Index Methodology

MSCI ACWI
Sustainable Impact
Index Methodology
August 2024

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MSCI ACWI Sustainable Impact Index Methodology | August 2024

Contents
1.

Introduction .......................................................................................................... 32.

Constructing the Index .......................................................................................... 4

3.

4.

2.1

Defining the Parent Index ........................................................................................ 4

2.2

Security Selection..................................................................................................... 4

2.2.1

Sustainable Impact Sales Percentage ............................................................ 4

2.2.2

Minimum ESG Standards ................................................................................. 5

2.2.3

Minimum Number of Issuers........................................................................... 5

2.3

Weighting Scheme ................................................................................................... 6

2.4

Treatment of Unrated Companies .......................................................................... 6

Maintaining the Index ........................................................................................... 7
3.1

Quarterly Index Reviews .......................................................................................... 7

3.2

Minimum Number of Issuers .................................................................................. 7

3.3

Monthly Updates on Basis of Controversies ......................................................... 7

3.4

Ongoing Event Related Changes ............................................................................ 7

MSCI ESG Research .............................................................................................. 9
4.1

MSCI ESG Ratings .................................................................................................... 9

4.2

MSCI ESG Controversies ......................................................................................... 9

4.3

MSCI ESG Business Involvement Screening Research ......................................... 9

4.4

MSCI Impact Solutions: Sustainable Impact Metrics ........................................... 9

4.4.1

MSCI Sustainable Impact Metrics Categories ............................................. 10

Appendix I: Definition of Controversial Activities ....................................................... 20
Appendix II: Methodology Set .................................................................................... 22
Appendix III: Changes to this Document..................................................................... 23© 2024 MSCI Inc. All rights reserved. Please refer to the disclaimer at the end of this document.

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MSCI ACWI Sustainable Impact Index Methodology | August 2024

1.

Introduction
The MSCI ACWI Sustainable Impact Index (“Index”) is designed to identify listed companies whose
core business addresses at least one of the world’s social and environmental challenges, as definedby the United Nations Sustainable Development Goals (UN SDGs). The Index selects companies that
contribute to the SDGs through the provision of products and services that can help address someof these challenges and meet minimum ESG standards for their operations1.

1 The Index is governed by a set of methodology and policy documents (“Methodology Set”), including the present index

methodology document. Please refer to Appendix II for more details.

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MSCI ACWI Sustainable Impact Index Methodology | August 20242.

Constructing the Index
The Index uses company ratings and research provided by MSCI ESG Research2 for the Index
construction.
The Index is constructed using the following steps:•

Defining the Parent Index•

Security Selection•

Weighting Scheme

The steps mentioned above are defined in detail in the subsequent sections.

2.1

Defining the Parent Index
The Parent Index serves as the universe of eligible securities for the Index. The Index is constructedon the MSCI ACWI Index (“Parent Index”).

2.2

Security Selection
To be eligible for inclusion in the Index, companies must meet all of the below criteria:

2.2.1 Sustainable Impact Sales Percentage
Companies must generate cumulatively at least 50% sales from one or more of the Sustainable
Impact Metrics categories as defined by MSCI Sustainable Impact Metrics.
1. Alternative energy
2. Energy efficiency
3. Green building
4. Sustainable water
5. Pollution prevention and control
6. Sustainable Agriculture
7. Nutrition
8. Major disease treatments
9. Sanitation
10. Affordable Real Estate
11. SME Finance
12. Education

2 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.

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MSCI ACWI Sustainable Impact Index Methodology | August 2024

13. Connectivity – Digital divide

2.2.2 Minimum ESG Standards
Companies must maintain all of the following minimum ESG standards:
1. MSCI ESG Controversies: Companies must not have faced ESG controversies as
defined by an MSCI ESG Controversy Score of 0, 1 and 2 respectively
2. MSCI ESG Ratings: Companies must have an MSCI ESG Rating greater or equal to BB
3. Tobacco: Companies must not generate more than 10% sales from tobacco
production
4. Alcohol: Companies must not generate more than 10% sales from alcohol
production
5. Predatory lending: Companies must not be involved in predatory lending practices.
MSCI ESG Research defines involvement in lending practices as those companies
that provide products and services associated with certain controversial lending
activities and those companies that have been subject of alleged lending
controversies
6. Controversial Weapons: Companies must not be involved in manufacture of Cluster
munitions, Landmines, Blinding lasers, White phosphorus, Non-detectible fragments,
Depleted uranium and Biological & chemical weapons
7. Nuclear Weapons: Companies must not be involved in manufacture of Nuclear
weapons warheads & missiles, Intended use components, Nuclear exclusive delivery
platforms and Nuclear weapons support services
8. Conventional Weapons : Companies must not generate more than 5% fromconventional weapons and systems
9. Civilian Firearms: Companies must not be involved in manufacture of semiautomatic civilian firearms or should not generate more than 5% revenue fromcivilian firearms production
Definition of above mentioned controversial activities are available in Appendix I.

