How MSCI Climate Tools
Can Help Drive Corporate
Sustainability Goals

Overview2»

At MSCI, we leveraged a suite of our climate change
data and analytics to map our own pathway tonet-zero carbon emissions by 2040, demonstrating
the role that comprehensive metrics and advanced
forecasting tools can play in helping companies
assess risk and achieve sustainability goals.

»The MSCI ESG Research data, designed to help
clients meet industry reporting standards, wasincorporated into our Task Force on Climate-related
Financial Disclosures (TCFD) reports, providingvisibility into our support for environmental
sustainability while serving as another platform for us
to help drive momentum behind the global transition
to a low-carbon economy.

»Our Climate Targets and Commitments Dataset,along with our Climate Value at Risk (Climate VaR)
and Implied Temperature Rise metrics, can serve
as a critical starting point for chief sustainability
officers (CSOs) and others seeking to launch or
accelerate their company’s transition — enablingthem to strategize and gauge their standing
against peers as they work to maximize valuations,minimize risk, detect opportunities, and optimize
performance.

Challenge

ActionMSCI is a leading provider of environmental, social andgovernance (ESG) and climate solutions with more than 50
years of experience in delivering research, data and technology.
As a firm subject to the same investor demands as the morethan 18,000 public companies and subsidiaries whose carbon
emissions data we track, we continually seek ways to maximize
progress toward our sustainability goals.

Here’s what we used to support our net-zero decision-making:We have made it our mission to build market infrastructure tohelp owners and managers of assets, banks and companies meetsustainability goals. Our clients, including CSOs, rely on our data
to quantify climate-related uncertainty, build sustainability-linked
products, and align investments with a low-carbon future.
We have called on capital markets participants to help drive thelow-carbon transition and speed the world’s move toward a new eraof sustainable growth. But we aim to hold ourselves to the same
standard we set for others — by setting ambitious climate goals forour own firm.
With this objective, we asked: How can we set an aggressive
net-zero target for MSCI and map out the strategy to achieve it?

The cost of a low-carbon world
The expected transition to a lower-carbon economy isestimated to require a staggering level of investment.
Specifically, the International Energy Agency reports that theannual clean energy investment will need to more than triple
globally by 2030 to roughly $4 trillion to achieve net-zeroemissions by 2050.

Our solutions are built to help companies adopt sustainable practices — aligningwith global temperature goals, while detecting climate-related risks andopportunities that could affect valuations.
At MSCI, we relied on our climate data and forward-looking tools to set a baseline andchart the steps to achieve our goals. Using our Climate Targets and Commitments
Dataset, which enables companies to evaluate other companies’ pledges todecarbonize, we were able to compare our targets to those of our peers.
Understanding the carbon footprint embedded in company supply chains can bea murky endeavor. But with our dataset, we were able to gain a clearer picture ofwhich of our suppliers are sustainable.
We further quantified our status with data from our Implied Temperature Rise
metric, which is designed to indicate how well public companies align with global
temperature goals. It estimates the global rise in average temperature this century if
the global economy were to undershoot or overshoot its remaining carbon budget tothe same extent as the company.
We also applied our Climate VaR model, designed to provide a forward-looking
and return-based valuation assessment to measure climate-related risks andopportunities. We used the metric to help gauge our exposure to future climaterelated transition and physical risks — analyzing how scenarios involving extreme
weather or regulatory change, for example, might impact our finances or operations.
Both Implied Temperature Rise and Climate VaR provide insight based on specificscenarios such as those established by the Paris Agreement, which aims to limit
the rise in average temperatures to well below 2°C, preferably to no more than 1.5°C,
above preindustrial levels.
MSCI ESG Research’s Implied Temperature Rise was named “Most Innovative
ESG Product” at the ESG Investment Awards 2023.

3

Impact
With our analysis, we committed to reaching net-zero emissions by 2040,
and our near-term, long-term and net-zero targets have been validated by
the Science Based Targets initiative (SBTi), a global body enabling
businesses to set ambitious emissions reductions targets in line with thelatest climate science.
Setting a net-zero target date is a complex process. It is imperative tounderstand the range of risks companies can face — from biodiversity loss
and tropical cyclones to reputational fallout and shareholder litigation — and tounderstand the drivers behind each of them, as well as all the variables that canalter their course.
To achieve our target, we concluded we needed to drive down emissions in oursupply chain. With an analysis from our Climate Targets and Commitments
Dataset, we consequently intensified efforts to reduce emissions within oursupply chain — the source of 78% of our greenhouse gas emissions in 2021.

