MSCI ESG Ratings

msci.com

Providing institutional investors with a more robust ESG
integration tool designed to support ESG risk mitigationand long term value creation.

MSCI ESG Ratings

Integrating MSCI ESG Ratings
into investment decision making
can help identify risks andopportunities that may not
be captured by conventional
financial analysis
Eric Moen
Managing Director, MSCI ESG Research

MSCI
ESG Ratings
More insight. More context. More informed decisions.
MSCI ESG Ratings uses a rules-based methodology designed to measure a company’s resilience tolong-term, industry material environmental, social and governance (ESG) risks. Leveraging Artificial
Intelligence (AI), machine learning and natural language processing augmented with our 200+
strong team of analysts, we research and rate companies on a ‘A AA‘ to ‘CCC’ scale according to theirexposure to industry-material ESG risks and their ability to manage those risks relative to peers.
Overview

MSCI research has identified
that the ESG factor in MSCI ESG
Indexes, such as the ACWI ESG
Leaders Index shown below, has
contributed to outperformance¹

We have over 40 years of experience through our legacy
companies collecting, cleaning, standardizing andmodelling ESG data from thousands of sources to createa precision tool for a clear signal of ESG performance.

200+

1,500

1,700

ESG Analysts(Over 350 FTE2)ESG Equity andFixed Income Indexes3

ESG Research
Clients Worldwide

MSCI ACWI ESG Leaders Index
Cumulative index performance – gross returns (USD) Sep 2007 – Oct 2020
205.85188.28200

100

MSCI ACWIMSCI ACWIESG Leaders
OCT 2020

SEP 2019

AUG 2018

JUL 2017

JUN 2016

MAY 2015

APR 2014

MAR 2013

FEB 2012

JAN 2011

DEC 20091	 MSCI ESG Indexes during the coronavirus crisis https://www.msci.com/www/blog-posts/msci-esg-indexes-during-the/01781235361

2

 Source: MSCI ESG Research as of October 2020. Includes full time employees, employees of foreign affiliates providing investment advisory services toMSCI ESG Research LLC, and global allocated staff performing non-investment advisory tasks.

3

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OCT 2008

SEP 2007

0MSCI ESG Indexes and MSCI Analytics utilize information from, but are not provided by, MSCI ESG Research LLC. MSCI Indexes are products of MSCI Inc.
and are administered by MSCI Limited.

msci.com 3

MSCI ESG Ratings

Methodology

Key features and benefits
Dynamic model to capture
new and emerging risks

Robust data on boards anddirectors

Daily updates

Frequent model recalibration to review

Data on board size, tenure and director

including daily monitoring of 3,400

industry Key Issues and weights based

election standards; director age andmedia publications and regular updates

on the latest data and research as

gender diversity; plus financial, industryof public documents and third-party

well as input from our annual client

and risk management expertise on key

data sets.

consultations.

board committees.

Market leading corporate
governance insights

Tech-enabled human insights
We leverage AI to increase the timelinessand client service professionals

For each company, we examineand precision of data collection andproviding around the clock expertise

analysis, and to check and validate data.

and support to help clients find thekey metrics that look at board, pay,ownership and control, and accounting
practices.

Unique alternative data
Alternative data helps minimize

Our approach

Global, multilingual team of analystsdisclosure to uncover potential risks

MSCI ESG Research has beendata has helped refine our industry-and opportunities.

recognized as a ‘Gold Standard data

methodology to select the ESG risks
most material to an industry.

8,500 companies (14,000 total

We collect andstandardize public data:• Alternative data
including government,regulatory and NGO
datasets

provider’ by the Deep Data Delivery• Company disclosure
documents

Standard.

more than 680,000 equity and fixed

MSCI ESG Ratings andESG Indexes4

income securities globally.

MSCI ESG Ratings forms the foundation

issuers, including subsidiaries) andMetrics

No questionnaires

investment processes.

