Business Involvement
Methodology Overview
MSCI ESG Research
July 2020

July 2020

BUSINESS INVOLVEMENT METHODOLOGY OVERVIEWJULY 2020

Contents

Business Involvement Screening Research4

Coverage Universe

4

Research Process

5

Ongoing Monitoring and Update Cycle

5

Corporate Actions

5

Additions and Deletions

6

Sources6Company Communication

6

Revenue

6

Quality Assurance

7

Business Involvement Screens

7

Abortion Providers

7

Abortifacients

7

Adult Entertainment

8

Alcohol

8

Animal Welfare

8Biocides

9

Fur

10

For Profit Healthcare

10

Genetic Engineering

11

Lending Practices

11

CRA Rating

12

Nuclear Power

12

Palm Oil

13

Stem Cells

13

Tobacco13

Defense and Weapons

14

Firearms

14

Cluster Munitions

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BUSINESS INVOLVEMENT METHODOLOGY OVERVIEWJULY 2020

Landmines

14

Global Weapons Production

15

Depleted Uranium Weapons

15

Blinding Laser Weapons

15

Incendiary Weapons15

Non-detectable Fragments

16

Nuclear Weapons

16

Weapons General Exclusions

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BUSINESS INVOLVEMENT METHODOLOGY OVERVIEWJULY 2020

Business Involvement Screening Research
In order to help asset owners and managers ensure that their investment decisions
comply with client mandates, MSCI ESG Research provides research on companies
involved in specific business activities. This summary is an abridge version of themethodology governing MSCI ESG Research’s Business Involvement Screening
Research. For more detail please see the full document.

Coverage Universe
The coverage universe for the MSCI Business Involvement Screening Research(BISR) in the below areas of involvement is comprised of global equity issuers, plus
coverage for selected bond-issuing subsidiaries, selected corporate bond issuersand selected government-owned entities that operate as corporations-

Abortion Providers,-

Abortifacients,-

Adult Entertainment,-

Alcohol,-Animal Welfare,-

Biocides,-Breast Milk Substitutes,-

Cannabis,-

Contraceptives,-

Gambling,-

Genetic Engineering,-

Nuclear Power,

-

Pork,

-

Stem Cells,-

Tobacco,-Defense and Weapons

For other business involvement areas, the coverage is specified in the relevant
sections below.

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BUSINESS INVOLVEMENT METHODOLOGY OVERVIEWJULY 2020

Research Process
The MSCI ESG Research team includes a team of content specialists dedicated to
producing research on controversial types of business involvement. These analysts
are specialists responsible for identifying involvement in issue areas within acompany.
Using a combination of industry classifications, business descriptions, and keyword
searches in select company filings, we identify issuers that could have potential
involvement in each of the screening topics. If this initial review process identifies
the potential for involvement, an analyst will review the company’s regulatory filings,
annual reports, company websites and third-party sources, including news, media
and non-governmental organizations, to determine if a company is in fact involved in
one of the covered activities. If after this step there is no evidence to flag thecompany for one of the covered activities, then the company is also categorized as“Not Involved – Verified.” If during the screening process or analyst review evidence
is captured relating to the companies’ involvement in a covered activity, then thecompany is categorized as “Involved.”
Screens are designed only to flag companies with involvement in the covered
activity and should not be used to produce comprehensive lists of companies
without involvement.
Ongoing Monitoring and Update Cycle
MSCI ESG Research regularly reviews all companies in the coverage universe
throughout the year, based on fiscal-year reporting cycles.
Corporate Actions
MSCI ESG Research analysts review and incorporate corporate actions to theresearch following the event’s completion. Corporate events include: acquisitions,consolidations, mergers, name changes, public offerings and spinoffs.
Spin-offs: both the company that spins off operations as well as the new business
entity are assessed to estimate the extent of their involvement in screened businessactivities (if any).
Mergers and Acquisitions: We assess involvement in screened business activities formerged entities, acquiring companies and acquired companies.
Name changes: The name of the company in our systems will reflect the new name;however the body of the company’s report may continue to reflect the old name until
the company undergoes scheduled data review.