2.2.3 Minimum Number of Issuers
The Index is constructed with a minimum of 30 issuers. All securities from the issuer whose
Sustainable Impact Sales Percentage is greater than 50% and meet minimum ESG standards as per
2.2.2 are included in the Index.
If the number of issuers selected is less than 30, remaining issuers are selected from those issuersthat meet the minimum ESG Standards in decreasing order of Sustainable Impact Sales Percentage.
If multiple eligible issuers have the same Sustainable Impact Sales Percentage, then the issuer
having a higher weight in the Parent Index is given a higher rank.

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MSCI ACWI Sustainable Impact Index Methodology | August 2024

2.3

Weighting Scheme
Securities are weighted on the basis of sustainable impact dollar sales, which are adjusted to reflect
the ratio of Parent Index market capitalization of security to total market capitalization of issuer aswell as the ratio of number of shares of security to total number of shares of issuer. Sustainable
impact dollar sales are computed using product of the trailing 12-month sales and the cumulative
percentage of sales from the sustainable impact categories.
𝑆𝑒𝑐𝑢𝑟𝑖𝑡𝑦 𝑊𝑒𝑖𝑔ℎ𝑡 = (𝑆𝑢𝑠𝑡𝑎𝑖𝑛𝑎𝑏𝑙𝑒 𝑖𝑚𝑝𝑎𝑐𝑡 𝑠𝑎𝑙𝑒𝑠 % × 𝑇𝑟𝑎𝑖𝑙𝑖𝑛𝑔 12 𝑚𝑜𝑛𝑡ℎ 𝑠𝑎𝑙𝑒𝑠 ××

𝑃𝑎𝑟𝑒𝑛𝑡 𝐼𝑛𝑑𝑒𝑥 𝑚𝑎𝑟𝑘𝑒𝑡 𝑐𝑎𝑝𝑖𝑡𝑎𝑙𝑖𝑧𝑎𝑡𝑖𝑜𝑛 𝑜𝑓 𝑠𝑒𝑐𝑢𝑟𝑖𝑡𝑦
𝑇𝑜𝑡𝑎𝑙 𝑚𝑎𝑟𝑘𝑒𝑡 𝑐𝑎𝑝𝑖𝑡𝑎𝑙𝑖𝑧𝑎𝑡𝑖𝑜𝑛 𝑜𝑓 𝑖𝑠𝑠𝑢𝑒𝑟

𝑁𝑢𝑚𝑏𝑒𝑟 𝑜𝑓 𝑠ℎ𝑎𝑟𝑒𝑠 𝑜𝑓 𝑠𝑒𝑐𝑢𝑟𝑖𝑡𝑦)
𝑇𝑜𝑡𝑎𝑙 𝑛𝑢𝑚𝑏𝑒𝑟 𝑜𝑓 𝑠ℎ𝑎𝑟𝑒𝑠 𝑜𝑓 𝑖𝑠𝑠𝑢𝑒𝑟

The above weights are then normalized to 100%.
Additionally, the maximum weight of any sector in the Index is capped at 20%, while the maximum
weight of any issuer is capped at 4%. After applying both sector and issuer capping, excess weights
are distributed among remaining sectors in proportion of their existing sector weights in the Index.
Within sectors that are allocated excess weights, the weights are distributed among constituents
within the sector while meeting the issuer capping requirements.
Notes:•For Financials companies, where trailing 12-month sales is not available, net interest income
would be used to calculate security weight. For companies where net interest income isunavailable, earnings (net income from the continuing operations) would be used.
For more details on the MSCI definition of sales and earnings, please refer to MSCI Fundamental
Data methodology at https://www.msci.com/index-methodology.

2.4•

The security’s Parent Index market capitalization is the security free float-adjusted market
capitalization times the security Index Inclusion Factor (IIF). An IIF may be applied in the Parent
Index to include a security at a fraction of its free float-adjusted market capitalization, forexample in the case of multiple step inclusion of securities.

•

The issuer’s total market capitalization is the sum of the full market capitalization for all theissuer’s securities included in the Parent Index.

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 Index.
•

MSCI ESG Ratings•

MSCI ESG Controversies•

MSCI Sustainable Impact Metrics•

MSCI Business Involvement Screening Research (BISR)© 2024 MSCI Inc. All rights reserved. Please refer to the disclaimer at the end of this document.

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MSCI ACWI Sustainable Impact Index Methodology | August 2024

3.

