Consultation on Potential
Enhancement to the MSCIJapan Empowering Women
Index (WIN)SEPTEMBER 2021

This consultation may or may not lead to the implementation of any or all of the proposedchanges in the highlighted or any other MSCI indexes. Consultation feedback will remain
confidential. MSCI may publicly disclose feedback if specifically requested by specific market
participants. In that case, the relevant feedback would be published together with the final
results of the consultation.
© 2021 MSCI Inc. All rights reserved.
Information Classification: GENERAL

Please refer to the disclaimer at the end of this document.

Proposed Enhancement
MSCI proposes a methodology change aiming to mitigate index turnover in the MSCI Japan
Empowering Women Index (WIN)New
Securities
Existing
Constituents

Current Selection Rule

Proposed Selection Rule

Gender Diversity Score >= median of the sector

Gender Diversity Score >= median of the sector
Gender Diversity Score >= 65th percentile of the sector

Gender Diversity Score >= median of the sector

In addition, existing WIN constituents with a Gender
Diversity Score below the sector median for a prolonged
period (two years) will be deleted• MSCI invites feedback from market participants on or before October 20, 2021 and will announce theresults of the consultation as well as the implementation timeline on or before October 27, 2021.

Information Classification: GENERAL

2

Current WIN Methodology
Parent Index
Selection Criteria
Exclusions

Weighting Scheme

MSCI Japan Investable Market Index (IMI) Top 700 Index
Gender Diversity Score >= median of the sector*• Companies with missing ESG Gender Diversity Data
• Companies with missing ESG Controversy Score• Companies in the GICS Industry ‘REITs’• Companies with ESG Controversy Score = 0• Companies with Human Rights Controversy Score <= 2
• Companies with Labor Rights Controversy Score <= 4Security Weight = Market cap weight in parent index * Sector Relative
Gender Diversity Score * Sector Relative Quality Score

The above weights are then normalized to 100%Additionally, a 5% issuer capping is applied*The sector median is calculated after excluding securities with Gender Diversity Score = 0 or unavailable Gender Diversity Score• Most additions and deletions in WIN are due to companies crossing the sector median Gender Diversity score during SemiAnnual Index Reviews, due to:‒ Change in security Gender Diversity score AND/OR‒ Change in sector median Gender Diversity score following changes in other securities’ Gender Diversity score as wellas parent index additions and deletions
Information Classification: GENERAL

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Details of Proposal
Proposal

Rationale1) PERCENTILE BUFFER:• Mitigate index turnover coming from additions and deletions of companies
crossing the sector median Gender Diversity Score• Apply a buffer threshold to ensure that companies with low Gender Diversity
Scores are still removed from WIN• All “Sector Leaders” will continue to be included in WIN (no reduction inindex opportunity set)

At each Semi-Annual Index Review,
existing WIN constituents will need tohave a Gender Diversity Score above
the 65th percentile of the sector(=buffer threshold) to remain in theindex2) BUFFER PERSISTENCY RULE:

Existing WIN constituents with a
Gender Diversity Score below thesector median (but above the buffer
threshold) for the current SemiAnnual Index Review as well as theprevious four consecutive SemiAnnual Index Reviews will be deleted• Avoid maintaining companies in WIN indefinitely if their Gender Diversity
Score is persistently in the buffer (i.e., below the sector median)• Provide a reasonable timeframe (i.e., two years) for companies in the buffer
to improve their gender diversity profile

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Simulated Impact – Key Metrics
WIN - current
methodology

WIN - 65th percentile
bufferTotal return* (%)

6.0

6.4

Total risk (%)

13.8

13.9

Tracking error (%)

3.1

3.1

Number of constituents***

259

285

Turnover** (%)

37.9

30.2

ESG score

6.4

6.4

ESG leaders (AAA-AA) (%)

33.1

34.0

ESG laggards (B-CCC) (%)

3.0

3.8

Female directors (wtd avg %)

14.7

14.4

Governance pillar score

4.7

4.7

Wtd Avg. Gender Diversity Score

7.4

7.3

Period: Nov 30, 2017 to Aug 31, 2021. * Gross returns annualized in USD ** Annualized one-way index turnover over index reviews ***Monthly averages
ESG Metrics as of Aug 31, 2021.

