MSCI:ENABLINGSUSTAINABLE
INVESTING
Task Force on Climate-related
Financial Disclosures (TCFD) Report
December 2020

MSCI’S TCFD REPORTHenry A. Fernandez
Chairman andChief Executive Officer
As the global economic and investment impact of climate change grows, the need toact now has never been more critical. The
climate emergency is one of the defining
threats of our time and reminds us how
fragile our world is.
We believe the financial industry can play
an important role in bringing attention to
the climate crisis and, through the allocation of capital, set the global economy ontrack for a more sustainable future. We
are committed to educating the market
on environmental, social and governance(ESG) trends via our research, podcasts
and participation in industry events. Earlier
this year, we published “The MSCI Principles of Sustainable Investing,” a framework
designed to illustrate specific, actionable
steps for investors to integrate ESG considerations across the investment value chain.
We also offer a suite of tools and data tohelp measure and manage climate risk. Our
goal is to help investors build better portfolios for a more sustainable future.
Building a sustainable future entails a dualrole for MSCI. On the one hand, we provide
our clients with cutting-edge tools andproducts to help them assess the impact ofclimate change on their investment portfolios; on the other, we hold ourselves to thesame high standards that we use to assess
the risk profiles of the companies in thoseinvestment portfolios. For both clients and
MSCI, there are both risks and opportunities.
The risks for investors are all too evident.
Recent extreme climate events such as
the devastating hurricanes and wildfires
around the world make this clear, creating
potential costs for asset owners and managers. For our clients, the MSCI Climate
Risk Center, within MSCI ESG Research,
provides groundbreaking climate-scenario
analyses and forward-looking assessmentsof transition and physical risks. I am excited
to share its analysis and methodologies,
which present the risks and opportunities
facing MSCI in this report.

DECEMBER 2020

Baer Pettit
President andChief Operating Officer
Just as it is critical that investors focus on
climate control in their portfolios, so it isequally critical that we as managers of apublic company take meaningful steps toward integrating environmental principles
into our strategy. To that end, I am pleased
to announce that, using science-based targets’ methodologies, we are committing to
reduce our Scope 1 and Scope 2 emissions by 50% and our Scope 3 emissions
by 20% by 2035.
We have already taken action to implement initiatives to reduce our impact on
the environment. We remain committed
to developing, adopting and monitoringclimate and carbon-related environmental
impact strategies to further reduce our environmental footprint, and we have createdinternal policies that prioritize environmental impacts. Specifically, we have secured
leases in green-certified buildings. We arealso harnessing renewable energy in ourdata centers and across our firm’s operations and are engaging systematically inrecycling. Furthermore, we have established an extensive governance structure
for monitoring and addressing climate
risks, as described in this report.

Diana Tidd
Head of Index and
Chief Responsibility Officer
We strongly support the TCFD’s objectives
to enhance transparency around climate-related risks and opportunities.
We believe this transparency will help
companies and investors take criticalactions needed to protect our planet.
Institutional investors are already taking
action. For example, they are seeking moretransparent and consistent ESG data so as
to better incorporate ESG considerationsin their investment decisions and to
facilitate better engagement withportfolio companies.
To aid the transition to a low-carbon
world, we offer a broad array of tools
and solutions to help investors measureand manage climate risks and opportunities. For example, we have introduceda suite of equity and fixed-income MSCI
Climate Indexes. In addition, we provide
ESG data and analytics to help investorsalign with reporting initiatives including
the TCFD and the EU Sustainable Finance
Disclosure Regulation. To help educate
the marketplace, we offer free company
and fund ESG ratings, and index metrics
search tools.

Our strategy, and the outcomes we seek
through environmentally responsible
behaviors, are strongly aligned and are
inspired by our investors, clients andemployees, and a vested interest in thecommunities in which we operate. Our
support for climate-related disclosuresboosts employee morale and enhances
our ability to attract talented people.

At MSCI, we strive to bring greater transparency to the investment process, enabling the global investment community tomake better decisions for a better world.
We help bring clarity to dynamic andincreasingly complex financial markets.
We believe, and our research shows, thatsound ESG practices have been linked tobetter business and investment results.

This report aligns with the recommendations of the Financial Stability Board’s Task
Force on Climate-related Financial Disclosures (TCFD). It aims to provide greatertransparency regarding our approachto sustainability, facilitating sustainable
investing and helping to reduce our own
long-term financial risks related to climatechange. We hope that you find it usefuland informative.

We at MSCI believe it is important to both
“talk the talk” and “walk the walk.” We do
this by aligning our climate solutions with
our own firm’s actions. Providing MSCI’s
TCFD Report is just one part of this process
as we seek to provide transparency on ourown climate-related actions and our efforts
to create a more sustainable world.

This is the time for companies and investors to rise to the challenge. At MSCI, we
are committed to building a sustainable
future for all.

2

MSCI

Task Force on Climate-related Financial Disclosures (TCFD) Report

MSCI’S TCFD REPORTDECEMBER 2020

Background
The TCFD was the brainchild of the Financial Stability Board, which was created in
April 2009 to monitor the world’s financial system. Chaired by Michael Bloomberg,
the TCFD’s principal purpose is to help companies better understand what financial
markets need in terms of carbon-related exposure information.
In 2017, the TCFD published climate-related financial disclosure recommendations
designed to help companies provide better information in support of their capital
allocation priorities. Its recommendations are voluntary and have been created “by themarket, for the market.” It currently has over 1,500 supporters in 70 countries. 1
According to the Task Force’s 2020 Status Report, around 60% of the world’s 100
largest public companies now support the TCFD — but the TCFD is still urging companies to do more. Interestingly, energy companies, and materials and building companies, are leading the way in terms of disclosure. However, the Task Force found that
only one in 15 companies discloses information on the resilience of their strategies.
The TCFD also encouraged asset managers and asset owners to do more in terms ofreporting to their clients and beneficiaries.
On a more positive note, the TCFD reports that corporations and investors find information on the impact of climate change on their business and strategies very usefulfor decision-making. And insights from experts help companies to prioritize theirefforts and build a road map for the future.

We strongly support the
TCFD’s objectives toenhance transparency
around climate-relatedrisks and opportunities.
We believe this transparency
will help companies andinvestors take critical actions
needed to protect our planet.”– Diana Tidd, Head of Index and
Chief Responsibility Officer

In this report, we examine how MSCI takes climate change into account in managing
our own business. We have a multipronged approach that ensures that we monitor,
evaluate and take action on areas of our business vulnerable to climate change as well
as examine ways we can reduce our own climate footprint.

This total includes “over 1,340 companies with a market capitalization of $12.6 trillion and financial institutions responsible
for assets of $150 trillion.” “Task Force on Climate-related Financial Disclosures: 2020 Status Report.” TCFD, October 2020.