Maintaining the Index

3.1

Quarterly Index Reviews
The Index is reviewed on a quarterly basis to coincide with the Index Reviews of the Parent Index.
The latest reported Sustainable Impact Sales percentage data would be used for the Index Review.
Companies are evaluated for index eligibility as per security section rules defined in section 2.2.
Existing constituents are retained in the index as long as they meet minimum ESG standards andtheir Sustainable Impact Sales percentage does not fall below 40%. Deletions from the Parent Index
at the time of the Quarterly Index Reviews are simultaneously reflected in the Index.
Sector weights would be capped at 20% and issuer weights would be capped at 4% at each Quarterly
Index Review.
The pro forma MSCI ACWI Sustainable Impact Index is generally announced nine business days
before the effective date.
In general, MSCI uses MSCI ESG Research data32(including MSCI ESG Ratings, MSCI ESG
Controversies, MSCI ESG Business Involvement Screening Research and MSCI Impact Solutions) asof the end of the month preceding the Index Reviews. For some securities, such data may not be
published by MSCI ESG Research by the end of the month preceding the Index Review. For suchsecurities, MSCI will use ESG data published after the end of month, when available.

3.2

Minimum Number of Issuers
At each Quarterly Index Review, the Index is constructed with a minimum of 30 issuers.
If the number of issuers selected at a Quarterly Index Review as per the index rebalancing rules
mentioned in section 3.1 is less than 30, remaining issuers are selected from those issuers thatmeet the minimum ESG Standards in decreasing order of Sustainable Impact Sales Percentage. If
multiple eligible issuers have the same Sustainable Impact Sales Percentage, then the issuer having
a higher weight in the Parent Index is given a higher rank.

3.3

Monthly Updates on Basis of Controversies
Index constituents would be reviewed on a monthly basis for the involvement in ESG controversies.
Existing constituents would be deleted if they face controversies as defined by ESG controversy
score of 0, 1 and 24. The pro forma index is generally announced nine business days before the firstbusiness day of the month.

3.4

Ongoing Event Related Changes
The general treatment of corporate events in the Index 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

2

3 See section 4 for details of data sourced from MSCI ESG Research used in the Index.

4 Existing constituents not assessed by MSCI ESG Research on MSCI ESG Controversies are not considered for deletion.

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MSCI ACWI Sustainable Impact Index Methodology | August 2024

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 MSCI ACWI Sustainable Impact Index, the changes made to the Parent Indexduring 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.
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/index/methodology/latest/CE© 2024 MSCI Inc. All rights reserved. Please refer to the disclaimer at the end of this document.

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MSCI ACWI Sustainable Impact Index Methodology | August 2024

4.

MSCI ESG Research
The Index is a product of MSCI Inc. that utilizes information such as company ratings and research
produced and provided by MSCI ESG Research LLC (MSCI ESG Research), a subsidiary of MSCI Inc.
In particular, the Index uses the following MSCI ESG Research products: MSCI ESG Ratings, MSCIESG Controversies, MSCI ESG Business Involvement Screening Research and MSCI Impact
Solutions. MSCI Indexes are administered by MSCI Limited and MSCI Deutschland GmbH.

4.1

MSCI ESG Ratings
MSCI ESG Ratings aim to measure entities’ management of environmental, social and governancerisks and opportunities. MSCI ESG Ratings use a weighted average key issue calculation that isnormalized by industry to arrive at an industry-adjusted ESG score (0-10), which is then translated toa seven-point scale from ‘AAA’ to ‘CCC’, indicating how an entity manages relevant key issues
relative to industry peers.
The MSCI ESG Ratings methodology can be found at: https://www.msci.com/legal/disclosures/esgdisclosures.

4.2

MSCI ESG Controversies
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.

4.3

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.
For more details on MSCI ESG Business Involvement Screening Research, please refer tohttps://www.msci.com/legal/disclosures/esg-disclosures.

4.4

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.
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MSCI ACWI Sustainable Impact Index Methodology | August 2024

Pillar

ThemesEnvironmental
ImpactClimate Change

Categories

Natural CapitalSocial Impact

Basic needs

1.

Alternative energy

2.

Energy efficiency

3.

Green building

4.

Sustainable water

5.

Pollution prevention and control

6.

Sustainable agriculture

7.

Nutrition

8.

Major disease treatments

9.

Sanitation

10. Affordable real estate
Empowerment

11. SME finance
12. Education
13. Connectivity - Digital divide

Under each of the actionable social and environmental 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

4.4.1 MSCI Sustainable Impact Metrics Categories

Alternative Energy
This category includes 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.

Inclusions•

Renewable energy sources include wind, solar, geothermal, biomass, small scale hydro (25 MW),waste-to-energy and wave tidal.

•

Alternative energy sources include biodiesel, biogas and cellulosic ethanol.

•

Other alternative energy technologies include batteries & energy storage devices for alternative
energy and fuel cells.