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BUSINESS INVOLVEMENT METHODOLOGY OVERVIEWJULY 2020

Additions and Deletions
Companies are added to or removed from MSCI ESG Research Business Involvement
Screens under the following circumstances:•

If MSCI ESG Research determines conclusively that the company is nolonger involved with the relevant activity.

•

In the event that there is no conclusive evidence of either continued
involvement or a discontinuation of involvement in a subject activity, MSCIESG Research retains a company’s involvement flags for up to three years.
After this period, if there is no evidence of continued involvement, MSCIESG Research considers the company no longer involved.

Sources
MSCI ESG Research uses a wide range of information tools and sources, including:•Company websites,•

Company annual reports and regulatory filings,•

Media search services,•

Business directories,•

Nongovernmental organization (NGO) reports and websites,•

Government agencies and disclosures,•

Financial data providers, and•Direct communication with company.

Company Communication
MSCI ESG Research seeks input from every company that is included in any of thebusiness involvement screens when its information is updated, at a minimum of
once a year. Where MSCI ESG Research has the e-mail contact information, thecompanies are invited to review MSCI ESG Research’s assessments and reports, andto provide updates, clarifications and comments. Information provided by companies
during this process is reviewed by analysts and incorporated into the research as
appropriate.
Revenue
MSCI ESG Research provides company revenue percentages for companies withcertain types of business activity. Where the revenue for a covered business activity
is not disclosed by a company and is not available through other publicly available
sources, a revenue estimate is supplied.

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BUSINESS INVOLVEMENT METHODOLOGY OVERVIEWJULY 2020

Revenue Estimation Process
When companies do not report exact revenue figures for a covered business activity,
MSCI ESG Research provides an estimate of the extent of companies’ involvement in
the subject activity. The estimation approach is as follows:•

The reported business segment of the business involvement activity isidentified.

•

The other activities in that segment(s) are determined and considered inorder to calculate the estimated revenue for said business involvement
activity. All available disclosures are considered.

•

In the absence of information indicating otherwise, assumptions are madethat product lines are of equal weight in terms of revenue contribution.

Quality Review
Initial company research and analysis is followed by a rigorous quality review
process. Data accuracy and company profiles are peer-reviewed, then sent to content
leads for final approval. In specific cases in which a company’s business activity is
not clearly defined by MSCI ESG Research’s methodology and there is no precedent,
the case is escalated to the Head of Screening Research. Cases that require further
interpretation or an update to the methodology are brought to the MSCI ESG Impact
and Screening Methodology Committee for resolution.

Business Involvement Screens
Abortion Providers
MSCI ESG Research’s abortion provider research identifies companies that own or
operate facilities where abortions are performed. Companies are not placed on the
Abortion Provider screen unless MSCI ESG Research has received confirmation fromthe company within the last three fiscal years that an abortion has been performed at
a company facility.
In addition, MSCI ESG Research identifies companies that own or operate acute carefacilities with the capacity to perform abortions.

Abortifacients
MSCI ESG Research’s abortifacients research identifies companies that manufacture
abortifacient products. The research describes both the type of involvement and therevenue from that involvement.
An abortifacient is defined as any drug, compound or chemical that results in thetermination of pregnancy by causing the cervix to dilate and the uterus to© 2020 MSCI Inc. All rights reserved. Please refer to the disclaimer at the end of this document.

MSCI.COM | Page 7 of 18

BUSINESS INVOLVEMENT METHODOLOGY OVERVIEWJULY 2020prematurely contract. MSCI ESG Research includes drugs or other agents primarily
designed or approved for use in the termination of pregnancy, as well as drugs orother agents recognized by medical authorities as having a significant secondary use
in the termination of pregnancy, including methotrexate, misoprostol, oxytocin,
dinoprost, hemabate (carboprost), RU 486 (mifepristone) or gemeprost.
In addition, MSCI ESG Research identifies companies that own or operate acute carefacilities with the capacity to perform abortions.

