Index Methodology

MSCI Climate Paris
Aligned Indexes
Methodology
July 2024© 2024 MSCI Inc. All rights reserved. Please refer to the disclaimer at the end of this document.

MSCI Climate Paris Aligned Indexes Methodology | July 2024

Contents
1. Introduction ............................................................................................................. 3
2. Index Construction Methodology ............................................................................. 4
2.1 Eligible Universe ............................................................................................................ 4
2.2 Optimization Constraints .............................................................................................. 5
2.3 Determining the Optimized Index................................................................................. 7
2.4 Treatment of Unrated Companies ............................................................................... 8
3. Maintaining the Indexes ........................................................................................... 9
3.1 Semi-Annual Index Reviews ......................................................................................... 9
3.2 Ongoing Event Related Changes .................................................................................. 9
4. MSCI ESG Research ............................................................................................... 11
4.1 MSCI Climate Change Metrics ................................................................................... 11
4.2 MSCI Climate Value-at-Risk ........................................................................................ 11
4.3 MSCI Impact Solutions: Sustainable Impact Metrics ............................................... 11
4.4 MSCI Impact Solutions: SDG Alignment.................................................................... 12
4.5 MSCI ESG Business Involvement Screening Research ............................................ 12
Appendix I: MSCI Low Carbon Transition Risk Assessment ....................................... 13
Appendix II: MSCI Climate Value-at-Risk ................................................................... 15
Appendix III: Calculation of Target Metrics ................................................................ 16
Appendix IV: Decarbonization Trajectory of Indexes .................................................. 21
Appendix V: Companies Involved in Nuclear Weapons Business ................................ 23
Appendix VI: Calculation of Implied Temperature Rise and Cumulative Projected
Emissions .................................................................................................................. 24
Appendix VII: Barra Equity Model Used in the Optimization ........................................ 26
Appendix VIII: New Release of Barra® Equity Model or Barra® Optimizer .................. 27
Appendix IX: Methodology Set ................................................................................... 28
Appendix X: Changes to this Document ..................................................................... 29© 2024 MSCI Inc. All rights reserved. Please refer to the disclaimer at the end of this document.

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MSCI Climate Paris Aligned Indexes Methodology | July 2024

1. Introduction
The MSCI Climate Paris Aligned Indexes1 (“the Indexes”) are designed to support investors seeking
to reduce their exposure to transition and physical climate risks and who wish to pursue
opportunities arising from the transition to a lower-carbon economy while aligning with the Paris
Agreement requirements. The Indexes incorporate the TCFD recommendations and are designed to
exceed the minimum standards of the EU Paris-Aligned Benchmark2. The Indexes are constructedfrom their corresponding market capitalization weighted indexes (“the Parent Indexes”) through an
optimization process that aims to:
o
o
o
o
o
o

o
o
o
o

Exceed the minimum technical requirements laid out in the EU Delegated Act
Align with the recommendations of the Task Force on Climate-related Financial Disclosures(TCFD)3
Achieve a maximum Implied Temperature Rise of 2.0°C for the Index
Align with a 1.5°C climate scenario using aggregated cumulative projected emissions, the
MSCI Climate Value-at-Risk and a “self-decarbonization” rate of 10% year on year
Reduce the Index’s exposure to physical risk arising from extreme weather events by at least
50%
Shift index weight from companies facing climate transition risks to companies having
climate transition opportunities, using the MSCI Low Carbon Transition Score, and by
excluding categories of fossil fuel-linked companies
Increase the weight of companies which are exposed to climate transition opportunities andreduce the weight of companies which are exposed to climate transition risks
Reduce the weight of companies assessed as high carbon emitters using scope 1, 2 and 3
emissions
Increase the weight of companies with credible carbon reduction targets through theweighting scheme
Achieve a modest tracking error compared to the Parent Index and low turnover.

The Indexes are governed by a set of methodology and policy documents (“Methodology Set”), including the present index
methodology document. Please refer to Appendix IX for more details.
2 On December 3, 2020, the European Commission has published the delegated acts in the Official Journal ( https://eurlex.europa.eu/legal-content/EN/TXT/PDF/?uri=CELEX:32020R1818&from=EN) which contain the minimum technical requirements
for the EU Paris-aligned Benchmarks. In case there are changes in the EU delegated acts and an update to the Index methodology isrequired, MSCI will issue an announcement prior to implementing the changes in the methodology. MSCI will not conduct a formal
consultation for such an update.
1

3 https://www.fsb-tcfd.org/publications/final-recommendations-report/© 2024 MSCI Inc. All rights reserved. Please refer to the disclaimer at the end of this document.

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MSCI Climate Paris Aligned Indexes Methodology | July 2024

2. Index Construction Methodology
The Indexes use company ratings and research provided by MSCI ESG Research4 to determine
eligibility for index inclusion.

2.1 Eligible Universe
The Eligible Universe is constructed from the constituents of the Parent Index by excluding
securities based on the exclusion criteria listed below:
1. Controversial Weapons: All companies involved in Controversial Weapons as defined by themethodology of the MSCI Ex-Controversial Weapons Indexes.
2. Environmental Harm: All companies assessed as having involvement in environmental
controversies that are classified as Red (MSCI Environmental Controversy Score of 0) orOrange Flags (score of 1).
o

A Red Flag indicates an ongoing, Very Severe ESG controversy implicating a company
directly through its actions, products, or operations.

o

An Orange Flag indicates an ongoing Severe ESG controversy implicating a company
directly, or a Very Severe ESG controversy that is either partially resolved or indirectly
attributed to the company’s actions, products, or operations.

3. ESG Controversies: All companies assessed as having involvement in ESG controversies
that are classified as Red Flags (MSCI ESG Controversy Score of 0). A Red Flag indicates anongoing, Very Severe ESG controversy implicating a company directly through its actions,products, or operations.
4. Oil & Gas: All companies deriving 10% or more revenue from oil and gas related activities,
including distribution / retail, equipment and services, extraction and production,
petrochemicals, pipelines and transportation and refining but excluding biofuel production
and sales and trading activities.
5. Power Generation: All companies deriving 50% or more revenue from thermal coal based
power generation, liquid fuel based power generation and natural gas based power
generation5.
6. Tobacco: All companies with involvement in Tobacco as defined by the methodology of the
MSCI Global ex Tobacco Involvement Indexes.
7. Thermal Coal Mining: All companies deriving 1% or more revenue (either reported or
estimated) from the mining of thermal coal (including lignite, bituminous, anthracite andsteam coal) and its sale to external parties. It excludes revenue from metallurgical coal, coal
mined for internal power generation (e.g. in the case of vertically integrated power
4 See section 4 for further information regarding ESG and climate data used in the Indexes that MSCI Limited and MSCI DeutschlandGmbH source from MSCI ESG Research LLC, a separate subsidiary of MSCI Inc. MSCI ESG Research is solely responsible for thecreation, determination and management of such data as a provider to MSCI Limited and MSCI Deutschland GmbH. MSCI Limited
and MSCI Deutschland GmbH are the benchmark administrators for the MSCI indexes.
5 As per https://www.ipcc.ch/site/assets/uploads/2018/02/ipcc_wg3_ar5_chapte`r7.pdf, thermal coal based power generation,liquid fuel based power generation and natural gas based power generation have median lifecycle emissions exceeding
100gCO2/kWh.