Information Classification: GENERAL

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Simulated Impact – Historical Index Review Turnover*MSCI Japan IMI Top 500 Index until Nov 2019, MSCI Japan IMI Top 700 Index since Nov 2019

Information Classification: GENERAL

6

Simulated Impact – Number of Constituents

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Simulated Impact – Reverse Index Turnover (“Flip Flops”)• Between the Nov 2019 and May 2021 Semi-Annual Index Reviews, there were 36 cases of reverse turnover– 30 of these cases would have been avoided (securities maintained in the index) with the proposed 65th percentile buffer
Top 10 companies with reverse index turnover cases since the Nov 2019 Semi-Annual Index Review
Name

Sector NameHOYA CORP
Health Care
KUBOTA CORP
Industrials
UNI-CHARM CORP
Consumer Staples
DAIWA HOUSE INDUSTRY
Real Estate
ONO PHARMACEUTICAL CO
Health CareCYBER AGENT
Communication Services
DAITO TRUST CONSTRUCTION
Real Estate
NABTESCO CORP
Industrials
SQUARE ENIX HOLDINGS CO Communication Services
USS CO
Consumer Discretionary

Nov 19 pctile May 20 pctile Nov 20 pctile May 21 pctile
45%
39%
15%
30%
68%
44%
50%
58%
64%
71%

57%
52%
52%
60%
72%
50%
65%
43%
75%
40%

63%
58%
58%
17%
46%
52%
62%
49%
48%
31%

22%
48%
49%
31%
65%
28%
42%
56%
60%
78%

Avoided Reverse Japan IMI Top
Turnover700 weight
1.1%
✓
0.5%
✓
0.4%
✓
0.4%
✓
0.2%
x
0.2%
✓
0.2%
✓
0.1%
✓
0.1%
✓
0.1%
x

For each Semi-Annual Index Review, companies are highlighted when their Gender Diversity Score is below the sector median.
The weight in MSCI Japan IMI Top 700 Index is as of May 28, 2021.

Information Classification: GENERAL

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Simulated Impact – Buffer Persistency Rule
Simulated Number of Constituentsduring Semi-Annual Index Reviews

SAIR

WIN – 65th
percentile
bufferWIN – 65th
percentile
buffer withpersistency
rule

Nov 19329

328

May 20336

334

Nov 20341

340

May 21

358

356• Simulation period Nov 30, 2017 to Aug 31, 2021. Results are shown from Nov 2019 Semi-Annual Index Review as the buffer persistency ruleconsiders the current and previous four consecutive Semi-Annual Index Reviews.

Information Classification: GENERAL

9Discussion Points• Do you agree with the proposal to apply a buffer on the Gender Diversity Score for the selection ofexisting WIN constituents?
– If yes, do you agree with the proposed buffer threshold (65th percentile)?

• Do you agree with the proposal to delete companies that remain in the Gender Diversity Score
buffer for a prolonged period (“buffer persistency rule”)?
– If yes, do you agree with the proposed two-year period (i.e., current and previous four consecutive SemiAnnual Index Reviews)?

• Should a buffer on the Human Rights Controversies and/or Labor Rights Controversies be
considered?
• Do you agree with implementing any adopted changes as part of the November 2021 Semi-Annual
Index Review?
• Clients may provide feedback through an online survey available on:https://www.msci.com/consultation-WIN

Information Classification: GENERAL

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Appendix

Information Classification: GENERAL

Simulated Impact – Turnover/Additions/Deletions (%)

Information Classification: GENERAL

12

Simulated Impact – Additions/Deletions (Number)Information Classification: GENERAL

13

Percentile Buffer – Simulated Sensitivity Analysis

Annualized
Turnover (%)*

Average Numberof Constituents

WIN – Current
methodology

37.9

256

WIN – 60th
percentile buffer

33.5

273

WIN – 65th
percentile buffer

30.2

281

WIN – 70th
percentile buffer

29.8

286

* Annualized one-way index turnover over index reviews, Period: Nov 30, 2017 to Jul 30, 2021

Information Classification: GENERAL

•

•

•

Compared to the current WIN
methodology, the application of a
60th percentile buffer on the Gender
Diversity Score would decrease theannualized turnover by 4.4%
Compared to the current WIN
methodology, the application of a65th percentile buffer on the Gender
Diversity Score would decrease theannualized turnover by 7.7%
No significant impact as the buffer
increases beyond the 65th percentile

14

Reverse Turnover Cases in WIN – Full List (1/2)
NameSector NameHOYA CORP
Health Care
KUBOTA CORP
Industrials
UNI-CHARM CORP
Consumer Staples
DAIWA HOUSE INDUSTRY
Real Estate
ONO PHARMACEUTICAL CO
Health CareCYBER AGENT
Communication Services
DAITO TRUST CONSTRUCTION
Real Estate
NABTESCO CORP
Industrials
SQUARE ENIX HOLDINGS CO Communication Services
USS CO
Consumer Discretionary
YAMADA HOLDINGS CO
Consumer Discretionary
AIR WATER
Materials
NIKON CORP
Consumer Discretionary
SCSK CORP
Information Technology
NOMURA REAL ESTATE HLDG
Real Estate
KYUSHU RAILWAY CO
Industrials
ALFRESA HOLDINGS
Health CareNIFCO JAPANConsumer Discretionary