Adult Entertainment
MSCI ESG Research’s adult entertainment research identifies companies that are
involved in the production, distribution or retailing of adult entertainment products.
The research describes both the type of involvement and the revenue from thatinvolvement. The total revenue derived from adult entertainment is available, as well
as revenue derived from each of the following subcategories: producer, retailer anddistributor.
MSCI ESG Research defines adult entertainment products as material in which thedominant theme is “sexually explicit” conduct, specifically the depiction or
description of sexual or excretory activities in a lascivious way. MSCI ESG Researchuses the term “adult entertainment” interchangeably with “sexually explicit material”
and “sexually explicit adult entertainment.”

Alcohol
MSCI ESG Research’s alcohol research identifies companies that produce, distribute,retail, license or supply alcoholic beverages, key products and services. The research
describes both the type of involvement and the revenue from that involvement. The
total revenue derived from alcohol is available, as well as revenue derived from eachof the following subcategories: producer, distributor, supplier, retailer, and licensor.
An alcoholic beverage is defined as any fermented liquor that contains ethyl alcoholor ethanol as an intoxicating agent. MSCI ESG Research captures beverages with any
amount of alcoholic content.

Animal Welfare
MSCI ESG Research’s animal welfare research identifies companies involved in
testing products or product ingredients of any sort on animals, breeding animals foranimal testing purposes, exhibiting animals and operating factory farms. MSCI ESG
Research includes publicly traded companies that perform testing activities in-house,
as well as those that outsource that testing to third parties.

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BUSINESS INVOLVEMENT METHODOLOGY OVERVIEWJULY 2020

Animal Welfare research refers to the research and testing performed on animals todetermine safety and efficacy of specific products; factory farming; and the breedingand exhibiting of animals.

BiocidesMSCI ESG Research’s biocides research identifies companies that are involved in the
production or the supply of chemicals that are used to control unwanted organisms.
The total revenue derived from biocides is available, as well as revenue derived fromeach of the following subcategories: supplier and producer.
Biocides are defined as products that are used to control unwanted organisms.
These include pesticides, rodenticides, insecticides, and antifouling products.

Breast Milk Substitutes
MSCI ESG Research’s BMS screen identifies companies that have been flagged by
the International Baby Food Action Network (IBFAN) as violating the International
Code of Marketing of Breast Milk Substitutes.

Cannabis
MSCI ESG Research’s Cannabis research identifies companies that are involved in
the production, retailing or pharmaceutical research of cannabis. The research
describes both the type of involvement and the revenue from that involvement. The
total revenue derived from cannabis is available, as well as revenue derived fromeach of the following subcategories: producer and retailer.
Cannabis products and derivatives usually come from the dried leaves and flowers of
the Cannabis sativa or Cannabis indica plant. It has a psychoactive substance thatcan be used for both medicinal and recreational use. Its main psychoactive chemicalcomponent, tetrahydrocannabinol (THC), works as an anti-emetic drug that is
effective against vomiting and nausea during medical treatments. Additionally, THC
can also induce a euphoric high, which lets users experience a state of relaxation.
Consumption of Cannabis is most commonly done through smoking, vaporizing oringestion by mixing with food. It is also known as marijuana, weed, grass, ganja, bud,hash, pot, blunts, or joint.
Note that companies that produce or retail products that are CBD-based and do notcontain significant amounts of THC, and companies that manufacture
miscellaneous paraphernalia (such as pipes, bonds, hookahs, papers, etc) areexcluded from this screen.

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BUSINESS INVOLVEMENT METHODOLOGY OVERVIEWJULY 2020

Contraceptives
MSCI ESG Research’s contraceptives research identifies companies that
manufacture or license their company brand name to contraceptive products. The
research describes both the type of involvement and the revenue from thatinvolvement.
Contraception is defined as the prevention of fertilization of the ovum by sperm cells.
Note that retailers of contraceptives are excluded from this screen.