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MSCI Climate Paris Aligned Indexes Methodology | July 2024

producers), intra-company sales of mined thermal coal, and revenue from coal trading (either
reported or estimated)
8. Civilian Firearms:oAll companies classified as “Producer” of firearms and small arms ammunitions forcivilian markets. It does not include companies that cater to the military, government,
and law enforcement markets.

oAll companies deriving 5% or more aggregate revenue from the production anddistribution (wholesale or retail) of firearms or small arms ammunition intended for
civilian use.

9. Nuclear Weapons: All companies involved meeting specific Nuclear Weapons businessinvolvement criteria as described in Appendix V.

2.2 Optimization Constraints
At each Semi-Annual Index Review, the indexes are constructed using an optimization process thataims to achieve replicability and investability as well as minimize ex-ante tracking error relative to
the Parent Index subject to the following constraints:
1. Transition and physical risk objectives – constraints detailed in Table 1
2. Climate transition opportunities objectives – constraints detailed in Table 2
3. Diversification objectives – constraints detailed in Table 3
The definitions of the target metrics for the optimization are detailed in Appendix III.
Table 1: Constraints imposed to meet transition and physical risk objectives

No.
1
2

3

4

Transition and Physical Risk Objective
Minimum reduction in Greenhouse Gas (GHG)
Intensity (Scope 1+2+36) relative to Parent Index
Minimum average reduction (per annum) in GHG
Intensity relative to GHG Intensity at the Base Date7
Minimum active weight in High Climate Impact Global
Industry Classification Standard (GICS®)8
sector relative to Parent Index as defined in Appendix
III
Minimum increase in the aggregate weight ofCompanies Setting Targets relative to the aggregate

Target Value
50%
10%

0%

20%

6 Prior to the May 2020 Semi-Annual Index Review (SAIR) of the Indexes, the Weighted Average Carbon Emissions Intensity has been

calculated based on Scope 1+2 Emissions.
7 Prior to the May 2020 Semi-Annual Index Review (SAIR) of the Indexes, the average reduction in WACI has been calculated using

Scope 1+2 Emissions since Inception.
8 GICS is the global industry classification standard jointly developed by MSCI and S&P Global Market Intelligence.

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MSCI Climate Paris Aligned Indexes Methodology | July 2024

Parent Index weight of such companies that meet theeligibility criteria.

5
6

7

8

Companies Setting Targets are defined in Appendix
III and eligibility criteria are defined in Section 2.1.
Minimum reduction in Weighted Average Potential
Emissions Intensity relative to Parent Index
Aggregated Climate Value-at-Risk9
Please see more detail on Aggregated Climate Valueat-Risk in Appendix II and Appendix III.
Minimum increase in weighted average Low Carbon
Transition (LCT) Score relative to Parent Index
Please see more detail on LCT Score in Appendix I
Minimum reduction in Weighted Average PhysicalRisk Climate Value-at-Risk (Aggressive Scenario)
relative to Parent Index

50%>= Max(-5%,Aggregated Climate
VaR of Parent Index)
10%

50%10

Table 2: Constraints imposed in order to meet transition opportunity objectives

No.
9
10
11
12
13

Transition Opportunity Objective

Target Value

Minimum increase in weighted average LCT Score11
relative to the Parent Index12
Minimum ratio of Weighted Average Green Revenue/
Weighted Average Fossil fuels-based Revenue
relative to the Parent Index
Minimum increase in Weighted Average Green
Revenue relative to the Parent Index

4 times

Index Implied Temperature Rise (ITR)13<=2.0°C

Aggregate Cumulative Projected EmissionsError!
Bookmark not defined.

10%

100%

Aligned with <=1.5°C
ITR

9 Prior to the May 2020 Semi-Annual Index Review (SAIR) of the Indexes, the Policy Risk Climate VaR using Scope 1 Emissions since

Inception.
During the November 2023 Index Review the Aggregated Climate VAR constraint was applied at “>= Max (-10%, Aggregated Climate
Value-at-Risk of Parent Index)” for the MSCI EM, MSCI AC Asia Pacific ex Japan, MSCI AC Asia ex Japan, MSCI Japan, MSCI China,
and MSCI China A, Climate Paris Aligned Indexes. The same treatment was applied at the May 2024 Index Review for the MSCIJapan, and MSCI China, Climate Paris Aligned Indexes. For more details on Climate value-at-Risk, please refer to Appendix II.
10 In case the Parent Index has a positive Weighted Average Physical Risk Climate VaR, the floor will be applied at the level of the

Weighted Average Physical Risk Climate VaR of the Parent Index
11 The constraint on increase in LCT Score is designed to underweight companies with a low LCT Score (assessed as companies

facing risks from a low carbon transition) and overweight companies with a high LCT Score (assessed as companies which may
have opportunities from a low carbon transition). Thus, the constraint has been repeated in Table 2 to illustrate how the constraint
meets both the objectives.
12 For the MSCI USA Climate Paris Aligned Index and the MSCI Japan Climate Paris Aligned Index, the minimum Increase inweighted average LCT Score relative to the Parent Index constraint is applied at 5% instead of 10%.
13 For further details on the Implied Temperature Rise and Cumulative Projected Emissions calculations, please refer to Appendix VI© 2024 MSCI Inc. All rights reserved. Please refer to the disclaimer at the end of this document.

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MSCI Climate Paris Aligned Indexes Methodology | July 2024

Table 3: Constraints imposed to meet diversification objectives

No.

Diversification Objective

Target Value

14

Constituent Active Weight14+/- 2%

15

Minimum constituent weight

0.01%

16
17

Security Weight as a multiple of its weight in the
Parent Index
Active Sector Weights (the Energy GICS Sector is notconstrained)

20x+/- 5%

18

Active Country Weights15

19

One Way Turnover16

20

Common Factor Risk Aversion

0.00075

21

Specific Risk Aversion

0.0075+/- 5%
5%

During the Semi-Annual Index Review, in the event that there is no optimal solution that satisfies all
the optimization constraints, the following constraints will be relaxed, until an optimal solution isfound:•

Relax the one-way index turnover constraint in steps of 1% up to 20%•

Relax the active sector weight constraint in steps of 1% up/down to +/-20%•

The one-way index turnover constraint and the active sector weight constraint are alternately
relaxed until a feasible solution is achieved.