Examples of and services typically included under the Alternative Energy category

Products

Services••••

Solar panels
Solar inverters
Wind mills

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

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MSCI ACWI Sustainable Impact Index Methodology | August 2024

•
•
•
•
•

Wind Towers
BiofuelGeothermal turbines
Tidal Turbines
Batteries supporting renewableenergy••••Electricity generated fromphotovoltaic power plants
Construction of biomass plants
Transmission and distribution ofrenewable energy
Construction of waste incineration
plants that generate electricity

Source: MSCI ESG Research

Energy Efficiency
This category includes products and services that support the maximization of productivity in labor,transportation, power and domestic applications with minimal energy consumption to ensure
universal access to affordable, reliable and modern energy services.

Inclusions•

Products and services that improve business and industrial operations and IT systems include
energy-efficient industrial automation and IT optimization services and infrastructure.

•

Technologies and systems that increase the efficiency of power usage include demand-side
management, smart grid, LED and CFL lighting, insulation, superconductors and batteries &energy storage devices for other sustainable applications.

•

Products that focuses on help reduce fuel consumption and improve transport infrastructure
include hybrid/electric vehicles, charging stations for hybrid/electric vehicles and improved
traffic systems.

Examples of products and services typically included under the Energy Efficiency category

Products

Services

•
•
•
•
•

•
•
•
•

Building automation
LED lightbulbs
Electric and hybrid vehicle units
Batteries for hybrid/electric vehicles
Solar and geothermal powered
water heaters•
Insulation building materials•
Infrastructure as a Service (IaaS)•
Platform as a Service (PaaS)
Source: MSCI ESG Research••

LED streetlight installation services
Railway installation and construction
Smart grid services
Installation of insulating materials
for homes
Telematics services
Provider of electric/hybrid car rental
services.

Green BuildingThis includes design, construction, redevelopment, retrofitting, or acquisition of green-certified
properties to promote mechanisms for raising capacity for effective climate change mitigation andadaptation.

Inclusions•

Ownership of properties, facilities and buildings designed and built according to environmental
or sustainable standards and certified by third parties.

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MSCI ACWI Sustainable Impact Index Methodology | August 2024•

Construction of green or sustainable properties, facilities or buildings, which may also include
retrofitting or redevelopment of non-certified properties to comply with green building standards.

•

Provision of consultancy services that aid in the green building certification of properties,
facilities, or building.

Examples of green building certifications

Green building certifications
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•

LEED (United States)
BREEAM (United Kingdom)
Green Star (Australia)
Green Mark (Singapore)
Energy Star (United States)
Pearl Rating System for Estidama (United Arab Emirates)
MINERGIE (Switzerland)
Building-Housing Energy-Efficiency Labeling System (Japan)
BEAM (Hong Kong)
BEE (India)
BOMA (Canada)
CALENER (Spain)
CASBEE (Japan)
China Tree Star (China)
Development Bank Japan (Japan)
DGNB (Germany)
Green Building Index (Malaysia)
Green Garage Certification (United States)
Green Globe (United States)
Green Globes (Canada)
Green Key (Denmark)Green Standard (Russia)
Green Star (Australia)
Green Star SA (South Africa)
GRIHA (India)
HQE (France)
Homestar (New Zealand)
IGBC (India)
Living Building Challenge (United States)
NABERS (Australia)
Nordic Ecolabelling (Denmark, Finland, Iceland, Norway, Sweden)
Qualiverde (Brazil)
Superior Energy Performance (United States)
Built Green (United States)
GreenPoint (United States)• Trakhees (United Arab Emirates))
Source: MSCI ESG Research

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

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MSCI ACWI Sustainable Impact Index Methodology | August 2024

Inclusions•

Products and projects that aim to address water supply and access include water infrastructure
projects and distribution, water recycling technologies and smart metering devices.

•

Technologies and services that use alternative water sources include desalination and rainwater
harvesting systems.

•

Products that improve the water efficiency and drought resiliency of agricultural operations
include drought resistant seeds.

Examples of products and services typically included under the Sustainable Water category

Products

Services•••

Specialized wastewater treatment
chemicals•
Smart metering devices•
Drought resistant seeds•
Waste water filters•
Desalination equipment
Source: MSCI ESG Research••

Desalination services
Maintenance of current water
distribution infrastructure
Construction of wastewater plants
Construction of stormwater systems

Pollution Prevention & Control
This category includes 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 and organic pollutants in various
environmental media to significantly address pollution in all levels and its negative effects.

Inclusions•

Technologies and systems that aim to reduce pollution include conventional pollution control
devices.

•

Services and infrastructure projects that address the growing waste problem and environmental
pollutants include recycling, environmental remediation and waste treatment.

•

Sustainable alternative materials for buildings and homes include low toxicity/VOC products.