Fur
MSCI ESG Research’s fur screen identifies companies that derive any detectablerevenues from the production and/or sale of fur products, including those that raise,trap or slaughter animals for their fur as well as those deriving revenue from the saleof products made from or incorporating fur, such as coats, muffs, hats and stoles, aswell as home décor, craft supplies, etc. The total revenue derived from fur isavailable, as well as revenue derived from each of the following subcategories:
producer and retailer.
MSCI ESG Research’s definition of fur includes shearling and astrakhan. Leather is
not included in the screen.
Coverage Universe: MSCI ACWI IMIFor Profit Healthcare
MSCI ESG Research’s for-profit healthcare screen identifies companies with ties toabortion or birth control, including HMOs that offer coverage for these products andservices, as well as companies offering standard healthcare services.
Coverage Universe: MSCI World excluding US + US Top 3,000

For Profit Prisons
MSCI ESG Research’s For-Profit Prisons screen identifies companies that derive any
detectable revenue from the operation of private prisons, jails, detention centers orcorrectional facilities or from the provision of integral services to these types offacilities. Integral services include: complete facilities management (end-to-end),
security services and detention services. For-Profit Prisons may be alternatively
known as private prisons. The total revenue derived from for profit prisons isavailable.
Note that companies that provide supplemental services to for-profit prisons (suchas cleaning, catering, recreational programs, rehabilitation, probation, etc.) areexcluded from this screen.

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BUSINESS INVOLVEMENT METHODOLOGY OVERVIEWJULY 2020

Coverage Universe: MSCI ACWI IMI

Gambling
MSCI ESG Research’s gambling research identifies companies that own or operate
gambling facilities or provide support or services to the gambling industry. The
research describes both the type of involvement and the revenue from thatinvolvement. The total revenue derived from gambling is available, as well as revenue
derived from each of the following subcategories: operations, support services, andlicensing agreements.
Gambling is defined as the betting or staking of money or something of value, withconsciousness of risk and hope of gain, on the outcome of a game, a contest or an
event, the outcome of which is determined by chance.
Note that companies that only own property on which casinos are located orcompanies that lease land or space on which casinos are operated are excluded
from this screen.

Genetic Engineering
MSCI ESG Research’s genetic engineering research includes companies thatgenetically modify organisms (GMOs) for agricultural use or human consumption.
Specifically, this includes companies that have filed for a notification with the USDA’s
Animal and Plant Health Inspection Service (APHIS) for field testing of organisms
engineered to produce compounds intended for agricultural use; companies includedin the European Union (EU) – Food Safety Administration (EFSA) list that haveapplied for permits to market genetically engineered material for food or foodadditives in the EU; and companies found in the GM crop database from the Center
for Environmental Risk Assessment (CERA).
Note that companies that use genetically modified ingredients in their products,
and companies that retail foodstuffs that contain genetically modified organisms as
an ingredient are excluded from this screen.

Lending Practices
Controversial lending practices are defined as those in which lenders take advantage
of borrowers’ lack of understanding and/or lack of access to more traditional
financial services to impose loan terms that place a disproportionately and often
untenably high burden on the borrower. This is often done through deception, fraud,or manipulation via aggressive sales tactics.

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BUSINESS INVOLVEMENT METHODOLOGY OVERVIEWJULY 2020

Lending Practices
MSCI ESG Research’s Lending Practices research is designed to identify companies
involved in the provision of products and services associated with controversial
lending practices including payday loans, installment loans, pawn loans, title loans,tax refund anticipation loans, and doorstep loans. In addition, the total revenue
derived from the above activities is available.
Lending Controversy Ties
The Lending Practices research also identifies companies with severe or very severe
controversies within the past three years related to consumer lending such asallegations of usurious interest payments, discriminatory lending practices, or
deceptive or dubious home loan or subprime mortgage marketing practices.
Coverage Universe: MSCI ACWI and US Top 3000 by Market Cap