In the event that no optimal solution is found after the above constraint relaxations are exhausted, therelevant Index will not be rebalanced for that Semi-Annual Index Review.

2.3 Determining the Optimized Index
The Indexes are constructed using the Barra Open Optimizer17 in combination with the relevant Barra
Equity Model. The optimization uses universe of eligible securities and the specified optimization
objectives and constraints to determine the constituents of the Indexes.

14 For the MSCI Canada Climate Paris Aligned Index, the constituent active weight constraint is set to +/- 5% instead of +/- 2%.
15 In case there are countries in the parent index which weigh less than 2.5% in the parent index then for such countries the active

country upper bound of +5% is not applicable. When a country weighs less than 2.5% in parent index then the upper bound ofcountry weight in the Index is set at three times of the country’s weight in parent index.
The May 2022 Index review for MSCI Canada Climate Paris Aligned Index was conducted by relaxing the one-way turnoverconstraint to 25%.
16

17 Please refer to Appendix VII and VIII for more details.

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MSCI Climate Paris Aligned Indexes Methodology | July 2024

2.4 Treatment of Unrated Companies
Companies not assessed by MSCI ESG Research on data for any of the following MSCI ESG
Research products are not eligible for inclusion in the Indexes:•

MSCI ESG Controversies

For the treatment of unrated companies in the calculation of target metrics for the optimization
process, please refer to Appendixes III and VI.

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MSCI Climate Paris Aligned Indexes Methodology | July 2024

3. Maintaining the Indexes
3.1 Semi-Annual Index Reviews
The Indexes are rebalanced on a semi-annual basis, as of the close of the last business day of May
and November, coinciding with the May and November Index Review of the MSCI Global Investable
Market Indexes. The pro forma Indexes are in general announced nine business days before theeffective date.
In general, MSCI uses MSCI ESG Research data (including MSCI Climate Change Metrics, MSCI
Climate Value-at-Risk, MSCI ESG Sustainable Impact Metrics, MSCI ESG Controversies and MSCI
Business Involvement Screening Research) as of the end of the month preceding the Index Reviews
for the rebalancing of the Indexes.

3.2 Ongoing Event Related Changes
The general treatment of corporate events in the Indexes aims to minimize turnover outside of Index
Reviews. The methodology aims to appropriately represent an investor’s participation in an event
based on relevant deal terms and pre-event weighting of the index constituents that are involved.
Further, changes in index market capitalization that occur as a result of corporate event
implementation will be offset by a corresponding change in the Variable Weighting Factor (VWF) of
the constituent.
Additionally, if the frequency of Index Reviews in the Parent Index is greater than the frequency ofIndex Reviews in the Index, the changes made to the Parent Index during intermediate Index Reviews
will be neutralized in the Index.
The following section briefly describes the treatment of common corporate events within the Index.
No new securities will be added (except where noted below) to the Index between Index Reviews.
Parent Index deletions will be reflected simultaneously.

EVENT TYPE

EVENT DETAILSNew additions to the Parent Index

A new security added to the Parent Index (such as IPO
and other early inclusions) will not be added to theindex.

Spin-Offs

All securities created as a result of the spin-off of an
existing Index constituent will be added to the Index
at the time of event implementation. Reevaluation forcontinued inclusion in the Index will occur at thesubsequent Index Review.

Merger/Acquisition

For Mergers and Acquisitions, the acquirer’s post
event weight will account for the proportionate
amount of shares involved in deal consideration, while
cash proceeds will be invested across the Index.

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If an existing Index constituent is acquired by a nonIndex constituent, the existing constituent will bedeleted from the Index and the acquiring nonconstituent will not be added to the Index.
Changes in Security Characteristics

A security will continue to be an Index constituent if
there are changes in characteristics (country, sector,
size segment, etc.) Reevaluation for continued
inclusion in the Index will occur at the subsequentIndex Review.

Further detail and illustration regarding specific treatment of corporate events relevant to this Index
can be found in the MSCI Corporate Events Methodology book under the sections detailing thetreatment of events in Capped Weighted and Non-Market Capitalization Weighted indexes.
The MSCI Corporate Events methodology book is available at: https://www.msci.com/indexmethodology.

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4. MSCI ESG Research
The Indexes are products of MSCI Inc. that utilize information such as company ratings andresearch produced and provided by MSCI ESG Research LLC (MSCI ESG Research), a subsidiary of
MSCI Inc. In particular, the Indexes use the following MSCI ESG Research products: MSCI Climate
Change Metrics, MSCI Climate Value-at-Risk, MSCI Impact Solutions, MSCI ESG Controversies and
MSCI ESG Business Involvement Screening Research. MSCI Indexes are administered by MSCI
Limited and MSCI Deutschland GmbH.

4.1 MSCI Climate Change Metrics
MSCI Climate Change Metrics provides climate data & tools to support institutional investors
seeking to integrate climate risk & opportunities into their investment strategy and processes. This
includes investors seeking to achieve a range of objectives, including measuring and reporting on
climate risk exposure, implementing low carbon and fossil fuel-free strategies, alignment withtemperature pathways and factoring climate change research into their risk management processes,
in particular through climate scenario analysis for both transition and physical risks.
The dataset spans across the four dimensions of a climate strategy: transition risks, green
opportunities, physical risks and 1.5° alignment.
For more details on MSCI Climate Change Metrics, please refer to https://www.msci.com/climatechange-solutions.

4.2 MSCI Climate Value-at-Risk
Climate Value-at-Risk (Climate VaR) is designed to provide a forward-looking and return-based
valuation assessment to measure climate related risks and opportunities in an investment portfolio.
The fully quantitative model offers deep insights into how climate change could affect company
valuations.
For more details on MSCI Climate Value-at-Risk, please refer to https://www.msci.com/climate-dataand-metrics.

4.3 MSCI Impact Solutions: Sustainable Impact Metrics
MSCI Impact Solutions’ Sustainable Impact Metrics is designed to identify companies that derive
revenue from products or services with positive impact on society and the environment. The
Sustainable Impact Metrics are comprised of six Environmental Impact categories and seven Social
Impact categories arranged by theme.

MSCI Sustainable Impact Taxonomy
PillarEnvironmental
Impact

ThemesClimate Change

Categories
1. Alternative energy
2. Energy efficiency
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MSCI Climate Paris Aligned Indexes Methodology | July 2024

Natural capitalSocial Impact

Basic needs

Empowerment

4. Sustainable water
5. Pollution prevention
6. Sustainable agriculture
7. Nutrition
8. Major Disease Treatment
9. Sanitation
10. Affordable Real Estate
11. SME Finance
12. Education
13. Connectivity – Digital divide

Under each of the actionable environmental and social impact themes, MSCI ESG Research has
identified specific categories of products and services that it has determined companies can offer
as potential solutions to environmental and social challenges.
For more details on MSCI Sustainable Impact Metrics, please refer tohttps://www.msci.com/legal/disclosures/esg-disclosures.