1

3

MSCI

Task Force on Climate-related Financial Disclosures (TCFD) Report

MSCI’S TCFD REPORTDECEMBER 2020

We have structured our TCFD report around four areas recommended by TCFD:
governance, strategy, risk management and metrics and targets.
Our Governance
We are committed to having good management and governance structures inplace that underscore the importanceof ESG and climate-related issues to ourcompany. Our management team has
day-to-day responsibility for identifying,assessing and managing ESG and climate-related risks and opportunities, while
the MSCI Board of Directors ultimately
oversees management’s execution ofthese responsibilities.
As the Chairman of MSCI’s Board, MSCI’s
Chief Executive Officer ensures, throughcontinuous and frequent communication,alignment between management and theBoard on key ESG and climate-related
initiatives.
Our Board’s four standing committees
oversee the management of specific risks
and the execution of strategic opportunities, including climate-related risks andopportunities that fall within the committee’s area of responsibility. The committee
chairs provide regular updates to the full
Board on the activities of their committees. The Board’s committees are theCompensation and Talent Management
Committee, the Audit Committee, theNominating and Corporate GovernanceCommittee and the Strategy and FinanceCommittee. Please see the chart on thefollowing page as well as Appendix 1 formore information.
At the management level, there are twocommittees responsible for monitoringclimate-related risks — the Enterprise Risk

Oversight Committee (EROC) and, under
the leadership of the Chief Responsibility
Officer, the Corporate Responsibility Committee (CRC). For example, the EROC oversees MSCI’s risk-management governanceto ensure that MSCI has an effective
process designed to identify, evaluate andmanage risks that may have an adverse
impact on MSCI’s ability to achieve its
operational and strategic objectives.
The EROC is comprised of the President,
the Chief Financial Officer, the GeneralCounsel, the Chief Human Resources Officer, the Chief Technology Officer, the Headof Internal Audit, the Head of Investor Relations and the Enterprise Risk Management
Officer to ensure well-rounded knowledgeof potential exposure risks.
In 2020, the Chief Responsibility Officer
and our Global Head of Corporate Services
led the EROC in a review of our TCFD
Scenario Analysis report and a climaterelated scenario analysis to assess ourmost probable climate-related, facilitylevel, physical and enterprise-level transition risks in accordance with the TCFD
recommendations. The EROC also
reviewed the risks disclosed in our mostrecent CDP filing2 and committed toperforming an ongoing assessment ofclimate risk as part of our enterprise risk
management system.
The Audit Committee receives a quarterly
update from the Enterprise Risk Management Officer on the work of the EROC,
which in 2020 included the EROC’s focus
on: the growing interest by investors, clients and employees as to how institutions

globally are responding to climate change;
how we are addressing global climatechange (including our own environmental
impact); and MSCI’s existing resourcing
and approach to monitoring and responding to such exposures. In addition, theChief Information Security Officer periodically updates the Audit Committee on ourbusiness continuity plans and IT disasterrecovery efforts to mitigate the impact ofpotential disruptions, including those that
could be caused by climate and extreme
weather events. While not directly related
to climate, the COVID-19 pandemic has
proven the resiliency of a number ofour business continuity and disasterrecovery plans.
The CRC has some overlapping membership with the EROC, e.g., the Chief Human
Resources Officer and the Head of Investor Relations. It also includes the Headof Global Communications, the Global
Head of MSCI ESG Research, the Global
Head of Corporate Services, the Corporate
Responsibility Business Manager and the
Corporate Secretary.
The CRC identifies and supports ESG
initiatives that promote sustainability.
For example, as a member of the CRC,
the Global Head of MSCI ESG Researchadvises the Committee on trends and bestpractices in ESG, including with respect
to climate-related matters. Each year, ourChief Responsibility Officer participates ina number of investor meetings, including
our corporate responsibility roadshow, todirectly address and solicit feedback on
ESG-related matters that are important to
our investors.

The TCFD framework will provide transparency
for corporations and investors alike,requiring them to articulate their climate strategies.”– Remy Briand, Head of ESG

2

4

CDP is a not-for-profit charity that runs the global disclosure system for investors, companies, cities, states and regions to manage their environmental impacts.

MSCI

Task Force on Climate-related Financial Disclosures (TCFD) Report

MSCI’S TCFD REPORTDECEMBER 2020

MSCI’s Governance Structure

Compensation& Talent
Management
Committee

Board ofDirectors

Strategy &FinanceCommittee

Advises and oversees management’s
execution of its core strategic plan,
including pursuing climate-related
opportunities through product development
and strategic partnerships and acquisitions

Oversees executive compensation
program, including key performanceindicators linked to ESG- andclimate-related matters

Audit
Committee

Nominating &Corporate
GovernanceCommittee

Chairman/CEO

Oversees enterprise risk management
program, including monitoring the
Firm’s evolving exposure to climate andits role in disaster recovery andbusiness continuity plans

Executive Committee
President/Chief Operating Officer
Head of Client Coverage
Chief Financial Officer

Oversees governance of environmental (including
climate), social and governance matters,
including ensuring the proper governanceframeworks are in place for transparency
and escalation of climate-related matters

General Counsel
Chief Technology Officer
Heads of Product Segments
Chief Human Resources Officer
Head of Research andProduct Development
Regional Coverage Heads
Chief Responsibility Officer

Management
Enterprise Risk
Management
Officer

Chief Information
Security Officer(CISO)

Enterprise Risk
Oversight Committee

IT Risk OversightCommittee

CFO – ChairCISO – Chair

President/Chief
Operation Officer

President/
Chief Operating Officer

Chief Responsibility Officer

Corporate Responsibility Committee

Facilities Managers

Chief Responsibility Officer andHead of Index

Location-based Employee
Resource Groups (Eco Groups)