CRA Rating
MSCI ESG Research also provides a list of companies that are given a "Needs toimprove" or "Substantial Noncompliance" rating under the Community Reinvestment
Act (CRA) of the United States.
The CRA is intended to encourage depository institutions to help meet the credit
needs of the communities in which they operate, including low- and moderate
income neighborhoods, consistent with safe and sound banking operations.
U.S. financial institutions that received a rating of "Needs to improve" or "Substantial
Noncompliance" after taking the CRA examination within the last three years.

Nuclear PowerMSCI ESG Research’s nuclear power research is designed to identify companies thatown or operate nuclear power plants, and manufacture and supply key products orservices to the nuclear power industry. The research describes the type of
involvement, the company's percentage of power generation derived from nuclear
sources, percentage of total nuclear installed capacity and the revenue from nuclear
power-related activities. The total revenue derived from nuclear power is available, as
well as revenue derived from each of the following subcategories: utility, supplier,and uranium mining.
Note companies that provide generic / non-essential components (such as nuts,
bolts, screws, wiring, etc.) or raw materials (such as metal or steel) are excluded
from this screen.

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BUSINESS INVOLVEMENT METHODOLOGY OVERVIEWJULY 2020

Palm OilMSCI ESG Research’s Palm Oil Screen identifies companies that are involved in the
production and distribution of palm oil products. The research describes both thetype of involvement and the revenue from that involvement. The total revenue
derived from palm oil is available, as well as revenue derived from each of thefollowing subcategories: Producer and Distributor. In addition, MSCI ESG Researchmonitors the Round Table for Sustainable Palm Oil (RSPO) Annual Communication of
Progress Reports that indicate palm oil plantation certification to RSPO’s standards.
MSCI ESG Research defines palm oil as a yield of the African oil palm or Elaeis
guineensis Jacq. The oil can either be extracted from the flesh of the fruit of thepalm or the crushed extract of the kernel of the fruit.
Note that companies that manufacture or sell products that use palm oil as aningredient are excluded from this screen.
Coverage Universe: MSCI ACWI IMI

Pork
MSCI ESG Research’s pork research identifies companies that are involved in the
production of pork products, including pig breeding, slaughtering and processing
meat and food products with pork ingredients. The research also includes
companies with significant retailing and distribution activities. The total revenue
derived from pork is available, as well as revenue derived from each of the following
subcategories: Producer and Retailer.
Pork is the culinary name for meat from the domestic pig (swine or Sus domesticus).

Stem Cells
MSCI ESG Research’s stem cell research identifies companies that conduct researchusing stem cells derived from human embryos, human fetal tissue or human adulttissue. MSCI ESG Research also identifies publicly traded companies with research
partnerships or collaborations that conduct stem cell research through a third party;
companies using human fetal cell lines; and companies that produce technology or
products that enable stem cell research.

TobaccoMSCI ESG Research’s tobacco research identifies companies that produce,
distribute, retail, license or supply key tobacco products and services. The research
describes both the type of involvement and the revenue from that involvement. The
total revenue derived from tobacco is available, as well as revenue derived from eachof the following subcategories: Producer, Distributor, Retailer, Licensor and Supplier.

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BUSINESS INVOLVEMENT METHODOLOGY OVERVIEWJULY 2020

Tobacco is produced from the dried nicotina plant.