4.4 MSCI Impact Solutions: SDG Alignment
MSCI ESG Controversies provide assessments of controversies concerning the potential negativeenvironmental, social, and/or governance impact of company operations, products and services. The
evaluation framework used in MSCI ESG Controversies is designed to be consistent withinternational norms represented by the UN Declaration of Human Rights, the ILO Declaration on
Fundamental Principles and Rights at Work, and the UN Global Compact. MSCI ESG Controversies
Score falls on a 0-10 scale, with “0” being the most severe controversy.
The MSCI ESG Controversies methodology can be found at:https://www.msci.com/legal/disclosures/esg-disclosures.

4.5 MSCI ESG Business Involvement Screening Research
MSCI ESG Business Involvement Screening Research (BISR) aims to enable institutional investors tomanage environmental, social and governance (ESG) standards and restrictions reliably andefficiently.
The MSCI Business Involvement Screening Research methodology can be found at:https://www.msci.com/legal/disclosures/esg-disclosures.

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Appendix I: MSCI Low Carbon Transition Risk Assessment
MSCI ESG Research’s Low Carbon Transition Risk assessment18 is designed to identify potential
leaders and laggards by measuring companies’ exposure to and management of risks andopportunities related to the low carbon transition. The assessment is derived from company
disclosures and estimates.
The final output of this assessment is two company-level factors:(1) Low Carbon Transition Category: This factor groups companies in five categories thathighlight the predominant risks and opportunities they are most likely to face in the transition(Exhibit 1).
(2) Low Carbon Transition Score: This score is based on a multi-dimensional risks andopportunities assessment and considers both primary and secondary risks a company
faces. It is an industry agnostic assessment of a company’s position vis-à-vis the transition.
Exhibit 1: Low Carbon Transition Categories and Scores

Calculation methodology
The Low Carbon Transition Categories and Scores are determined by a combination of eachcompany’s current risk exposure and its efforts to manage the risks and opportunities presented by
the low carbon transition. The 3-step process followed by MSCI ESG Research is explained below.

18 For more details on MSCI Climate Change Metrics: https://www.msci.com/climate-change-solutions© 2024 MSCI Inc. All rights reserved. Please refer to the disclaimer at the end of this document.

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MSCI Climate Paris Aligned Indexes Methodology | July 2024

Step 1: Measure Low Carbon Transition Risk Exposure
The first step towards measuring the Low Carbon Transition Risk Exposure for a company is thecomputation of its estimated total net carbon intensity – which considers operational and productcarbon emissions. In the next step, we compute Low Carbon Transition Risk Exposure Category and
Score based on total net carbon intensity.
Step 2: Assess Low Carbon Transition Risk Management
In the second step, MSCI ESG Research assesses a company’s management of risks andopportunities presented by the low carbon transition. This assessment is based on policies andcommitments to mitigate transition risk, governance structures, risk management programs andinitiatives, targets and performance, and involvement in any controversies.
Step 3: Calculate Low Carbon Transition Category and Score
In the final step, the Low Carbon Transition Risk Exposure Category and Score that was calculated in
Step 1 is adjusted for the strength of management efforts. Following this adjustment, Low Carbon
Transition Risk Exposure Score of companies with top or second quartile risk management improves
and some top and second quartile companies may move up one category.

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Appendix II: MSCI Climate Value-at-Risk
The MSCI Climate Value-at-Risk measurement helps investors to assess future costs related toclimate change and understand what those future costs could mean in the current valuation of
securities. The premise of Climate Value-at-Risk is to aggregate costs related to specific climate
risks and calculate what these costs might signify about financial performance into the foreseeable
future.
1.5°C Aggregated Policy Risk Equity Climate VaR (REMIND NGFS Orderly) [%]An equity's aggregated downside policy risk exposure according to all emission sources (Scope 1, 2,3), expressed as a percentage of the equity's market value, assuming a global 1.5°C target and using
carbon prices from the REMIND model under the NGFS Orderly scenario. Please refer to the Climate
VaR methodology document for further details on scenario options.
1.5°C Technology Opportunities Equity Climate VaR (REMIND NGFS Orderly) [%]An equity's upside technology opportunity exposure, expressed as a percentage of the equity'smarket value capped at 100%, assuming a global 1.5°C target and calculated using carbon prices
from the REMIND model under the NGFS Orderly scenario. Please refer to the Climate VaR
methodology document for further details on scenario options.
4°C Aggregated Physical Risk Equity Climate VaR (IPCC SSP3-7.0, Aggressive Outcome) [%]An equity's "worst-case" (95th percentile) downside or upside potential, expressed as a percentageof the equity's market value, assuming trends in extreme cold, extreme heat, extreme precipitation,
heavy snowfall, extreme wind, coastal flooding, fluvial flooding, river low flow, tropical cyclones andwildfires continue along the 4°C IPCC SSP3-7.0 scenario.

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Appendix III: Calculation of Target Metrics
Greenhouse Gas (GHG) Emissions Intensity

MSCI ESG Research collects company-specific direct (Scope 1) and indirect (Scope 2) greenhousegas emissions (GHG) data from company public documents and/or the Carbon Disclosure Project. If
a company does not report GHG emissions, then MSCI ESG Research estimates Scope 1 and Scope
2 GHG emissions.
MSCI ESG Research estimates company-specific indirect (Scope 3) GHG emissions from the Scope
3 Carbon Emissions Estimation Model. The data is generally updated on an annual basis.

Calculation of GHG Intensity

Carbon emissions of a company are normalized for size by dividing annual carbon emissions byEnterprise Value including Cash (EVIC). The Carbon Emissions Intensity is calculated using the latest
Scope 1+2 carbon emissions, Scope 3 carbon emissions and EVIC of a company.
Security Level GHG Intensity (Scope 1+2+3) =(Unadjusted Security Level GHG Intensity (Scope 1+2) + Unadjusted Security Level GHG Intensity(Scope 3)) * (1 + EVIAF)
Unadjusted Security Level GHG Intensity (Scope 1+2) =(𝑆𝑐𝑜𝑝𝑒 1 + 2 𝐶𝑎𝑟𝑏𝑜𝑛 𝐸𝑚𝑖𝑠𝑠𝑖𝑜𝑛𝑠)
𝐸𝑉𝐼𝐶 (𝑖𝑛 𝑀$)
If Scope 1+2 carbon emissions and/or EVIC are not available, the average Scope 1+2 intensity of all
the constituents of the MSCI ACWI in the same GICS Industry Group in which the security belongs isused.