Chief Human Resources Officer
Corporate Secretary andSecurities Counsel

General Counsel

General Counsel

Head of Communications

Chief Technology Officer

Chief Technology Officer

Head of Investor Relations

Chief Human
Resources Officer

Head ofCorporate Services

Head of Investor Relations

Product &Technology Leads

Head of Corporate Services

Enterprise Risk
Management Officer

5

Head of Corporate Services

MSCI

Head of ESG Research
Corporate Responsibility
Business Manager

Task Force on Climate-related Financial Disclosures (TCFD) Report

MSCI’S TCFD REPORTOur Strategy
Our strategy has been influenced byclimate-related risks and opportunities.
In general, they can be divided between
operational and product risks and opportunities. These areas include our business
operations, our products and services, oursupply chain, our investment in R&D and
our long-term planning process and development of climate-related products for theinvestment community.
Key Operational Risks and Opportunities
Using science-based target methodologies, we are committing to reducing our
Scope 1 and Scope 2 emissions by 50%
and our Scope 3 emissions by 20% by2035, starting in 2019. This aligns with theobjective of reducing our carbon footprint.
From an operational perspective, we
remain committed to limiting our environmental impact and have developed an Environmental Policy that we monitor via anenvironmental management system, withspecific metrics and periodic reporting to
our Corporate Responsibility Committee.
While MSCI’s primary business of providing financial products and services does
not expose us directly to climate-related risks, we may experience businessinterruptions from increased severity andfrequency of extreme weather events,
such as a heat wave, hurricane or floodthat may result in a power loss or telecommunications failure. Our ability to continue
to operate depends, in part, on the healthand availability of our personnel, our officefacilities and the proper functioning of ourelectronic, telecommunication and otherrelated systems and operations.
Key Product Risks and Opportunities:
An increasing portion of our revenues
comes from products that relate to certain
trends, such as ESG investing, including
climate change. Our ESG products include
MSCI ESG Ratings, screening, indexes andclimate-related products. Clients often use
our ESG and climate products and services to address the following objectives:
1. investing with a systematic and explicit
inclusion of ESG and climate risks andopportunities in investment analysis,
6

MSCI

DECEMBER 2020

2. investing with the intention to generatemeasurable positive social or environmental benefits alongside a financial
return, and
3. investing in alignment with an organization or individual’s values.
For example, our MSCI ESG Ratings product, an innovative and pioneering risk metric that calculates a company’s resilienceto long-term ESG risks, helps investors understand and quantify relevant risks within
their portfolios. In addition, our acquisitionof Carbon Delta (now the MSCI Climate
Risk Center) in 2019 allows us to offer a
climate scenario analysis model to clients.
Please see “Climate Solutions for Investors” box on p. 10 for more information on
this and other climate-related solutions
across our business segments including
ESG Index, Analytics and Real Estate.
Going forward, we foresee a growing
focus on climate change and the need forsolutions. We see significant opportunities
for climate-related products and services.
Research
Our research is critical in helping clients understand and address current investment
challenges. In offering a solution to theirmost pressing investment problems, we
can illustrate the efficacy of our products.
Recent examples include the following
papers and blog posts:• “Aligning with the Paris Agreement: An
Index Approach” illustrates how an index
that embeds forward-looking measuresof climate risk and return may help
investors in their journey to decarbonizing their portfolios, both as a benchmark
and as the basis for indexed allocations.
• “Managing Climate Risk in Investment
Portfolios” shows how the MSCI Climate
Value-at-Risk Model (Climate VaR)
can be applied to a hypothetical global
actively managed fund. This paper
examines the different dimensions ofclimate-related risks, both in terms of
measuring climate risks for the portfolio
as a whole as well as which sectors,
countries and securities were driving
these risks.

• “Climate Change and Climate Risk:
An Index Perspective” shows how atransition to a low-carbon economy
could reduce demand for carbon-intensive products and services in favorof low-/zero-carbon counterparts. This
migration in demand could also alter
the risk-return profiles — not only of
individual companies but of some entire
industries. As this paper explains, the
MSCI Climate Change Index aims toreflect these potential changes.
• “Climate Change and Low-Carbon Risks
and Opportunities in China” provides a
focused look at the implications of how
a shift to a low-carbon economy could
affect the risk-return profile of manyindustries in China. It supports the MSCI
China Climate Change Index and the
MSCI China A Climate Indexes.
• “Measuring Climate Risk in Real Estate
Portfolios” explains that private realestate may be especially vulnerable toboth physical and transition risks fromclimate change. Our analysis found thatdifferent potential physical risks may
require different mitigation strategies,
while transition risk may also play an increasingly important role with investors
facing potential costs from emission-reduction requirements.
Scenario Analysis
In 2020, we conducted a detailed climate-related scenario analysis toquantitatively analyze the climate-relatedrisks and opportunities that we can expect
to face between now and 2030 using MSCIESG Research’s Climate VaR Model.
MSCI ESG Research comprehensively
assesses future climate-change risks andopportunities, which include transition
risks and opportunities related to greenhouse gas (GHG) emission limitations aswell as physical risks and opportunities
resulting from climate change. Moredetails about the methodology can befound in Appendix 2.

Task Force on Climate-related Financial Disclosures (TCFD) Report

MSCI’S TCFD REPORTDECEMBER 2020

Our Strategy (continued)
Map of MSCI Facilities

The infrastructure map displays all of the company facilities that MSCI ESG Research maintains in its global database. These locations include production
sites and sales offices in buildings that MSCI leases, as well as other assets that are owned by MSCI. The charts below identify physical risks for some ofthese locations. It should be noted that the employee populations and significance to MSCI’s operations vary by location.

Source: MSCI Climate Value-at-Risk, November 2020

Policy Risk (Scope 1, 2, 3) Climate VaR

The bar charts illustrate how MSCI compares to its market peers in terms of the Policy Risk Climate VaR. The Policy Risk Climate VaR encapsulates GHG
emission-reduction costs from climate-change policies, including both direct and indirect exposure to climate policies. Climate VaR is a downside risk indicator that determines the potential maximum drawdown that an asset could experience under a defined climate-change scenario. The below charts display
how policy risks could impact MSCI’s stock price. According to our model, MSCI’s stock price could drop by less than 0.1% under a 2°C policy scenario.
Given that this is a very small downsize risk level, especially when placed alongside MSCI’s sector peers, MSCI’s risk analysis should prioritize physical-climate risks instead of climate-policy risks.
-0.12

FactSet

-0.23
-0.08

London Stock Exchange

-0.11
-0.14
-0.07

-0.03

BlackRock-0.03

S&P Global-0.04 -0.03-0.4-0.35 -0.3

-0.25 -0.2

-0.15 -0.1

FactSet-0.05

Direct Emissions Climate VaR (AIM/CGE 2°C) [%]Electricity Use Climate VaR (AIM/CGE 2°C) [%]London Stock ExchangeBlackRockS&P Global

MSCI Inc.
MSCI Inc.

0
-0.4

-0.35

-0.3

-0.25

-0.2

-0.15 -0.1

-0.05

0

Policy Climate VaR (AIM/CGE 2°C) [%]Value Chain Climate VaR (AIM/CGE 2°C) [%]Source: MSCI Climate Value-at-Risk, November 2020

IMPORTANT NOTICE: Affiliate Conflicts Disclosure
MSCI ESG Research LLC (“MSCI ESG Research”) has developed a fully automated and forward-looking financial climate risk model called Climate Value-at-Risk (Climate VaR)
that was used to quantitatively analyze the climate-related risks and opportunities included in this report for MSCI Inc. MSCI Inc. is the ultimate parent company of MSCI ESG
Research. The application of the Climate VaR model and analysis included herein were conducted in the same manner and based on the same information available for othercompanies that are not affiliated with MSCI Inc. However, due to the affiliate relationship and the potential for a conflict of interest, this report should not be relied upon as anindependent analysis of MSCI Inc.