MSCI milestones to achieve in 2025
Demonstrating progress toward our 2030 near-term targets*•••

Source 100% renewable electricityReduce absolute Scope 1 and 2 CO2e emissions by 60%
Increase to 60% by spend our suppliers with science-based targets*In each case, from a 2019 base year4

“We know from our own net-zero journey
how daunting this transition can be —navigating a complex labyrinth of risk
variables under mounting pressure frominvestors, regulators, vendors, suppliersand employees to increase transparency.
We recognize the critical need for yourcompany to detect new risks andopportunities, and to set targets alignedwith your own path to sustainability. Oursuite of proprietary forecasting tools isdesigned to ease this transformation
as much as possible by equipping you
with climate-related data, delivered in thelanguage your stakeholders understand.”Tia Counts
MSCI Chief Responsibilityand Diversity OfficerWe did that by developing a sustainable suppliermanagement program to fully integrate climate
considerations into our supplier selection andprioritize our spend with suppliers aligned withour climate goals. Ultimately, the dataset provided
additional insights which enable us to sharpen ourdialogue with suppliers on this critical topic.
While our data indicates our climate-transition
risks related to increased costs of raw materials
are low, we still regularly look for ways to reduce
the potential impact of supply-chain disruptions,
identifying multiple sources of critical services
wherever possible.
Additionally, according to our Implied Temperature
Rise analysis, our net-zero target and future
emissions pathway are aimed to align with a5

temperature rise of 1.3°C above preindustrial
levels — below the 1.5° cap preferred by theParis Agreement.
The Climate VaR analysis indicated our projected
emissions levels were far below our internal
threshold for carbon emissions, unsurprising for acompany in the financial services sector, typicallyassociated with a lower carbon footprint.
But the model provided further insights on theadverse effects that climate change may have on
our business operations. Tropical cyclones, forexample, have an aggregated potential impact ofroughly USD 183 million between 2021 and 2100,
based on an assessment of transition and physicalrisks as well as opportunities.

As part of our near-term target, we committed
to reducing our absolute Scope 1 and 2 CO2e¹emissions by 80% and our absolute Scope 3 CO2eemissions by 50%, in each case by 2030 and froma 2019 base year.
The data validated our decision to open a new
office in the highly-elevated Pune, India, rather
than expand our current office in Mumbai, which ismore prone to flooding risk.
Our business continuity planning team uses
the analysis to continually assess the severity,
probability and scale of extreme weather events inlocations where we operate.
1 CO2e is a unit used to express the global warming potentialof different greenhouse gases as a single figure, namely theequivalent amount or concentration of carbon dioxide

While the model served to validate assumptions for MSCI, it could reveal morecritical exposures for companies in carbon-intensive sectors such as energythat may be unaware of the true impacts of policy change, related to degrees
of carbon pricing, for example, on their valuation.
The metrics enabled us to easily quantify the extent of our exposure in
widely adopted disclosure frameworks for investors evaluating portfolio
performance. Our metrics are specifically designed to support the Financial
Stability Board’s TCFD reporting. We conducted scenario analyses, assessedboth physical and transition risk, and then used the data to enhance thetransparency of our second TCFD report.

With the tools, we were able to better report our progress toward achieving
our goal of net-zero emissions across our value chain before 2040,
responding to the TCFD’s call for increased transparency. We also used thedata for our CDP climate change questionnaire as well as for our Climate
Transition Plan, an action plan that an increasing number of companies havebegun to publish.

Data from MSCI’s 2022 TCFD Report

0.008%

0.006%

0.005%

0.011%

0.024%

0.009%

0.007%

0.006%

0.013%

0.028%

Hong KongShanghai

BostonTokyoManila

Annual relative damage (%)
2040

62021

Source: MSCI ESG Research, June 2022

Conclusion
Our solutions support companies who seek tobetter contextualize their carbon emissions while
incorporating industry shifts, environmental
change and investor demands into their risk andopportunity management strategies.
But we view this process through the eyesof institutional investors seeking to untangle
company commitments as they make asset
allocation decisions, looking for a morecomprehensive view of these risks and theirrelationship to global warming trajectories. They
often rely on a slate of advanced forecasting
tools to help determine the rationality of targets
and viability of net-zero strategies.
Ultimately, our proprietary climate data andanalytics are built to serve as powerful tools
intended to meet industry reporting standards
with detailed scenario, physical and transition risk
analysis. They are designed to enable companies
to deliver data that speaks to investors in a clear,standardized format, with a simplified lens thatallows for efficient comparisons across sectors.

Interested in quantifying climate risks
and opportunities for your firm?
Learn more7

About MSCIMSCI 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 andtechnology, 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.
To learn more, please visit www.msci.com
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