Unadjusted Security Level GHG Intensity (Scope 3) =(𝑆𝑐𝑜𝑝𝑒 3 𝐶𝑎𝑟𝑏𝑜𝑛 𝐸𝑚𝑖𝑠𝑠𝑖𝑜𝑛𝑠)
𝐸𝑉𝐼𝐶 (𝑖𝑛 𝑀$)
If Scope 3 carbon emissions and/or EVIC are not available, the average Scope 3 intensity of all theconstituents of the MSCI ACWI in the same GICS Industry Group in which the security belongs is
used.

Enterprise Value Inflation Adjustment Factor (EVIAF) =(𝐴𝑣𝑒𝑟𝑎𝑔𝑒(𝐸𝑉𝐼𝐶))−1
𝑃𝑟𝑒𝑣𝑖𝑜𝑢𝑠 (𝐴𝑣𝑒𝑟𝑎𝑔𝑒(𝐸𝑉𝐼𝐶))

Weighted Average GHG Intensity of Parent Index =∑(𝑊𝑒𝑖𝑔ℎ𝑡 𝑖𝑛 𝑃𝑎𝑟𝑒𝑛𝑡 𝐼𝑛𝑑𝑒𝑥 ∗ 𝑆𝑒𝑐𝑢𝑟𝑖𝑡𝑦 𝐿𝑒𝑣𝑒𝑙 𝐺𝐻𝐺 𝐼𝑛𝑡𝑒𝑛𝑠𝑖𝑡𝑦)© 2024 MSCI Inc. All rights reserved. Please refer to the disclaimer at the end of this document.

MSCI.COM | PAGE 16 OF 32

MSCI Climate Paris Aligned Indexes Methodology | July 2024

Weighted Average GHG Intensity of Derived Index =∑(𝐼𝑛𝑑𝑒𝑥 𝑊𝑒𝑖𝑔ℎ𝑡 ∗ 𝑆𝑒𝑐𝑢𝑟𝑖𝑡𝑦 𝐿𝑒𝑣𝑒𝑙 𝐺𝐻𝐺 𝐼𝑛𝑡𝑒𝑛𝑠𝑖𝑡𝑦)

Calculation of Potential Carbon Emissions Intensity

Security Level Potential Carbon Emissions (PCE) Intensity =𝐴𝑏𝑠𝑜𝑙𝑢𝑡𝑒 𝑃𝑜𝑡𝑒𝑛𝑡𝑖𝑎𝑙 𝐸𝑚𝑖𝑠𝑠𝑖𝑜𝑛𝑠
𝐸𝑉𝐼𝐶(𝑖𝑛 𝑀$)
If Absolute Potential Emissions data is not available, MSCI uses zero fossil fuel reserves.

Weighted Average Potential Emissions Intensity of Parent Index =∑(𝑊𝑒𝑖𝑔ℎ𝑡 𝑖𝑛 𝑃𝑎𝑟𝑒𝑛𝑡 𝐼𝑛𝑑𝑒𝑥 ∗ 𝑆𝑒𝑐𝑢𝑟𝑖𝑡𝑦 𝐿𝑒𝑣𝑒𝑙 𝑃𝐶𝐸 𝐼𝑛𝑡𝑒𝑛𝑠𝑖𝑡𝑦)

Weighted Average Potential Emissions Intensity of Derived Index =∑(𝐼𝑛𝑑𝑒𝑥 𝑊𝑒𝑖𝑔ℎ𝑡 ∗ 𝑆𝑒𝑐𝑢𝑟𝑖𝑡𝑦 𝐿𝑒𝑣𝑒𝑙 𝑃𝐶𝐸 𝐼𝑛𝑡𝑒𝑛𝑠𝑖𝑡𝑦)

Calculation of Average Decarbonization

On average, the Indexes follow a 10% decarbonization trajectory since the Base Date. The Weighted
Average GHG Intensity at the Base Date (W1) is used to compute the target Weighted Average GHG
Intensity at any given Semi-Annual Index Review (Wt) as per the below formula.
(𝑡−1)
2

𝑊𝑡 = 𝑊1 ∗ 0.90

Where ‘t’ is the number of Semi-Annual Index Reviews since the Base Date.
Thus, for the 3rd Semi-Annual Index Review since the Base Date (t=3), the target Weighted Average
GHG Intensity will be W1*0.90.

Companies Setting Targets

The Index requires a minimum 20% increase in the aggregate weight of companies setting
emissions reduction targets relative to the aggregate Parent Index weight of such companies thatmeet the eligibility criteria. Companies setting targets are defined as companies having one or more
active carbon emissions reduction target(s) approved by the Science Based Targets initiative (SBTi),or companies meeting all the following requirements:•

Companies publishing emissions reduction targets•

Companies publishing their annual emissions and© 2024 MSCI Inc. All rights reserved. Please refer to the disclaimer at the end of this document.

MSCI.COM | PAGE 17 OF 32

MSCI Climate Paris Aligned Indexes Methodology | July 2024•

Companies reducing their GHG intensity by 7% over each of the last 3 years.

Calculation of Green Revenue to Fossil fuels-based Revenue Multiple

Green Revenue
For each constituent in the Parent Index, the Green Revenue% is calculated as the cumulative
revenue (%) from the six Clean Tech themes which are as follows:•

Alternative Energy – products and services that support the transmission, distribution andgeneration of renewable energy and alternative fuels to reduce carbon and pollutant
emissions in supporting affordable and clean energy to combat climate change.

•

Energy Efficiency – products, and services that support the maximization of productivity inlabor, transportation, power and domestic applications with minimal energy consumption toensure universal access to affordable, reliable and modern energy services.

•

Sustainable Water – products, services, infrastructure projects and technologies that resolve
water scarcity and water quality issues, through minimizing and monitoring current water
demand, improving the quality and availability of water supply to improve resource
management in both domestic and industrial use.

•

Green Building – design, construction, redevelopment, retrofitting, or acquisition of greencertified properties to promote mechanisms for raising capacity for effective climate change
mitigation and adaptation.

•

Pollution Prevention – products, services, infrastructure projects and technologies that
reduces volume of waste materials through recycling, minimizes introduction of toxic
substances, and offers remediation of existing contaminants such as heavy metals andorganic pollutants in various environmental media to significantly address pollution in alllevels and its negative effects•

Sustainable Agriculture - revenues from forest and agricultural products that meetenvironmental and organic certification requirements to address significantly biodiversity
loss, pollution, land disturbance, and water overuse

The Weighted Average Green Revenue% is calculated as:= ∑(𝑊𝑒𝑖𝑔ℎ𝑡 𝑖𝑛 𝐼𝑛𝑑𝑒𝑥 ∗ 𝐺𝑟𝑒𝑒𝑛 𝑅𝑒𝑣𝑒𝑛𝑢𝑒%)
Fossil fuels-based Revenue
For each constituent in the Parent Index, the Fossil fuels-based Revenue% is calculated as the
cumulative revenue (%) from the following sources:•

Revenue% (either reported or estimated) from the mining of thermal coal (including lignite,
bituminous, anthracite and steam coal) and its sale to external parties. It excludes revenue
from metallurgical coal, coal mined for internal power generation (e.g. in the case ofvertically integrated power producers), intra-company sales of mined thermal coal andrevenue from coal trading (either reported or estimated)•

Revenue% from the extraction, production and refining of Conventional and Unconventional
Oil & Gas. Conventional Oil and Gas includes Arctic onshore/offshore, deep water, shallow© 2024 MSCI Inc. All rights reserved. Please refer to the disclaimer at the end of this document.