7

MSCI

Task Force on Climate-related Financial Disclosures (TCFD) Report

MSCI’S TCFD REPORTDECEMBER 2020

Our Strategy (continued)

A Company’s Contribution to
Rising Temperatures
The Warming Potential metric encapsulates a company’s contribution to risingtemperatures. The metric aims to quantify
the alignment of a company’s activities
against pathways commensurate with
future temperature goals. This metricalso allows for standardized comparison
between companies. This concept draws
on the Intergovernmental Panel on Climate
Change goal to limit global temperature
increases by the year 2100 to 2°C or lower
compared to pre‐industrial levels. This
metric allows investors to assess compliance with globally agreed temperaturethresholds, such as “well below (the) 2°C”
target enshrined in the Paris Agreement.
The minimum value that can be assigned
to a company is 1.3°C and the maximum
value is 10°C.

indirect emissions that occur in the value
chain) Warming Potential results, as wellas the Cooling Potential of the company.
The weights used are sector-specific andaim to give most weight to the most relevant scope for each company.
Aggregated Warming
Potential Without andwith Company Targets
The temperature gauge
illustrates the company’s
aggregated Warming
Potential without
the decarbonization
target taken into
account. It ismarked in blue
while reference
temperatures are 2.37ºC
marked in black.

10.0ºC

6.0ºC

3.0ºC

1.82ºC
1.5ºC
0.0ºC

Temperature Gauge
The temperature gauge shows the aggregated Warming Potential of the company
while relating it to important target temperatures in global climate-change negotiations. It has been calculated by combining Scope 1 (direct emissions), Scope 2(indirect emissions from the generation ofpurchased energy) and Scope 3 (all other

Source: MSCI Climate Value-at-Risk, November 2020

As the above temperature gauge shows,
MSCI’s activities currently are aligned witha 2.37°C temperature rise. Assuming MSCI
meets its carbon reduction targets (SeeMetrics & Targets section), its activities
will contribute to a 1.82°C global warming

by 2100. Effectively, MSCI is alignedwith the Paris Agreement’s objective of
keeping the rise in the global temperature
below 2°C.
Physical Scenario Analysis
Climate-related physical risk affects allcompany facilities to varying degrees.
Particularly at risk are those companies
with locations in climate-sensitive regions,or with long-lived fixed assets.
Physical-risk scenarios are essential in
identifying the potential change in extreme
weather caused by increased levels of
GHG emissions in the atmosphere. These
scenarios model the physical aspects ofthe climate system changes, including
variables such as temperature and sea
level rise, and changes to the frequency
and severity of specific extreme weather
events. MSCI ESG Research has established the current level of climate-related
physical risk from eight distinct hazards
to companies’ facilities and modeled
how that may change in the future under
different scenarios. MSCI ESG Research
has also translated the physical risk fromthese hazards into detailed costs oropportunities calculations for eachcompany facility.

Physical Climate Risk of the Company by Hazard
The graph below illustrates the change in the physical risk exposure (in %)from today's climate to one in 15 years time. This is an aggregation of
the physical risk across all company facilities of MSCI INC.

Physical Climate Risk of the Company by Hazard

The graph below illustrates the change in the physical-risk exposure (in percent) from today’s climate to one in 15 years’ time. This is an aggregation of thephysical risk across all company facilities of MSCI.
TropicalCyclones

CoastalFlooding

Extreme
Heat

ExtremeExtremeCold
Precipitation Snowfall

ExtremeWind

FluvialFlooding

All

Average
Source: MSCI Climate Value-at-Risk, November 2020

8

MSCI

Task Force on Climate-related Financial Disclosures (TCFD) Report

MSCI’S TCFD REPORTDECEMBER 2020

Our Strategy (continued)
Acute Physical Risk Exposure: Tropical Cyclones

The below graph shows the assets with the biggest change in exposure to tropical cyclones. The current exposure is today’s average relative damage to
CHRONICPHYSICALRISKEXPOSURE:
EXTREMECOLD
the asset caused bytropical
cyclonesRISK
inrelationto theTROPICAL
valueof theasset. The future exposure is the average relative damage to the asset (in relation to the
ACUTE
PHYSICALEXPOSURE:CYCLONES
below
graphcausedshows theby
assetswith thebiggest change
in exposure
extreme cold
events. The
exposure
is today's numberof daysIf this value is higher than thevalue of the asset)The
in
15
years
tropical
cyclones
basedonthetoaverageoutcomeof current
acurrent
futurephysical-risk
scenario.
The
below
graph
shows
the
assetswiththebiggestchangeinexposure
to tropical
cyclones.
exposure
is today's
relative
per year in which the asset is exposed to extreme cold weather events. The future
exposureis theThenumberof days
per yearin whichaverage
the asset
willcurrent exposure to
tropical
cyclones,
the
asset
will
be
exposedtomorefrequentor
intensetropical
cycloneevents.
MSCI
ESG Research models the risk
damagetotheasset
causedbytropical
cyclonesinrelation
to
the
value
of
the
asset.
The
futureexposureisaveragerelativedamagetotheasset
be exposed to extreme cold weather events in 15 years based on the average outcome of a future physical risk scenario. If this value is higher than(inrelation
to
the
value
of
the
asset)
in15
years
causedbytropical
cyclones
based
on
the
averageoutcomeofafuturephysicalrisk
scenario.
based on the difference
betweenthecurrent
exposure
andfutureexposure.
the 'Current exposure to extreme cold', the asset will be exposed to more frequent or intense cold weather events. MSCI ESG Research models theIfthisbasedvalue onis higher
than thebetween'Currentthe
exposure
tropical andcyclones',
asset will be exposed to more frequent or intense tropical cyclone events.
risk
the difference
currenttoexposure
future theexposure.