Examples of products and services typically included under the Pollution Prevention & Control
category

Products

Services

•
•
•

•
•
•
•

•

Diesel exhaust fluid
Selective catalytic reduction units
Low VOC paints and coating
materials
Recycling units•

Remediation services
Recycling services
Hazardous waste treatment
Construction of carbon adsorbers
and electrostatic precipitators
Oil spill removal

Source: MSCI ESG Research

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

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MSCI ACWI Sustainable Impact Index Methodology | August 2024

This category currently includes revenues from forest and agricultural products that meetenvironmental and organic certification requirements to address significantly biodiversity loss,
pollution, land disturbance, and water overuse.

Inclusions
Production of agricultural and forestry products using certified sustainable or organic practices.
Examples of Sustainable Agriculture certifications

Sustainable agriculture certifications
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•

Bonsucro
Rountable for Responsible Soy
Better Cotton Initiative
Forest Stewardship Council
Programme for the Endorsement of Forest Certification
Sustainable Forest Initiative
UTZ
Rainforest AllianceGood Agricultural Practices
Aqua Stewardship Council
United Stated Department of Agriculture Organic
National Association for Sustainable Agriculture Australia Organic
Australian Forestry Standard
Genesis GAPBest Aquaculture PracticeGreen Licenses
India Organic Certified
Malaysian Good Agricultural Practices

Nutrition
This category has been identified as a category deriving positive impact with the rationale that oneof the ways in which companies can play a key role in addressing concerns of basic needs isthrough the provision of basic nutritious food products.
The aim of this category is to identify the percentage of revenues generated from the manufactureand sale of basic food products. This category includes products classified under the “basic
products” category, as defined by Choices International 4, a science-based multi-stakeholder
organization focused on nutrition.
3

According to Choices International, basic products refer to those products that contribute to thedaily intake of essential nutrients while non basic are not needed to fulfill daily requirements. To
qualify as “basic”, food products must also adhere to requirements laid out by Choices International
regarding acceptable amounts of added sugars, salt, etc.
In 2019, Choices International provided a more specific guidance to qualifying nutritional content
that includes sugar, sodium, and saturated fat content restrictions. These new criteria are now
considered in addition to "basic" food definitions in the estimation of revenue for Nutrition category.

4 For more information on Choices International refer to http://www.choicesprogramme.org/public/criteria/international-productcriteria-2015-def.pdf
3© 2024 MSCI Inc. All rights reserved. Please refer to the disclaimer at the end of this document.

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MSCI ACWI Sustainable Impact Index Methodology | August 2024

Inclusions
Products found within basic product groups contribute significantly to the daily intakes of essential
nutrients.
Examples of basic food products typically included under the Nutrition category

Basic food products•
Fruits and vegetables•
Beans and legumes•
Sources of carbohydrates•
Meat, fish, poultry, eggs, and meat substitutes•
Dairy products•
Oils, fats and fat-containing spreads
•
Nuts
•
Water
•
Main meals such as salads, sandwiches, pizza, pasta/ rice/ noodles, etc.
Source: Choices International, MSCI ESG Research

Major Disease Treatments
Major Disease Treatments has been identified as a category deriving positive impact with therationale that one of the ways in which companies can play a key role in addressing concerns ofhealth is through the provision of products used to treat world’s major diseases.
The aim of this category is to identify the percentage of revenues generated from the manufactureand sale of products used to treat the world’s major diseases as defined by the World HealthOrganization (WHO).

Inclusions
Major diseases include those diseases with the highest daily adjusted life year (DALY)5 , collectively
accounting for approximately 50% of global disease mortality, as well as orphan diseases6 andneglected tropical diseases7 , which are underserved by research and treatment options.
4

5

6

Examples of major diseases

Major diseases••••

Ischaemic heartdiseaseLower respiratory
infections
StrokePreterm birthComplications

Neglected diseases
•
•
•
•
•

Buruli ulcer
Chagas disease
Dengue andChikungunya
Dracunculiasis (guineaworm disease)
Echinococcosis

Orphan diseases
•
•
•
•
•

Gaucher's disease
Pompe disease
Hodgkin's
lymphoma
Multiple myeloma
Fabry's disease

5 The WHO DALY represents the number of years of life lost due to poor health/disability and earlier death. The sum of these DALYs
across the population represents the global burden of disease. More information on DALY can be found here:
http://www.who.int/healthinfo/global_burden_disease/metrics_daly/en
4

6 Orphan drugs refer to treatments for orphan diseases which affect about 1 in 1500 people, as defined by the FDA.
5

http://www.fda.gov/ForIndustry/DevelopingProductsforRareDiseasesConditions/HowtoapplyforOrphanProductDesignation/default.
htm
7 More information on neglected diseases can be found here: http://www.who.int/neglected_diseases/diseases/en/
6© 2024 MSCI Inc. All rights reserved. Please refer to the disclaimer at the end of this document.