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MSCI Climate Paris Aligned Indexes Methodology | July 2024

water and other onshore/offshore. Unconventional Oil and Gas includes oil sands, oil shale(kerogen-rich deposits), shale gas, shale oil, coal seam gas, and coal bed methane.
•

Revenue% from thermal coal based power generation, liquid fuel based power generationand natural gas based power generation.

The Weighted Average Fossil fuels-based Revenue% is calculated as:= ∑(𝑊𝑒𝑖𝑔ℎ𝑡 𝑖𝑛 𝐼𝑛𝑑𝑒𝑥 ∗ 𝐵𝑟𝑜𝑤𝑛 𝑅𝑒𝑣𝑒𝑛𝑢𝑒%)
The Green Revenues to Fossil fuels-based Revenues multiple for either the Parent Index or the Index
is calculated as a ratio of the Weighted Average Green Revenue to the Weighted Average Fossil
fuels-based Revenue as per the formula below:=

𝑊𝑒𝑖𝑔ℎ𝑡𝑒𝑑 𝐴𝑣𝑒𝑟𝑎𝑔𝑒 𝐺𝑟𝑒𝑒𝑛 𝑅𝑒𝑣𝑒𝑛𝑢𝑒%
𝑊𝑒𝑖𝑔ℎ𝑡𝑒𝑑 𝐴𝑣𝑒𝑟𝑎𝑔𝑒 𝐵𝑟𝑜𝑤𝑛 𝑅𝑒𝑣𝑒𝑛𝑢𝑒%

Aggregated Climate Value-at-Risk (VaR)
The Index-level Aggregated Climate Value-at-Risk for any Index is calculated as the sum of the below
3 components:
1. Policy Risk Climate VaR19 (1.5 Degrees): Weighted average of security level 1.5°C
Aggregated Policy Risk Equity Climate VaR (REMIND NGFS Orderly) [%]2. Technology Opportunities Climate VaR (1.5 Degrees): Weighted average of security level
1.5°C Technology Opportunities Equity Climate VaR (REMIND NGFS Orderly) [%]3. Physical Risk Climate VaR (4 Degrees, Aggressive Outcome): Weighted average of security
level Aggregated Physical Risk Equity Climate VaR (Aggressive Outcome) [%]Climate Impact Sectors
NACE20 is the European Union’s classification of economic activities. As per the draft DA, stocks in
the NACE Section codes A, B, C, D, E, F, G, H, L are classified as “High Climate Impact” sector andother stocks are classified ‘Low Climate Impact’ sector. The GICS21 Sub-Industry code for eachsecurity is mapped to the corresponding “Climate Impact Sector” using a mapping. This mapping isconstructed in the following steps:
1. MSCI has published a mapping22 between the NACE classes and GICS Sub-Industry.

19 Starting from the May 2020 Semi-Annual Index Review, the Policy Risk Climate VaR used in the Indexes incorporate Scope 2 andScope 3 emissions as well. The Policy Risk Climate VaR used in the May 2020 Semi-Annual Index Review of the Indexes is as of
September 30, 2020.
20 For further details regarding NACE, please refer to https://ec.europa.eu/eurostat/statistics-

explained/index.php?title=NACE_background
21 For further information regarding GICS, please refer to https://www.msci.com/gics
22 This mapping is available in the Handbook of Climate Transition Benchmarks, Paris-Aligned Benchmark and Benchmarks’ ESG

Disclosures. Please note that the mapping does not reflect changes in the GICS structure that were implemented in the MSCI
indexes on June 1, 2023.

© 2024 MSCI Inc. All rights reserved. Please refer to the disclaimer at the end of this document.

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MSCI Climate Paris Aligned Indexes Methodology | July 2024

2. For each GICS Sub-Industry, the number of NACE classes which fall under the High Climate
Impact Sector (say the number of classes is NH) and Low Climate Impact Sector (say the
number of classes is NL) is identified
3. If all the NACE classes for a given GICS Sub-Industry are identified in the High Climate
Impact Sector (NL = 0), then the GICS Sub-Industry is mapped to the High Climate Impact
Sector. Conversely, if all the NACE classes for a given GICS Sub-Industry are identified in the
Low Climate Impact Sector (NH = 0) then the GICS Sub-Industry is mapped to the Low
Climate Impact Sector
4. In case a GICS Sub-Industry is mapped to some NACE classes in the High Climate Impact
Sector and the others in the Low Climate Impact Sector, the GICS Industry is mapped to the
Climate Impact Sector in the following manner:a. NH >= NL: If the number of NACE classes in the High Climate Impact Sector is at least
equivalent to the number of NACE classes in the Low Climate Impact Sector, theGICS Sub-Industry is mapped to the High Climate Impact Sectorb. NH < NL: If the number of NACE classes in the High Climate Impact Sector is lessthan the number of NACE classes in the Low Climate Impact Sector, the GICS SubIndustry is mapped to the Low Climate Impact Sector
5. Using the GICS Sub-Industry to Climate Impact Sector mapping created in Step 4, and the
security-level GICS Sub-Industry, each security in the Parent Index is classified in either HighClimate Impact Sector or Low Climate Impact© 2024 MSCI Inc. All rights reserved. Please refer to the disclaimer at the end of this document.

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MSCI Climate Paris Aligned Indexes Methodology | July 2024

Appendix IV: Decarbonization Trajectory of Indexes
The Weighted Average GHG Intensity on the Base Date (W1) is used to compute the target Weighted
Average GHG Intensity at any given Semi-Annual Index Review (Wt) as per the below formula.
(𝑡−1)
2

𝑊𝑡 = 𝑊1 ∗ 0.90

Where ‘t’ is the number of Semi-Annual Index Reviews since the Base Date. The table below shows
the Weighted Average GHG Intensity on the Base Date (W1) for each of the regions where theIndexes are constructed:
Index
MSCI ACWI Climate Paris
Aligned Index
MSCI J-Series ACWI Climate
Paris Aligned Index
MSCI ACWI ex USA Climate
Paris Aligned Index
MSCI World Climate Paris
Aligned Index
MSCI World ex USA Climate
Paris Aligned Index
MSCI World ex EMU Climate
Paris Aligned Index
MSCI EM (Emerging Markets)
Climate Paris Aligned Index
MSCI J-Series EM Climate
Paris Aligned Index
MSCI EAFE Climate Paris
Aligned Index
MSCI Europe Climate Paris
Aligned Index
MSCI Europe Small Cap
Climate Paris Aligned Index
MSCI EMU Climate Paris
Aligned Index
MSCI North America Climate
Paris Aligned Index
MSCI USA Climate Paris
Aligned Index
MSCI Canada Climate Paris
Aligned Index
MSCI Japan Climate Paris
Aligned Index