ESG Research models the risk based on the difference between the current exposure and future exposure.
Among the top fiveMSCI
locationsprojected to experience the largest change in exposure to cyclones, we believe that Taipei does not pose material risks to thecompany as we only have one employee located there. We acknowledge that Boston and New York’s exposure to increased frequency and/or intensity ofcyclones requires continued monitoring.
Portland
BostonStockholm
New York
Budapest
Portland
BostonGaithersburg
New York
Taipei

Source: MSCI Climate Value-at-Risk,
November 2020

Future exposure to extreme cold (number of days in 15 years)
Futureexposure
to tropical
cyclones(relative
annual damage to the asset in 15 years)
Current
exposure
to extreme
cold(numberof days)
Current exposure to tropical cyclones (relative annual damage to the asset)

Acute Physical Risk Exposure: Coastal Flooding

The below graph shows MSCI assets with the biggest change in exposure to coastal flooding. The current exposure is today’s average relative damage
to the asset caused by coastal flooding in relation to the value of the asset. The future exposure is average relative damage to the asset (in relation to thevalue of the asset) in 15 years caused by coastal flooding based on the average outcome of a future physical-risk scenario. If this value is higher than thecurrent exposure to coastal flooding, the asset will be exposed to more frequent or intense coastal flooding events. MSCI ESG Research models the risk
based on the difference between the current exposure and future exposure.
Shanghai

Mumbai

New York

Ann Arbor

Potsdam

Source: MSCI Climate Value-at-Risk,
November 2020

Future exposure to coastal flooding (relative annual damage to the asset in 15 years)
Current exposure to coastal flooding (relative annual damage to the asset)

CHRONIC PHYSICAL RISK EXPOSURE: EXTREME COLD
The below graph shows the assets with the biggest change in exposure to extreme cold events. The current exposure is today's number of days

Chronic Physical Risk
Exposure:
Extremeper yearin which the asset
is exposedColdto extreme cold weather events. The future exposure is the number of days per year in which the asset will

The below graph shows
the assets
withbiggestinbasedexposure
to extreme
events.
The
current
ishigher
today’s
be exposed
to extreme
coldtheweather
eventschange
in 15 years
on the averageoutcomecoldof a future
physicalrisk
scenario.exposure
If this value isthan number of days per year
'Current exposure
to extreme
the asset
will be exposed
to moreexposure
frequent or intense
weatherof
events.
Researchmodelsin which the asset is the
exposedto extreme
coldcold',
weather
events.
The futureis thecold
numberdaysMSCI
perESG
year
in whichthetheasset will be exposed tobased onbetweenon
the thecurrent
exposureoutcome
and future exposure.
extreme cold weatherrisk
eventsinthe
15difference
years based
averageof a future physical-risk scenario. If this value is higher than the current exposure
to extreme cold, the asset will be exposed to more frequent or intense cold weather events. MSCI ESG Research models the risk based on the difference
between the current exposure and future exposure.
Portland

Stockholm

Budapest

Boston

New York

Source: MSCI Climate Value-at-Risk,
November 2020

9

MSCI

Future exposure to extreme cold (number of days in 15 years)
Current exposure to extreme cold (number of days)

Task Force on Climate-related Financial Disclosures (TCFD) ReportFuture exposure to tropical cyclones (relative annual damage to the asset in 15 years)
Current exposure to tropical cyclones (relative annual damage to the asset)

MSCI’S TCFD REPORTDECEMBER 2020

Our Strategy (continued)

CHRONIC PHYSICAL RISK EXPOSURE: EXTREME HEATThe below graph shows the assets with the biggest change in exposure to extreme heat events. The current exposure is today's number of days

Chronic Physicalper
Risk
Exposure:
ExtremeHeat
year inwhich the asset
is exposed
to extreme heat weather events. The future exposure is the number of days per year in which the asset will

be exposed
to extreme
heattheweather
eventsin 15 years
based on theoutcomea future The
physicalrisk scenario.If
thisisvalue
is higher
than of days per year
The below graph shows
the assets
withbiggestchangein exposure
toaverage
extremeheatofevents.
current
exposure
today’snumbertheexposed'Current exposure
to extreme
the asset
will be The
exposedto morefrequentis
or theintenseheat weather
events.
Research
in which the asset is
to extreme
heatheat',weather
events.
futureexposure
numberof daysper MSCI
year ESG
in whichthemodelsassetthewill be exposed torisk based
on in
the15
difference
betweenon
thethecurrent
exposure
and futureof
exposure.
extreme heat weather
eventsyears based
averageoutcomea future physical-risk scenario. If this value is higher than the current exposure
to extreme heat, the asset will be exposed to more frequent or intense heat weather events. MSCI ESG Research models the risk based on the difference
between the current exposure and future exposure.
Singapore

Shanghai

NormanHong KongTokyo

Source: MSCI Climate Value-at-Risk,
November 2020

Future exposure to extreme heat (number of days in 15 years)
Current exposure to extreme heat (number of days)

Based on the physical risk assessments above, coastal flooding poses the greatest risk to MSCI’s office locations, especially in Shanghai and Mumbai. We
also observed that extreme heat and tropical cyclone risk exposure may slightly increase at some MSCI office locations. The current exposure to extreme
cold will be decreasing in most places.

Climate Solutions for Investors
Our climate solutions include a wide
range of tools, indexes and data designed
to help our clients address a variety ofneeds. Our MSCI ESG Research and Ratings, and our MSCI Climate Metrics andIndexes help meet increasing demand toprovide data and metrics on the financial
impacts of climate change. Increasingly,
we have shared key ESG data in an effort
to provide transparency to investors.
Recent highlights include:• We made our ESG ratings and methodologies publicly available in an effort
to promote ESG transparency. This
includes the most widely owned
companies worldwide.

10

MSCI

• In 2020, we also made public the ESG
characteristics of all our MSCI Equity
and Fixed Income Indexes regulated in
the EU and the most commonly owned
mutual funds.
• Since 2014, we have introduced a suiteof MSCI Climate Indexes, including low
carbon, ex-fossil fuels, climate change
and, most recently, the Climate Paris
Aligned Index.
• We launched MSCI Fixed Income ESG Indexes in January 2020 designed to help institutional investors manage, measure andreport on ESG fixed-income mandates. In
September 2020, we also launched MSCI
Climate Change Fixed Income Indexes addressing the growing demand for climatechange solutions in the credit space.

• With the acquisition of Carbon Delta(now the MSCI Climate Risk Center) in
2019, we now offer a climate scenario
analysis model: Climate Value-at-Risk isdesigned to provide a forward-looking
and return-based valuation assessment
to measure climate-related risks andopportunities in an investment portfolio
across asset classes.
• MSCI ESG Research’s Warming Potential tool enables clients to run “what if”
scenarios to 2050, using various metrics
and forward-looking data.
• We have incorporated ESG and climate
data into our analytics models, offeringclients enhanced tools to evaluate theirportfolios.