Over 13 years of live MSCI ESG Ratings

Extensive coverage

Databest way to integrate ESG into theirGold standard data provider

specific Key Issues and weight setting

and more than 680,000 equity and fixed income securities globally5

Global in-house teamreliance on voluntary corporate

Industry material ESG risks

ESG Rating of 8,500 companies (14,000 issuers, including subsidiaries)

Continuous evaluation of ESG risks,• 3,400 media sources• Standardized
methodology toassess company Risk
Exposure and Risk
Management relative
to industry peers• MSCI’s ESG issuer
communications
team engages withcompanies for data
verification

Evaluation• Industry-specific
Key Issues arescored (0-10) using
a rules-based
methodology• Daily monitoring
and weekly updateof controversies
and events

Rating• Key ESG Issue
scores and weights
combine to create
an overall ESG rating(AAA – CCC) relative
to industry peers• Ratings are subject
to industry andmarket-led
checks and formal
committee review

of many of the 1,500 MSCI ESG Indexes.
Visit msci.com/esg-indexes

Outputs
VALE S.A. (VALE3)
Steel | BR

Tailing Dam Collapse at Feijao Mine Points to Systemic SafetyConcerns
Key issues

LAST UPD
UPDA
ATE: October 02, 2019

ESG Rating history

This chart highlights the company's positioning relative to the industry average for each Key Issue that contributed
to its ESG Rating as of October 02, 2019.

Positive

ESG Rating history shows five most recent rating actions

IndustrIndustryy
Avererageage

Universe: MSCI ACWI Index constituents, Steel, n=33

Emissionsent

Key scores

Rating action date: JanuarJanuaryy 30, 2019
Vale has been downgraded to 'CCC' from 'B'.

Vale has undergone several major changes in the past two years related to its ownership structure,board, and executive management teams, and 2018 marked a successful year in not only reducing its
debt in half but also completing its pollution prevention equipment upgrades at Sudbury, Canada.
However, while still facing potentially heavy liabilities with the Samarco disaster of 2015 and questions atother controversial operations such as Onca Puma, Vale experienced another major dam failure on
January 25, 2019. The new incident may lead to Vale being severely handicapped in its capital
allocations for years to come.
Analyst: Samuel Block

MSCI ESG Ratings as seen on the MSCI ESG Manager platform

Best provider for research and data 2015, 2016,2017 and 2018/19
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Company, Industry &Thematic Reports

Carbon& Sa
fety

StressWaters&stability& InMan
agem

HealthLabortion
rrup

CoToxiWas c Emissi
teon& LandGovernance
rporateCoBiodUse iversity

Last ESG Rating action

The tailings dam failure near Brumadinho Brazil was the second major tailings failure for Vale in about
three years. It raises questions of the stability of other dams and will increase Vale's penalties, liabilities
and risks of community opposition.

IRRI Awards Survey: MSCI ESG Research voted

50%
60%
75%

ESG Rating distribution

Negative

Industry-Adjusted Score◤ Weighted-Average Key Issue Score◤ Environmental Pillar Score◤ Social Pillar Score◤ Governance Pillar Score

Weight Scor
Scoree (0-10)
0.8
2.2
49%
2.8
24%
1.8
27%
1.8

Data FeedsIndexes

Report table of contentsESG Rating tearsheet
Rating model details

Data appendix
P02

Corporate governancedataP10

Recent developments

P03

Key issue details

P27

Corporate governancesummary

P04

Glossary

P113

Analyst insights

P05

ESG Rating drill down

P08

Additional insight into significant ESG risks andopportunities through:What is an ESG Rating? MSCI ESG Ratings aim to measure acompany's resilience to long-term ESG risks. Companies arescored on an industry-relative AAA-CCC scale across the mostrelevant Key Issues based on a company's business model.

• Company reports• Industry reportsTear sheets designed to highlight thekey material risks and opportunities
driving the ESG Rating
Page 1 of 115

PortfolioAnalytics©2019 MSCI Inc. All rights reserved.

• Thematic reports• Analyst calls and webinars

Available on:
Aladdin, Archer, Barra©, Barclays POINT, Barra PortfolioManager,
Bloomberg, Caissa, Clearwater, Crux, FactSet, MSCI Beon,Novus, Rimes, RiskMetrics© RiskManager, StyleResearch, MSCIESG Manager or integrated into client platforms

More insight. More context. More informed decisions.
4	 MSCI ESG Indexes and MSCI Analytics utilize
information from, but are not provided by, MSCIESG Research LLC. MSCI Equity Indexes areproducts of MSCI Inc. and are administered by
MSCI Limited.

5Source MSCI ESG Research November 2020

msci.com 5

MSCI ESG Ratings

The making of an
MSCI ESG Rating
MSCI ESG Ratings is designed to provide more data with more context to support more
informed decisions for the modern institutional investor.
Data

1,000

100,000

data points

20 yearsof shareholder
meeting results

director profiles

Exposure scores

Management scores

80

MSCI ESG
Research Experience& Leadership

270business segment andgeographic exposure metrics

policies, programs, performanceand governance metrics

Key issue scores & weights

35

governance risks and industry-specific key issues weighted
based on impact and the time horizon of risk or opportunity

MSCI ESG Research is a pioneer in measuring forward-looking ESG risk and utilizing alternative
data and AI technology, with deep history and 40+ years of experience6 in objectively
measuring and modelling ESG performance.