Defense and Weapons
MSCI ESG Research’s Defense and Weapons research includes companies that are
involved in the production of civilian Firearms, Controversial and Conventional
Military Weapons. Defense and Weapons screens available are listed below:
Firearms
MSCI ESG Research’s Firearms research identifies companies that manufacture
handguns, pistols, shotguns, rifles, revolvers, and ammunition for civilian (nonmilitary) use. The research describes both the type of involvement and the revenue
from that involvement.
Firearms are devices capable of firing a projectile and using an explosive charge as apropellant.
Note that companies manufacturing firearm / ammunition components, firearmaccessories (such as scopes, mounts, gun cases, etc.), and air rifles are excluded
from this screen.
Cluster Munitions
MSCI ESG Research's Cluster Munitions screen identifies companies involved in the
production of cluster munitions, components and delivery platforms. The research
may also include select significant or notable private companies. The following
definitions are used:
Cluster munition: a bomb, missile, rocket or shell that carries submunitions anddisperses them over an area
Submunition: a small bomb contained with other submunitions in a cluster munition.
The submunition is designed to detonate prior to, on, or after impact.
Cluster munition component: an integral part to the basic function of a cluster
munition weapon system. It may also provide added lethality, precision or otherfunctionalities, such as targeting, guidance and navigation.
Cluster munition delivery platform: an independent weapons system capable ofcarrying and deploying cluster munitions to the designated target area. Delivery
platforms can include self-propelled rocket launcher systems and aircraft.
Landmines
MSCI ESG Research's Landmines Screen identifies companies involved in the
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BUSINESS INVOLVEMENT METHODOLOGY OVERVIEWJULY 2020

landmines. The research may also include select significant or notable privatecompanies. The following definitions are used:
Anti-personnel landmine: a munition that is placed under, on, or near the ground orother surface area and explodes by the presence, proximity or contact with a person
or upon command by an operator from a remote location.
Anti-personnel landmine component: an integral component to the basic function of
the weapon. It may also provide added lethality, precision or other functionalities tothe weapon.
Anti-vehicle landmine: munition that is placed under, on, or near the ground or othersurface area and explodes by the presence, proximity or contact with a vehicle.
MSCI ESG Research also considers and includes weapons or munitions that fulfill thesame function, role and/or purpose as landmines.
Global Weapons Production
MSCI ESG Research’s weapons research identifies companies that manufacture
military weapons systems and weapons components. The research describes boththe type of involvement and the revenue from that involvement. MSCI ESG
Research’s weapons research distinguishes between involvement in whole weaponssystems and components of those systems. Additionally, the research includes
recent-year percentage of revenue for the following main categories: Conventional
Weapons and Components, Chemical and Biological Weapons and Components,
Nuclear Weapons and Components, and Support Systems and Services. Analysts
capture each company’s total revenue from weapons, including both weaponsspecific DOD contract revenue, if applicable, and all other sources of weapons
revenue.
Depleted Uranium Weapons
MSCI ESG Research’s Depleted Uranium research identifies companies that
manufacture weapons, ammunition and armor made with Depleted Uranium (DU)
and DU alloys. DU is a by-product of the uranium-enrichment process used to makenuclear weapons and nuclear-reactor fuel. The U.S. Nuclear Regulatory Commission
defines depleted uranium as uranium whose percentage fraction by weight of the U235 isotope is less than 0.711%.
Blinding Laser Weapons
MSCI ESG Research’s Blinding Laser Weapons’ research identifies companies that
manufacture weapons using laser technology that causes permanent blindness tothe target.

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Incendiary Weapons
MSCI ESG Research’s incendiary weapons research identified companies that
manufacture incendiary weapons using white phosphorus.
Non-detectable Fragments
Non-Detectable Fragments Weapons are defined as any weapon with a primaryeffect to injure with fragments that cannot be detected by X-rays once inside thehuman body.
Nuclear Weapons
MSCI ESG Research's Nuclear Weapons screen identifies companies with different
types of ties to nuclear weapons including warheads and missiles, delivery platforms,
weapon components, and support / service providers.
Weapons General Exclusions
Companies that are involved in the production of generic or dual use components toweapons systems, military material (such as uniforms, footwear, foodstuffs),
supporting vehicles that do not have an offensive capability, and raw materials are
excluded from this screen.

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The Information may contain back tested data. Back-tested performance is not actual performance but is hypothetical. There are frequently material differences between back tested
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