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MSCI ACWI Sustainable Impact Index Methodology | August 2024••

Diarrheal diseases
Chronic obstructive
pulmonary disease•
Diabetes mellitus•
HIV/AIDS•
Tuberculosis•
Depressive
disorders•Cirrhosis of theliver•
Trachea, bronchus,lung cancers•
Malaria•
Kidney diseases•
Neonatal sepsis
and infections•
Endocrine, blood,
immune disorders•
Alzheimer disease
and other
dementias•
Asthma•Migraine•
Anxiety disorders•
Meningitis•
Liver cancer•
Hepatitis B and C
Source: WHO, MSCI ESG Research

•
•
•
•
•
•

•
•
•
•
•
•
•
•
•

Foodborne
trematodiases
Human African
trypanosomiasis(sleeping sickness)
Leishmaniasis
Leprosy (Hansen'sdisease)Lymphatic filariasis
Mycetoma,
chromoblastomycosis
and other deep
mycosesOnchocerciasis (river
blindness)
RabiesScabies and otherectoparasites
Schistosomiasis
Soil-transmitted
helminthiases
Snakebite envenoming
Taeniasis/Cysticercosis
Trachoma
Yaws (Endemic
treponematoses)••

Thrombocytopenia
purpuraWilson's disease

Products for the treatment of the major diseases of the world include drugs used for the treatmentof these diseases and healthcare equipment used to help diagnose or treat patients with suchdiseases.
Examples of healthcare equipment for the treatment of major diseases

Healthcare equipment•
Dialysis machine•
Cardiopulmonary equipment such as heart-lung machine, extracorporeal life support
•
Stent
•
Blood pressure monitor•
ECG machine•
Insulin pump
Source: MSCI ESG Research

Sanitation
Sanitation has been identified as a category deriving positive impact with the rationale that one of
the ways in which companies can play a key role in addressing concerns of basic hygiene andsanitary needs is through the provision of sanitation products.
The aim of this category is to identify the percentage of revenues generated from the manufactureand sale of basic sanitation products.

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

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MSCI ACWI Sustainable Impact Index Methodology | August 2024

Personal hygiene products for basic hygienic needs and not simply for beauty/cosmetic applications
or luxurious use.
Examples of basic sanitary products typically included under the Sanitation category

Basic sanitary products
•
•
•
•
•
•
•
•
•
•
•

Soaps and shampoos
Oral care products such as toothbrush, toothpaste and toothpowder
Sanitary napkins, toilet paper and tissues
Adult or infant diapers
Surface cleaners
Laundry and dishwashing detergent
Toilets
Washbasins
Faucets such as taps, shower heads, etc.
Insect repellent for home use
Water purifier

Affordable Real Estate
As per the United Nations Development Programme, making cities sustainable means creating
career and business opportunities, safe and affordable housing, and building resilient societies andeconomies.
Affordable Real Estate has been identified as a category deriving positive impact with the rationalethat one of the ways in which companies can play a key role in addressing concerns of sustainablecommunities is through the provision of affordably priced real estate.
The aim of this category is to identify the percentage of revenues generated from the lease or sale ofaffordable commercial and residential real estate properties.

Inclusions•

Affordable residential properties take the form of units devoted to being managed under social
rent, homes affordably priced for the low-income segment, and residences for the elderly. It also
includes affordable student housing.

•

Affordable commercial properties include commercial spaces for Small and Medium Enterprises(SMEs) as these are typically found to be sold/ leased at a lower price point.

SME Finance
SME Finance has been identified as a category deriving positive impact with the rationale that one of
the ways in which companies can play a key role in empowering underserved populations is throughthe provision of loans to small and medium sized enterprises.
The aim of this category is to identify the percentage of revenues generated from providing loans tomicro, small and medium-sized enterprises.

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

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MSCI ACWI Sustainable Impact Index Methodology | August 2024

Direct lending to micro, small and medium-sized enterprises (MSMEs).

Education
Education has been identified as a category deriving positive impact with the rationale that one of
the ways in which companies can play a key role in empowering underserved populations is throughthe provision of education products and services.
The aim of this category is to identify the percentage of revenues generated from education-related
products and services used in a school environment.

Inclusions
Products and services that ensure quality education at all levels.
Examples of products and services typically included under the Education category

Educational products and services
•
•
•
•
•
•

Educational books
Schools and institutes
Professional courses and trainings that entail a certification
Products and services in the domain of kindergarten, primary, secondary,undergraduate or postgraduate education
Provider of tutoring services to students appearing for undergraduate or postgraduate
examinations
Provider of tutoring services, study material for non-degree exams such as TOEFL,
GMAT, GRE, English language skills or other professional exams such as CFA.

Connectivity
This category currently includes companies that support telecommunication networks development
to address the need for bridging digital divide and empowerment of underserved communities
through better connectivity to information and communication. This new category currently
includes access to internet communication but may be expanded in the future to address othertypes of infrastructure that enable societal connectivity.
The aim of this category is to identify the percentage of revenues generated from identified products
and services that provide or support internet access for people in the Least Developed Countries(LDCs) as defined by the United Nations.