Parent Index
MSCI ACWI Index
MSCI J-Series ACWI
Index
MSCI ACWI ex USA
Index
MSCI World Index
MSCI World ex USA
Index
MSCI World ex EMU
Index
MSCI EM (Emerging
Markets) Index
MSCI J-Series EM
Index
MSCI EAFE Index
MSCI Europe Index
MSCI Europe Small
Cap Index
MSCI EMU Index
MSCI North America
Index
MSCI USA Index
MSCI Canada Index
MSCI Japan Index

Base Date

W1 (tCO2/M$
Enterprise
Value + Cash)

June 01, 2020

231.29June 01, 2020

231.29June 01, 2020

316.55June 01, 2020

227.32June 01, 2020

299.55June 01, 2020
June 01, 2020
June 01, 2020

211.72316.75316.75June 01, 2020
294.75June 01, 2020

270.23June 01, 2020
264.20June 01, 2020

306.37

June 01, 2020
192.33June 01, 2020
June 01, 2020
June 01, 2020

© 2024 MSCI Inc. All rights reserved. Please refer to the disclaimer at the end of this document.

208.81226.52400.80MSCI.COM | PAGE 21 OF 32

MSCI Climate Paris Aligned Indexes Methodology | July 2024

MSCI AC Asia ex Japan
Climate Paris Aligned Index
MSCI AC Asia Pacific ex Japan
Climate Paris Aligned Index
MSCI China Climate Paris
Aligned Index
MSCI China A Climate Paris
Aligned Index
MSCI EM (Emerging Markets)
ex China Climate Paris Aligned
Index

MSCI AC Asia ex
Japan Index
MSCI AC Asia Pacificex Japan Index
MSCI China Index
MSCI China A Index
MSCI EM (Emerging
Markets) ex China
Index

June 01, 2020

302.43June 01, 2020
289.77
June 01, 2020
128.08June 01, 2020
193.44
June 1, 2020

© 2024 MSCI Inc. All rights reserved. Please refer to the disclaimer at the end of this document.

393.56

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MSCI Climate Paris Aligned Indexes Methodology | July 2024

Appendix V: Companies Involved in Nuclear Weapons BusinessCompanies, whose activities meet the following criteria, as determined by MSCI ESG Research, areexcluded from the Index:•

All companies that manufacture nuclear warheads and/or whole nuclear missiles•

All companies that manufacture components that were developed or are significantly
modified for exclusive use in nuclear weapons (warheads and missiles)•

All companies that manufacture or assemble delivery platforms that were developed orsignificantly modified for the exclusive delivery of nuclear weapons.

•

All companies that provide auxiliary services related to nuclear weapons.

•

All companies that manufacture components that were not developed or not significantly
modified for exclusive use in nuclear weapons (warheads and missiles) but can be used innuclear weapons.

•

All companies that manufacture or assemble delivery platforms that were not developed or
not significantly modified for the exclusive delivery of nuclear weapons but have thecapability to deliver nuclear weapons.

All companies that manufacture components for nuclear-exclusive delivery platforms.

© 2024 MSCI Inc. All rights reserved. Please refer to the disclaimer at the end of this document.

MSCI.COM | PAGE 23 OF 32

MSCI Climate Paris Aligned Indexes Methodology | July 2024

Appendix VI: Calculation of Implied Temperature Rise andCumulative Projected Emissions
Implied Temperature Rise (ITR)
The index-level ITR is calculated through an aggregated budget approach. The sum of emissions
overshoot is compared against the sum of emissions budget for the portfolio and converted to adegree of temperature rise using the TCRE approach23.
Index-level ITR = 𝐵𝑎𝑠𝑒 𝑇𝑒𝑚𝑝𝑒𝑟𝑎𝑡𝑢𝑟𝑒 +𝐸𝑚𝑖𝑠𝑠𝑖𝑜𝑛𝑠 𝑂𝑣𝑒𝑟𝑠ℎ𝑜𝑜𝑡)
𝐸𝑉𝐼𝐶
𝐸𝑚𝑖𝑠𝑠𝑖𝑜𝑛𝑠 𝐵𝑢𝑑𝑔𝑒𝑡∑(𝑆𝑒𝑐𝑢𝑟𝑖𝑡𝑦 𝑊𝑒𝑖𝑔ℎ𝑡 𝑖𝑛 𝐼𝑛𝑑𝑒𝑥 ∗)𝐸𝑉𝐼𝐶∑(𝐺𝑙𝑜𝑏𝑎𝑙 𝐵𝑢𝑑𝑔𝑒𝑡 ∗ 𝑇𝐶𝑅𝐸 𝐹𝑎𝑐𝑡𝑜𝑟 ∗ 𝑆𝑒𝑐𝑢𝑟𝑖𝑡𝑦 𝑊𝑒𝑖𝑔ℎ𝑡 𝑖𝑛 𝐼𝑛𝑑𝑒𝑥 ∗

where
-

Base Temperature = 1.5 degrees24, as per the MSCI ITR Model-

Global Budget = remaining total carbon budget available to limit global warming to 1.5
degrees-

Emissions Overshoot [Budget] = company-level cumulative emissions overshoot [budget]
projected until 2050, as per the MSCI ITR Model

Cumulative Projected Emissions
Each company’s cumulative projected emissions overshoot is calculated from four different
estimates, using the formula “Max (Min (O1, O2, O3), O4)”, where:•

O1 = Cumulative Emissions Overshoot published by MSCI ESG Research, as per the MSCIITR Model•

O2 = Cumulative Emissions Overshoot Cap, imputed from assuming a maximum ITR of
10 degrees for the company25•

O3 = Cumulative Emissions Overshoot assuming decarbonization of the company’s
current Scopes 1+2+3 emissions at a constant rate of 10% until 2050•

O4 = Cumulative Emissions Overshoot Floor, imputed from assuming the company will
not decarbonize further once aligned with the minimum ITR of 1.3 degreesError! Bookmark notdefined.

23 The Transient Climate Response to Cumulative Carbon Emissions (TCRE), established by the IPCC, provides a relationship thatlinks each additional unit of emissions emitted beyond the available remaining global carbon budget to degrees of additional
warming.
24 The MSCI ITR Model references a global warming scenario of 1.55°C by the year 2100. Please note that “1.5°C” is generally used

as a shorthand in the MSCI ITR Methodology.
25 The Company-level ITR calculation compares the Cumulative Emissions Overshoot for the company against its Cumulative

Emissions Budget and is converted to a degree of temperature rise using the TCRE approach.