Task Force on Climate-related Financial Disclosures (TCFD) Report

MSCI’S TCFD REPORTDECEMBER 2020

Risk Management
Our climate-related risk and opportunity
identification, assessment and management processes are integrated intoa multidisciplinary, companywide risk
management process.
We look at risk from varying time horizons.
We define short-, medium- and long-termtime horizons as follows:
From (years)

To (years)

Short-term

01Medium-term

1

3Long-term

3>3

Climate Materiality: We define substantive strategic or financial impact fromclimate change as an impact that:• requires a significant change in ouroperations and/or how we deliver our
products to our clients;• warrants an extended or permanentchange in the location of a facility or the
implementation of our Business Continuity Plan beyond current scenarios; and• results in a significant change to ourbusiness strategy.
Currently, there are no disruptions to ourbusiness that meet this definition.
More generally, to the extent that climate-related issues may impact our operations or financial results, these issues are
addressed as part of our overall business
continuity and IT disaster recovery planning and are assessed periodically.
This disaster planning increases our ability
to operate in a “business as usual” fashionin the face of climate-related events.
Examples include Superstorm Sandy in the

How WeHave Improved
Our Offices
11

MSCI

Northeast U.S., droughts in South Africa,
monsoons in Mumbai, flooding in Budapest, extreme heat in Western Europe,
tornados in Oklahoma and typhoons in
Manila and Hong Kong. We routinely conduct tabletop disaster simulation eventsfor every office.
In all areas, we use our TCFD scenario
analysis to inform our office location strategy and help mitigate the disruption to ourbusiness as a result of longer-term global
climate changes.
Recently, the coronavirus pandemic illustrated the effectiveness of our businessresilience program. While not a climate-related event, it shows that we were able toquickly move the majority of our global
staff from offices to working from home.
Our Business Resiliency team assesses the severity, probability and scale ofextreme climate events in the geographiesthat we operate in and develops, implements and tests technology systems to
support our business continuity plans.
Our Crisis Management Team and Technology Service Operations Management
Team are responsible for all aspectsof our disaster and recovery response
efforts. Disaster recovery planning andtesting includes protecting the general
welfare and safety of our employees, data
centers, networks, applications supporting
business operations, communications
systems and general technology recovery
following an extreme weather incident or
natural disaster.
Our Supply Chain
We regularly evaluate the potential for
supply-chain disruption, which includes
climate-related changes over both shortand long-term horizons. Physical climate
risks, such as temperature extremes,
storm damage and coastal flooding havethe potential to disrupt the operationsof our supply chain and value chain

We recently chose a vendor
for new and remodeled officesthat uses 70% to 90% recycledmaterials.

members. This in turn may directly or
indirectly impact our operations and timely
customer delivery.
Wherever possible, we identify the multiple
sourcing of critical services to reduce theimpact of supply-chain disruptions. For example, our data centers are located in both
Europe and the U.S. and serve to mitigate
any impact to MSCI should a climate event
impact one of the data centers.
Along similar lines, we also seek opportunities to reduce our reliance on extended
supply chains and lower operating costs.
For example, we eliminated the use of
single-use plastics and other disposable
kitchen items and office supplies in mostof our offices, globally. This reduced ourannual operating costs by USD 565,000.
Employee Incentives
Under our compensation program, employees of the Global Corporate Services
Divisions are incentivized to take various
environmental factors (including local
recycling initiatives, the use of energy-efficient materials and the availabilityof public transport for employees) into
consideration as part of our approach toacquiring new office space.
When selecting new office space, we also
account for a property’s vulnerability to
extreme weather events and natural disasters. We also purchase energy-efficient
products for our offices and widely use
sustainable products, including recycled
and low-environmental-impact materials.
This practice has contributed to an emissions reduction trend and we forecast thatthe continued selection of lower-impact
equipment and materials will result in afurther reduction of our emissions.

Over 89% of our employees now
work in LEED or BREEM environmentally friendly offices, and
95% of our employees are now in
offices with automatic lighting.

Our principal vendor has 100%of all furniture and components
certified to a holistic environmental product standard.

Task Force on Climate-related Financial Disclosures (TCFD) Report

MSCI’S TCFD REPORTDECEMBER 2020

Metrics and Targets
Targets. Using science-based target methodologies, we are committed to reduce our
Scope 1 and Scope 2 emissions by 50% by
2035 and our Scope 3 emissions by 20% by2035, starting in 2019. Ways to achieve thosetargets include implementing energy-efficiency measures, increasing the use of renewables, shrinking employee commutes to theiroffices and business travel and reducing ourfootprint throughout the supply chain. Assuming we meet our carbon-reduction targets, ouractivities will contribute to a temperature rise
below 2°C by 2100, which is aligned with theobjectives of the Paris Agreement.

Year-over-Year Change in MSCI’s Scope 1 & 2 Emissions (MT C02e)

12

MSCI

Scope 2
(Location)

Scope 2
(Market)

2018

419

8,391

5,246

2019

272

7,392

4,089

MT CO2e Change

-147

-999

-1,157

Change

-35%

-12%

-22%

*Note: 2017 is not shown as estimates of Scope 1 and Scope 2 utilized simplistic methods that are notcomparable to subsequent years.

Year-over-Year Change in MSCI’s Scope 3 Emissions (MT C02e)

We began disclosing our annual GHG emissions on our website in 2019, and we intend
to update our annual emissions data every
year in our sustainability-related disclosures.
GHG Emissions. Over the last several years,
we have focused on improving our disclosures around GHG emissions associatedwith our business operations. Staying true tothat commitment, in 2020 we expanded thecoverage of our emissions to account for all
our relevant Scope 3 emissions. The tableson the right show the year-over-year change
in Scope 1, 2 and 3 emissions.

Scope 1(On-site Combustion)

Year*

Purchased
Good andServices

Waste
Generated in
Operations

Transmission andDistribution

EmployeeCommuteBusiness
Travel

Total

2018

16,777a

—

718

—

3,717

N/A

2019

19,373a

676a

609

2,568

4,417

27,643

Change

15%

N/A

-15%

N/A

19%

Year

Note: We derived these values using the GHG Protocol’s Scope 3 Evaluator tool. This tool generates high-level
estimates using an underlying economic input-output model database and contains a relatively high degree of
uncertainty.

aTask Force on Climate-related Financial Disclosures (TCFD) Report

MSCI’S TCFD REPORTAppendix 1

Strategy and Finance Committee

Board Oversight
The Board’s four standing committees
oversee the management of specific risks
and the execution of strategic opportunities, including climate-related risks, providing regular updates to the full Board. The
Board’s committees include the following:
The Nominating and Corporate
Governance Committee
Our Governance Committee is responsible
for overseeing environmental (including
climate), social and governance mattersas they relate to MSCI’s business andlong-term strategy. The Chief Responsibility Officer provides quarterly updates andreports semiannually to the GovernanceCommittee. These quarterly updates are
made available to the full Board. They
include progress on the execution of the
CRC’s operating plan. This provides aframework for executing on high-impact
areas for improvement, including MSCI’s
practices and disclosures, and for developing and implementing short- and long-termplans to address key priorities, commitments and reporting. For example, in 2019,
she led the Governance Committee in areview of the results of MSCI’s TCFD Scenario Analysis and, in 2020, she presented
to the Governance Committee on MSCI’s
climate-management strategy and ourefforts to enhance MSCI’s transparency
around climate reporting.
Audit Committee
Our Audit Committee oversees MSCI’s
enterprise risk management program andis responsible for reviewing: 1) our key
business risks; 2) policies and practices
for risk governance, risk assessment andrisk management; and 3) steps taken tomonitor and mitigate such risks.
The Audit Committee receives a quarterly report from our Risk Officer on thework of MSCI’s Enterprise Risk OversightCommittee. While climate change does
not currently present a significant risk toour business and operations, the Audit
Committee, through the EROC, monitors
its evolving exposure to the business.