Inclusions
Products and services that help reduce digital divide in LDCs through development oftelecommunications infrastructure.
Examples of products and services typically included under the Connectivity category

Connectivity products and services•

Internet service providers (ISPs): cable internet, DSL (digital subscriber line), fiberinternet, BPL (broadband over power lines), satellite internet access, mobile
broadband (3G+), WiMAX, and wireless internet service providers© 2024 MSCI Inc. All rights reserved. Please refer to the disclaimer at the end of this document.

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MSCI ACWI Sustainable Impact Index Methodology | August 2024•••

Telecommunication equipment provided to internet service providers includingtransceiver stations, transmission lines, multiplexers, digital switches, communication
satellites, etc.
Repair services for qualifying infrastructure/ service
Ethernet spine switches© 2024 MSCI Inc. All rights reserved. Please refer to the disclaimer at the end of this document.

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MSCI ACWI Sustainable Impact Index Methodology | August 2024

Appendix I: Definition of Controversial Activities
Predatory lending
Predatory lending is defined as the “imposition of unfair and abusive loan terms on borrowers” byengaging in deception, fraud, or manipulation through aggressive sales tactics, and taking unfair
advantage of a borrower’s lack of understanding about complicated transactions.
Examples of products and services associated with predatory lending include payday loans,installment loans, pawn loans, title loans, tax refund anticipation loans, doorstep loans, and checkcashing.
Defense & Weapons:
The various types of involvement in defense and weapons are defined as below:

Types ofWeaponDefinition

Cluster Munitions

Companies with any industry tie to cluster munitions.

Landmine

Companies that have any industry tie to the manufacture oflandmines except for Safety, which is a positive indicator.

Blinding Lasers
Weapons

Companies that manufacture weapons utilizing laser
technology that causes permanent blindness to the target.

Incendiary
Weapons

Companies that manufacture incendiary weapons using white
phosphorus.

Non-Detectable
Fragments

Companies that manufacture weapons that use nondetectable fragments to inflict injury to targets.

Depleted Uranium

Companies involved in the production of depleted uranium(DU) weapons, ammunition, and armor, including companies
that manufacture armor piercing, fin stabilized, discarding
sabot tracing rounds (APFSDS-T); Kinetic Energy Missiles
made with DU penetrators; and DU-enhanced armor, including
composite tank armor.

BiologicalChemicalComponents

Companies that manufacture key biological and chemical
weapons components.

BiologicalChemical
Systems

Companies that manufacture biological and chemical
weapons, including weapons that use pathogens such as
viruses, bacteria, and disease-causing biological agents,
toxins, or chemical substances that have toxic properties tokill, injure, or incapacitate.

Nuclear Weapons- Warheads &MissilesCompanies that manufacture nuclear warheads and/or whole
nuclear missiles. Includes assembly and integration of
warhead and missile body. INCLUDES companies with
contracts to operate/manage government-owned facilities
that manufacture nuclear warheads and missiles.

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

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MSCI ACWI Sustainable Impact Index Methodology | August 2024

Types ofWeaponDefinition

Nuclear Weapons- Intended-use
Components

Companies that manufacture components which weredeveloped or are significantly modified for exclusive use innuclear weapons (warheads and missiles). INCLUDES
companies with contracts to operate/manage governmentowned facilities that manufacture components for nuclear
warheads and missiles, such as fissile materials, non-nuclear
components, explosives, triggers and detonators, etc.

Nuclear Weapons– Exclusive
Delivery
Platforms

Companies that manufacture or assemble delivery platforms
that were developed or significantly modified for the exclusive
delivery of nuclear weapons.

Nuclear Weapons– Support
Services

Companies that provide auxiliary services related to nuclear
weapons, such as repairing and maintaining nuclear weapons,
providing overhaul and upgrade services (including
engineering), stockpiling and stewardship, R&D work, testingand simulations, etc. INCLUDES companies with contracts tooperate/manage government-owned facilities that conduct
R&D, testing, simulations, and other essential sciences on
nuclear weapons.

Civilian Firearms– Semi –Automatic
ProducerCompanies that manufacture firearms which automaticallyeject the cartridge case of a fired shot and load the next
cartridge from the magazine allowing the gun user to fire one
round of ammunition for every pull of the trigger.
The research specifically targets semi-automatic firearms thatpossess cosmetic, ergonomic, or construction features of anassault rifle. For additional detail on specific features
included, please refer to MSCI ESG Research’s Firearms
Screen methodology.
The research does not cover companies that cater to themilitary, government, and law enforcement markets.

Conventional
Weapons - Total
Involvement

The recent-year percent of revenue, or maximum estimatedpercent, a company has derived from weapons systems,
components, and support systems and services.