MSCI ESG RATINGS
combine Key Issues andweights and normalize
relative to industry peers toderive the ESG Rating

cccB

LAGGARDBBBBBAVERAGEAAAAAAFirst ESG provider to assesscompanies based on industry
financial materiality, datingback to 1999. Only datasetwith live history (13+ years)
demonstrating economic
relevance7

LEADER

How our clients use MSCI ESG Ratings

Fundamental /Quant Analyses

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Portfolio construction /Risk management

Engagement &thought leadership

Benchmarking / Index-based
product development

Objective rules based ESG
ratings, with an average
45% of data8 coming fromalternative data sources (notdisclosed by the rated entity),
utilizing AI tech to extract andverify unstructured data

First ESG ratings provider
to measure and embedcompanies’ ESG risk
exposure9

6

Through our legacy companies KLD, Innovest, IRRC, and GMI Ratings

7

Origins of MSCI ESG Ratings established in 1999. Produced time series data since 2007.

8Source: MSCI ESG Research 2,434 constituents of the MSCI ACWI Index as of November 30, 2017.

9

Through our legacy companies KLD, Innovest, IRRC, and GMI Ratings. Origins of MSCI ESG Ratings established in 1999. Produced time series data since 2007.

msci.com 7MSCI ESG Ratings

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-related business practices tocompanies worldwide. ESG ratings, data and analysis fromMSCI ESG Research LLC. are also used in the constructionof the MSCI ESG Indexes. MSCI ESG ResearchLLC is a
Registered Investment Adviser under the Investment
Advisers Act of 1940 and a subsidiary of MSCI Inc.
Contact us esgclientservice@msci.com

About MSCI Inc.
MSCI is a leading provider of critical decision support tools
and services for the global investment community. With
over 45 years of expertise in research, data and technology,
we power better investment decisions by enabling clientsto understand and analyze key drivers of risk and returnand confidently build more effective portfolios. We create
industry-leading research-enhanced solutions that clientsuse to gain insight into and improve transparency across theinvestment process.
To learn more, please visit www.msci.com/esg-investing.

The information contained herein (the “Information”) may not be reproduced or disseminated in whole or in part without prior written permission from MSCI. The Information may not be used to verify orcorrect other data, to create indexes, risk models, or analytics, or in connection with issuing, offering, sponsoring, managing or marketing any securities, portfolios, financial products or other investment
vehicles. Historical data and analysis should not be taken as an indication or guarantee of any future performance, analysis, forecast or prediction. None of the Information or MSCI index or other productor service constitutes an offer to buy or sell, or a promotion or recommendation of, any security, financial instrument or product or trading strategy. Further, none of the Information or any MSCI index
is intended to constitute investment advice or a recommendation to make (or refrain from making) any kind of investment decision and may not be relied on as such. The Information is provided “as is”
and the user of the Information assumes the entire risk of any use it may make or permit to be made of the Information. NONE OF MSCI INC. OR ANY OF ITS SUBSIDIARIES OR ITS OR THEIR DIRECT ORINDIRECT SUPPLIERS OR ANY THIRD PARTY INVOLVED IN THE MAKING OR COMPILING OF THE INFORMATION (EACH, AN “MSCI PARTY”) MAKES ANY WARRANTIES OR REPRESENTATIONS AND, TOTHE MAXIMUM EXTENT PERMITTED BY LAW, EACH MSCI PARTY HEREBY EXPRESSLY DISCLAIMS ALL IMPLIED WARRANTIES, INCLUDING WARRANTIES OF MERCHANTABILITY AND FITNESS FORA PARTICULAR PURPOSE. WITHOUT LIMITING ANY OF THE FOREGOING AND TO THE MAXIMUM EXTENT PERMITTED BY LAW, IN NO EVENT SHALL ANY OF THE MSCI PARTIES HAVE ANY LIABILITYREGARDING ANY OF THE INFORMATION FOR ANY DIRECT, INDIRECT, SPECIAL, PUNITIVE, CONSEQUENTIAL (INCLUDING LOST PROFITS) OR ANY OTHER DAMAGES EVEN IF NOTIFIED OF THE
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