© 2024 MSCI Inc. All rights reserved. Please refer to the disclaimer at the end of this document.

MSCI.COM | PAGE 24 OF 32

MSCI Climate Paris Aligned Indexes Methodology | July 2024

Note that at index level, the company-level cumulative projected emissions overshoot are
aggregated with the company-level projected emissions budget using the Index-level ITR formula
above, to assess Constraint 13 as per Section 2.2.
Missing Data Treatment: Companies with missing data for emissions budget and emissions
overshoot are not considered for the Index Implied Temperature Rise calculation.

© 2024 MSCI Inc. All rights reserved. Please refer to the disclaimer at the end of this document.

MSCI.COM | PAGE 25 OF 32

MSCI Climate Paris Aligned Indexes Methodology | July 2024

Appendix VII: Barra Equity Model Used in the Optimization
The Indexes currently use an optimization setup using the MSCI Barra Global Equity Model for LongTerm Investors (GEMLTL).

© 2024 MSCI Inc. All rights reserved. Please refer to the disclaimer at the end of this document.

MSCI.COM | PAGE 26 OF 32

MSCI Climate Paris Aligned Indexes Methodology | July 2024

Appendix VIII: New Release of Barra® Equity Model or Barra®
Optimizer
A major new release of the relevant Barra Equity Model or Barra Optimizer may replace the former
version within a suitable timeframe.

© 2024 MSCI Inc. All rights reserved. Please refer to the disclaimer at the end of this document.

MSCI.COM | PAGE 27 OF 32

MSCI Climate Paris Aligned Indexes Methodology | July 2024

Appendix IX: Methodology Set
The Indexes are governed by a set of methodology and policy documents (“Methodology Set”),
including the present index methodology document as mentioned below:•

Description of methodology set –https://www.msci.com/index/methodology/latest/ReadMe•

MSCI Corporate Events Methodology –https://www.msci.com/index/methodology/latest/CE•

MSCI Fundamental Data Methodology –https://www.msci.com/index/methodology/latest/FundData•

MSCI Index Calculation Methodology –https://www.msci.com/index/methodology/latest/IndexCalc•

MSCI Index Glossary of Terms –https://www.msci.com/index/methodology/latest/IndexGlossary•

MSCI Index Policies – https://www.msci.com/index/methodology/latest/IndexPolicy•

MSCI Global Industry Classification Standard (GICS) Methodology –https://www.msci.com/index/methodology/latest/GICS•

MSCI Global Investable Market Indexes Methodology –https://www.msci.com/index/methodology/latest/GIMI•

MSCI Global ex Controversial Weapons Indexes Methodology –https://www.msci.com/index/methodology/latest/XCW•

MSCI Global ex Tobacco Involvement Index –https://www.msci.com/index/methodology/latest/ExTobacco•

ESG Factors in Methodology*

The Methodology Set for the Indexes can also be accessed from MSCI’s webpage
https://www.msci.com/index-methodology in the section ‘Search Methodology by Index Name orIndex Code’.
* ‘ESG Factors in Methodology’ contains the list of environmental, social, and governance factors
considered, and how they are applied in the methodology (e.g., selection, weighting or exclusion). It
can be accessed in the Methodology Set as described above© 2024 MSCI Inc. All rights reserved. Please refer to the disclaimer at the end of this document.

MSCI.COM | PAGE 28 OF 32

MSCI Climate Paris Aligned Indexes Methodology | July 2024

Appendix X: Changes to this Document
The following sections have been updated effective June 01, 2022:•

Section 3.3: Added footnotes for the constraints that were relaxed during May 2022 SAIR.

The following sections have been updated effective December 01, 2022:•

Section 1: Updated the references to the delegated acts.

•

Section 3.3: Added footnotes for the constraints that were relaxed during November 2022
SAIR.

The following sections have been modified as of February 2023:•

Methodology book was updated to reflect the transition of the MSCI Global Investable
Market Indexes (GIMI) to Quarterly Comprehensive Index Reviews.

•

All references to “Semi-Annual Index Reviews” and “Quarterly Index Reviews” of the MSCIGIMI were replaced with “Index Reviews”•

Section 3.3: Added footnote to clarify the constituent active weight constraint applied to the
MSCI Canada Climate Paris Aligned Index.

The following sections have been modified as of May 2023:•

Methodology book was updated to reflect the change in the target for Aggregated Climate
Value -At-Risk from greater than or equal to 0% to greater than or equal to -5%.

•

The definition of Companies Setting Targets was expanded to include any company which
has received Science Based Targets from the Science Based Targets Initiative (SBTi)•

The calculation of aggregate weight of ‘Companies Setting Target’ will only include
companies which are not excluded from the index, as per the exclusion criteria described in
section 3.2 of the methodology document.

•

Section 2: The reference to the Applicable Universe was removed to simplify the Index
Construction methodology.

•

The ESG Research Product descriptions were moved from section 2 to section 4

The following sections have been modified as of November 2023:•

The ESG Screening criteria was updated in Section 2.1 to include civilian firearms andnuclear weapons.

•

The treatment of companies with ratings and research not available from MSCI ESG
Research was added to Section 2.4•

The Climate Value-at-Risk models and scenarios used were updated in Appendix II and III.

•The references on NACE and GICS mapping was updated in Appendix III.

•The calculation of GHG Intensity was updated to reflect the missing data treatment for
Scope 1+2. Scope 3 and EVIC in Appendix III.

•The calculation of Potential Emissions was clarified in Appendix III.

© 2024 MSCI Inc. All rights reserved. Please refer to the disclaimer at the end of this document.

MSCI.COM | PAGE 29 OF 32

MSCI Climate Paris Aligned Indexes Methodology | July 2024•

The detailed description for the Nuclear Weapons screening criteria was added in Appendix
V.

The following sections have been modified as of January 2024:•

Appendix 4: Added decarbonization trajectory of additional Indexes.

•

Appendix 8: Added details on the Methodology Set for the Indexes.

The following sections have been modified as of May 2024:•

Section 2.2: Added Implied Temperature Rise constraints.

•

Appendix I: Updated language and the Low Carbon Transition Categories and Scores table•

Appendix IV: Additional Index added in the table•

Appendix III: Updated language for Companies Setting Targets•

Appendix VI: Added details on the calculation of Implied Temperature Rise and Cumulative
Projected Emissions

The following sections have been modified as of July 2024•

Appendix VI: Added a new footnote to clarify the base temperature used by the MSCI ITR
methodology© 2024 MSCI Inc. All rights reserved. Please refer to the disclaimer at the end of this document.

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MSCI Climate Paris Aligned Indexes Methodology | July 2024

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MSCI Climate Paris Aligned Indexes Methodology | July 2024

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