13

MSCI

DECEMBER 2020

Our Strategy and Finance Committee monitors and provides guidance on our strategic
objectives. These may include sustainability-related mergers, partnerships and acquisition opportunities such as climate-related
products and services. For example, ourStrategy and Finance Committee advised
management on the acquisition of Carbon
Delta in 2019 (see “Climate Solutions for
Investors” box on p. 10).
Our Strategy and Finance Committee also
works with the Board and management
team in setting the agenda for the Board’s
annual two-day strategy session. At thesestrategy sessions, the heads of our productlines lead the discussions on our investment priorities. In 2020, the Board andmanagement team focused on initiatives
that would position MSCI as a leader in providing valuable insights on ESG and climatechange-related impacts to the institutional
investor community.
Compensation and Talent Management
Committee
Under our executive compensation program,executives (including our CEO, President
and Chief Responsibility Officer) receive
cash bonuses based on the achievement ofcertain financial performance metrics andindividual key performance indicators (KPIs).
Our Compensation and Talent Management
Committee is responsible for ensuring our
incentive awards align with our strategic
goals and reviewing, approving and assessing the attainment of those goals, including
financial performance metrics and KPIs.
The KPIs for our most senior leaders, who
serve on the Executive Committee, areshared broadly within the wider company
and provide an opportunity to set the “toneat the top.” To that end, in 2019 our CEO
identified among his goals supporting the
Chief Responsibility Officer in her ESG
objectives. These included calculating ourcarbon footprint, conducting a TCFD Aligned
Scenario Analysis and expanding employee-led local office groups (Eco Groups)
focused on improving how we operate froman environmental perspective. Meanwhile,
our President listed executing on priority investments in ESG among his strategic goals.

Task Force on Climate-related Financial Disclosures (TCFD) Report

DECEMBER 2020

Corporate
Responsibility
Committee

Led by the Chief Responsibility Officer, the
CRC is a cross-functional team of seniorleaders that coordinates our efforts to implement sound ESG policies and practices. The CRC is comprised of the following:
1 Head of Communications:assists in framing the messaging around
our ESG practices to both internal and external stakeholders and reports to MSCI’s
President.
2 Chief Human Resources Officer:

provides insight on ESG matters froma Human Resources perspective andreports to MSCI’s CEO.
3 Head of Investor Relations: liaises withinvestors on ESG matters, including
climate change, and communicates to
the CRC investors’ expectations withrespect to our ESG practices and reports
to MSCI’s CFO.
4 Head of MSCI ESG Research: leverages

expertise gained from leading one of thelargest teams of research analysts in theworld dedicated to identifying risks andopportunities arising from significant
ESG issues and understanding the ESG
practices of companies around the world,
providing expertise to the CRC’s own
processes and decisions. This position
reports to MSCI’s Head of Research.
5 Head of Corporate Services: oversees

our Corporate Real Estate, Facilities andProcurement Departments. This roleoversees initiatives to reduce MSCI’s and
MSCI’s vendors’ impact on the environment and collaborates with IT to ensurebusiness continuity during extreme climate events. This role reports to MSCI’s
Chief Human Resources Officer.
6 Corporate Responsibility Business

Manager: drives the direction and strategy on the execution of the CRC framework and initiatives and reports to theChief Responsibility Officer.

7 Corporate Secretary: provides insight

into the applicable regulatory andgovernance frameworks impacting ESG
practices and disclosures and reports to
MSCI’s General Counsel.

MSCI’S TCFD REPORTAppendix 1 (continued)

Management
Responsibilities
The following members of the management and management-level committees are responsible for the day-to-day
management of climate-related risks andopportunities. We are fully committed tocreating a governance structure at the
management level that promotes transparency in all its practices and ensuresproper escalation procedures with respect
to climate-related issues.
Our President
The heads of our product lines and key functional areas report directly to the President.
These leaders play an important role in theassessment and management of climate-related risks and opportunities within theirrespective areas. Our President oversees
investment in key strategic growth andoperational areas, including investments inclimate-related opportunities and strategies
to mitigate climate-related risks.
In 2020, our President approved ourEnvironmental Policy, which reiterates ourcommitment to limiting our environmental

14

MSCI

DECEMBER 2020

impact over time. He also encouraged our
stakeholders to do the same.
Chief Responsibility Officer
In 2018, the Chief Responsibility Officerrole was created to work closely with oursenior leadership team to guide and communicate our ESG policies, as well as oversee and improve the governance structure
for our ESG practices and assess how we
could further reduce our environmental
impact and carbon footprint through ourbusiness strategy. The Chief Responsibility Officer is also the Head of Index,
the company’s largest product line, and amember of the Executive Committee, reporting directly to the CEO — underscoring
the importance of the Chief Responsibility
Officer role.
Head of Corporate Services
The climate-related issues that impact our
supply chain, real estate and environmental
sustainability functions are assessed andmanaged by our Head of Corporate Services. This function reports directly to our
Chief Human Resources Officer.
The Real Estate, Facilities and Vendor Procurement management teams that reportto the Global Head of Corporate Services
have direct responsibility for monitoringclimate-related issues associated with
our day-to-day operations. Our Real Estate
management team is responsible formonitoring and managing our energy use
and efficiency efforts to reduce energy
consumption, including through leasing office space in buildings with LEED, BREAM
or equivalent green building recognitions.
LEED and BREAM are construction projectcertification programs that denote environmental-friendly design.
Our Vendor Procurement management
team uses responsible sourcing practices
and partners with our suppliers to minimize our environmental impact. We use athird-party platform (EcoVadis) to assess
our suppliers’ corporate responsibility
practices, including their environmental
performance.
Our Head of Corporate Services and the
Facilities management teams work witha series of local Eco groups, establishedin 17 offices. The Eco groups aim toincrease awareness and manage regional
environmental issues, including climaterelated issues.