Civilian Firearms Producer

The recent-year percent of revenue, or maximum estimatedpercent, a company has derived from manufacturing firearms
and small arms ammunition for civilian markets.

For more details on controversial activities, please refer to the MSCI ESG Research’s BusinessInvolvement Screening Research http://www.msci.com/resources/factsheets/MSCI_ESG_BISR.pdf© 2024 MSCI Inc. All rights reserved. Please refer to the disclaimer at the end of this document.

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MSCI ACWI Sustainable Impact Index Methodology | August 2024

Appendix II: Methodology Set
The Index is 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•

ESG Factors In Methodology*

The Methodology Set for the Index 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.

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MSCI ACWI Sustainable Impact Index Methodology | August 2024

Appendix III: Changes to this Document
The following sections have been modified as of May 2016:
Section 2.2: MSCI ESG Controversies•

Changes made to bring alignment with MSCI ESG Sustainable Impact Metrics

Section 2.4: MSCI ESG Sustainable Impact Metrics•

Changes made to bring alignment with MSCI ESG Sustainable Impact Metrics

Section 3.2.1: Sustainable Impact Sales Percentage•

Changes made to bring alignment with MSCI ESG Sustainable Impact Metrics

Section 3.2.2: Minimum ESG Standards•

Changes made to bring alignment with MSCI ESG Sustainable Impact Metrics

Section 3.2.2: Minimum ESG Standards•

Methodology enhancements due to changes in ESG Controversy Score calculation

Appendix II: Definition of Controversial Activities•

Methodology enhancements due to changes in ESG Controversy Score calculation

The following sections have been modified as of August 2016:
Section 4.1: Quarterly Index Reviews•

Same rules are applied for Quarterly and Annual Index Reviews so the Annual Index Review
section was removed. The latest reported Sustainable Impact Sales percentage data would
be used for all Quarterly Index Reviews•

Buffer rules have been added so that existing constituents continue to remain in the Index
unless their Sustainable Impact Sales percentage falls below 40%

The following sections have been modified as of June 2017:
The details on the Corporate Events treatment are now included in Section 4.4.
The following sections have been modified as of September 2017:
Section 4.1: Quarterly Index Reviews•

Clarification on use of ESG data for securities whose data would be available after the end of
the month preceding Index Review

The following sections have been modified as of May 2019:
Section 3.3: Weighting Scheme•

Clarification on the calculation of security weights, including the treatment of securities with
Index Inclusion Factor (IIF) applied in the Parent Index

The following sections have been modified as of February 2020:
Section 2.4: MSCI Sustainable Impact Metrics© 2024 MSCI Inc. All rights reserved. Please refer to the disclaimer at the end of this document.

MSCI.COM | PAGE 23 OF 27

MSCI ACWI Sustainable Impact Index Methodology | August 2024

Section 3.2.1: Sustainable Impact Sales Percentage•

Addition of ‘Sustainable Agriculture’ and ‘Connectivity – Digital Divide’ as new Sustainable
Impact categories

The following sections have been modified as of February 2021:
Section 2.4: MSCI Sustainable Impact Metrics•

Removed ‘natural gas-powered combined heat and power’ from the products and services
included in the ‘Alternative Energy’ category•

Removed the list of exclusions for each category•

Removed section 2.4.2 ‘Research Process for MSCI Sustainable Impact Metrics

The following sections haven been modified as of February 2022:
Section 3.3: Weighting Scheme•

Reworded section 3.3 to clarify the capping process

The following sections have been modified as of June 2023:
Section 3: Maintaining the MSCI ACWI Sustainable Impact Index•

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 MSCI GIMI were replaced with “Index Reviews”)

Section 4: MSCI ESG Research•

Moved that section after the Section 3 (Maintaining the MSCI ACWI Sustainable Impact
Index)•

Updated the descriptions of MSCI ESG Research products

Appendix I: Definition of Controversy Severity•

Removed the appendix

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

Section 2.4: Treatment of Unrated Companies•

New section detailing the treatment of companies with ratings and research not available
from MSCI ESG Research

Section 3.3: Monthly Updates on Basis of Controversies•

Added footnote on companies not assessed on MSCI ESG Controversies

Appendix II: Methodology Set•

Added details on the Methodology Set for the Index.

The following sections haven been modified as of August 2024
Section 2.4: Treatment of Unrated Companies© 2024 MSCI Inc. All rights reserved. Please refer to the disclaimer at the end of this document.

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MSCI ACWI Sustainable Impact Index Methodology | August 2024•

Added treatment of companies when business involvement screening research not available
from MSCI ESG Research© 2024 MSCI Inc. All rights reserved. Please refer to the disclaimer at the end of this document.

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MSCI ACWI Sustainable Impact Index Methodology | August 2024

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