed Asia Pacific  
Australia 
Australia 
Hong Kong 
Hong Kong, China 
Japan 
Japan 
New Zealand 
New Zealand 
Singapore 
Singapore 
 
 
Developed EMEA 
 
Austria 
Austria 
Belgium 
Belgium 
Denmark 
Denmark 
Finland 
Finland 
France 
France 
Germany 
Germany 
Israel 
Israel 
Italy 
Italy 
Netherlands 
Netherlands 
Norway 
Norway 
Spain 
Spain 
Sweden 
Sweden 
Switzerland 
Switzerland 
United Kingdom 
United Kingdom 
Other EMEA 
Developed 
Ireland, Portugal 
 
 
Home Market 
Classification 
Emerging Americas 
 
Brazil 
Brazil 
Chile 
Chile 
Mexico 
Mexico 
Other Americas 
Emerging 
Argentina, Colombia, 
Peru 
 
 
Emerging Asia Pacific 
 
China 
China 
India 
India 
Indonesia 
Indonesia 
Korea 
Korea 
Malaysia 
Malaysia 
Philippines 
Philippines 
Taiwan 
Taiwan 
Thailand 
Thailand 
Other APAC Emerging 
Pakistan 
 
 
Emerging EMEA 
 
Poland 
Poland 
Russia 
Russia 
Saudi Arabia 
Saudi Arabia 
South Africa 
South Africa 
Turkey 
Turkey 
Other EMEA Emerging 
Czech Republic, Egypt, 
Greece, Hungary, 
Kuwait, Qatar, United 
Arab Emirates 
 
 
Other 
 
Frontier 
All countries classed 
as Frontier by MSCI 
N/A 
n/a (fixed income)

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msci.com/contact-us 
 
 
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About MSCI 
MSCI is a leading provider of critical decision 
support tools and services for the global 
investment community. With over 50 years of 
expertise in research, data and technology, we 
power better investment decisions by enabling 
clients to understand and analyze key drivers of risk 
and return and confidently build more effective 
portfolios. We create industry-leading research-
enhanced solutions that clients use to gain insight 
into and improve transparency across the 
investment process. 
 
About MSCI ESG Research Products and Services  
MSCI ESG Research products and services are 
provided by MSCI ESG Research LLC, and are 
designed to provide in-depth research, ratings and 
analysis of environmental, social and governance-
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worldwide. ESG ratings, data and analysis from 
MSCI ESG Research LLC. are also used in the 
construction of the MSCI ESG Indexes. MSCI ESG 
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under the Investment Advisers Act of 1940 and a 
subsidiary of MSCI Inc. 
 
To learn more, please visit www.msci.com.

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