Task Force on Climate-related Financial Disclosures (TCFD) Report

MSCI’S TCFD REPORTDECEMBER 2020

Appendix 2
Transition Risks
and Opportunities
MSCI ESG Research’s Climate VaR
Model aims to provide a quantitative andforward-looking analysis on how climatechange may affect a company’s market
valuation. The Transition Risk and Opportunity Climate VaR Model is comprised offour main sub-models: the Direct Emissions Climate VaR, Electricity Use Climate
VaR, Value Chain Climate VaR and Technology Opportunity Climate VaR models.
Each model is summarized below.
Direct Emissions (Scope 1)
MSCI ESG Research employs a top-down
and bottom-up hybrid methodology to calculate potential risks from future climatechange policies coming from countries’
Nationally Determined Contributions(NDCs) stemming from the Paris Agreement. To calculate a company’s costs
associated with reaching emission-reduction targets, the policy risk methodology
uses technology and policy-based carbon
price estimates extracted from Integrated
Assessment Models. Company- and

15

MSCI

location-specific GHG reduction requirements, on an annual basis, are multipliedwith carbon price estimates per year,
which are scenario-specific. The modelcomputes the “Direct Emissions Climate
VaR,” identifying the companies that may
be most at risk from the emission-reduction requirements needed to reach longterm climate stabilization targets.
Electricity Use (Scope 2)
MSCI ESG Research developed a model tocalculate the potential risk that companies
could face through their electricity consumption in a climate-transition scenario.
The model uses scenario-specific electricity data obtained from Integrated Assessment Models and estimates of the costs,
coming from our Direct Emissions (Scope
1) Climate VaR Model, passed throughfrom electricity producers to final consumers, to compute an “Electricity Use Climate
VaR” metric.
Value Chain (Scope 3)
MSCI ESG Research developed a model tocalculate the potential risk that a company

faces from activities embedded within
its value chain. A company’s Scope 3
footprint is separated into upstream anddownstream elements. A company’s exposure to upstream emissions can add input
costs whereas downstream emission
exposure can lead to a company’s loss
in market share due to shifts in demand.
Therefore, both sides of the supply chain
are assessed independently to compute a
company’s “Value Chain Climate VaR.”
Technology Opportunities
MSCI ESG Research developed a low-carbon Technology Opportunity model basedon a company’s current low-carbon revenue streams and company-specific patentdata. Recently published patent databases
allow an evidence-based view into the strategic R&D investments of companies. Using granted, low-carbon patents as a proxy
for low-carbon innovative capacity, theTechnology Opportunity model computes
a company’s “Technology Opportunity
Climate VaR,” identifying which companies
might benefit from the implementation of
long-term climate stabilization targets on
a global level.

Task Force on Climate-related Financial Disclosures (TCFD) Report

MSCI’S TCFD REPORTDECEMBER 2020

Warming Potential

Appendix 2 (continued)

Physical Risks and Opportunities
Physical-climate scenarios define possible climate consequences resulting from increased
concentration of GHG emissions. They describe changes in global temperatures, precipitation levels, extreme weather events such as storms, snowfall and wildfires. Using the past
35 years of observed extreme weather to set a historical baseline, MSCI ESG Researchbrings current and future extreme weather developments into perspective for the coming
15 years.
Current physical-climate scenarios modeled by MSCI ESG Research include costs ofextreme weather events relating to temperature changes (extreme heat and cold), extreme
precipitation, extreme snowfall and wind patterns, tropical cyclones and coastal flooding(from sea-level rise). Recent additions to the model have been datasets on fluvial flooding.
Extremeheat and
cold

Heavy
precipitationand snowfall

Wind
gusts

Re-analysis

Re-analysis

Re-analysis

Coastalflooding

Tropical
cyclones

Fluvialflooding

Climate models

Probabilistic
model – Climada

Climate models,development inprogress

MSCI ESG Research’s Warming Potential
metric aims to measure how a given company is aligned to a pathway corresponding toa target level of global temperature rise. The
Warming Potential metric looks at the contributions to climate change from a company’s
direct greenhouse gas emissions (Scope 1),
indirect GHG emissions (Scopes 2 and 3)
and emission reductions from low-carbon
technology (Cooling Potential).
To compute the temperature alignment
for companies, MSCI ESG Research hasdeveloped an approach that considers both
sector-specific and sector-agnostic data. For
each sector, the logarithmic relationship between 1.5°C, 2°C, 3°C, 3.8°C and 6°C carbonintensity budgets and temperature levels in
2100 are computed. For the calculation of
the carbon-intensity budgets, analysis fromthe Nationally Determined Contributions has
been combined with insight from the latest
UNEP GAP publication. Sectoral as well as
sector-agnostic warming functions, whichtake into account global and sector-specific
GHG emission budgets, are incorporated into
the modeling approach.

Physical-climate impacts vary greatly depending on geographical positioning. This is why
MSCI ESG Research employs global gridded data for assessing physical impacts. To model high-resolution spatial distributions of extreme weather impacts across the globe, MSCIESG Research has produced a Cartesian grid with a resolution of up to 3” x 3” for acuterisks such as coastal flooding, on which hazard data is overlaid. The coverage is global
and the grid cell width in mid-latitudes is around 90 meters. For chronic risks such as heatstress, a grid resolution of 0.5° x 0.5° is used. The global coverage (reaching across all land
covered area) has a cell width in mid-latitudes of around 50 kilometers.
Cost Modeling
To quantify physical risks and opportunities, MSCI ESG Research applies a process used inmost hazard models in the insurance industry, which can be represented as follows:
Expected cost = vulnerability * hazard * exposure.

VULNERABILITY

Cost function

HAZARD

Extreme weather

EXPOSURE

Company facility

Cartesian grid

16

MSCI

Task Force on Climate-related Financial Disclosures (TCFD) ReportAbout MSCI Inc.
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 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.

Forward-Looking Statements and NoticeThis Report contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements relate to future events or performance and involve risks that may cause actual results or
performance differ materially and you should not place undue reliance on them. Risks that could affect results or performance are in MSCI’s Annual Report on Form 10-K for the most recent fiscal year ended on December 31 that is filed with the SEC.
MSCI does not undertake to update any forward-looking statements.
No information herein constitutes investment advice or should be relied on as such. MSCI grants no right or license to use its products or services without an appropriate license. MSCI MAKES NO EXPRESS OR IMPLIED WARRANTIES OF
MERCHANTABILITY, FITNESS FOR A PARTICULAR PURPOSE OR OTHERWISE WITH RESPECT TO THE INFORMATION HEREIN AND DISCLAIMS ALL LIABILITY TO THE MAXIMUM EXTENT PERMITTED BY LAW.
©2020 MSCI Inc. All rights reserved | CBR01220