Nov 19 pctile May 20 pctile Nov 20 pctile May 21 pctile
45%
39%
15%
30%
68%
44%
50%
58%
64%
71%
69%
41%
51%
25%
10%
62%
32%
45%

57%
52%
52%
60%
72%
50%
65%
43%
75%
40%
66%
55%
50%
51%
8%
53%
32%
64%

63%
58%
58%
17%
46%
52%
62%
49%
48%
31%
49%
32%
44%
51%
60%
38%
54%
30%

22%
48%
49%
31%
65%
28%
42%
56%
60%
78%
53%
46%
51%
27%
10%
52%
47%
26%

Avoided Reverse Japan IMI Top
Turnover700 weight
1.1%
✓
0.5%
✓
0.4%
✓
0.4%
✓
0.2%
x
0.2%
✓
0.2%
✓
0.1%
✓
0.1%
✓
0.1%
x
0.1%
✓
0.1%
✓
0.1%
✓
0.1%
✓
0.1%
✓
0.1%
✓
0.1%
✓
0.1%
✓

For each Semi-Annual Index Review, companies are highlighted when their Gender Diversity Score is below the sector median.
The weight in MSCI Japan IMI Top 700 Index is as of May 28, 2021.
Information Classification: GENERAL

15

Reverse Turnover Cases in WIN – Full List (2/2)
NameSector NameMITSUBISHI MATERIALS
Materials
ZENSHO HOLDINGS CO
Consumer Discretionary
COCA-COLA BOTTLERS JAPANConsumer Staples
AICA KOGYO COMPANY
Industrials
NISHI-NIPPON RAILROAD CO
Industrials
KENEDIX RETAIL REIT
Real Estate
KAWASAKI KISEN KAISHA
Industrials
HACHIJUNI BANK
Financials
NTN CORP
Industrials
COSMO ENERGY HOLDINGS CO
EnergyAUTOBACS SEVEN CO
Consumer Discretionary
OKUMURA CORP
Industrials
TOKAI TOKYO FINL HLDGS
Financials
JOYFUL HONDA
Consumer Discretionary
AEON DELIGHT
Industrials
JAPAN PETROLEUM EXPL
EnergyNOMURA CO
Industrials
MAXELL HOLDINGS
Information Technology

Nov 19 pctile May 20 pctile Nov 20 pctile May 21 pctile
35%
59%
54%
56%
76%
47%
36%
45%
44%
67%
41%
42%
52%
20%
93%
17%
47%
32%

52%
47%
36%
62%
50%
58%
58%
52%
52%
50%
55%
49%
40%
53%
47%
100%
50%
55%

52%
52%
39%
48%
54%
57%
47%
56%
45%
50%
61%
59%
47%
59%
55%
100%
57%
33%

48%
58%
63%
55%
95%
21%
52%
47%
41%
100%
39%
42%
52%
35%
84%
33%
37%
16%

Avoided Reverse Japan IMI Top
Turnover700 weight
0.1%
✓
0.0%
✓
0.0%
✓
0.0%
✓
0.0%
x
0.0%
✓
0.0%
✓
0.0%
✓
0.0%
✓
0.0%
x
0.0%
✓
0.0%
✓
0.0%
✓
0.0%
✓
0.0%
x
0.0%
x
0.0%
✓
0.0%
✓

For each Semi-Annual Index Review, companies are highlighted when their Gender Diversity Score is below the sector median.
The weight in MSCI Japan IMI Top 700 Index is as of May 28, 2021.
Information Classification: GENERAL

16

Simulated Impact – Minimum Gender Diversity Score
Simulated Gender Diversity score threshold
SectorNew securities(Median)Current
constituents(65th percentile)

Relativedifferencein score

Energy

5.74

5.57

-2.9%

Materials

5.62

5.25

-6.5%

Industrials

5.65

4.99

-11.6%

Consumer Disc.

5.95

5.33

-10.4%

Consumer Staples

7.15

6.60

-7.7%

Health Care

6.42

5.97

-7.0%

Financials

7.61

7.22

-5.1%

Information Tech.

5.95

5.45

-8.4%

Communication Services

6.35

6.07

-4.4%

Utilities

5.33

4.98

-6.7%

Real Estate

5.78

4.46

-22.9%

Average-8.5%

Data as of the May 2021 Semi-Annual Index Review.
Information Classification: GENERAL

17

Gender Diversity Score – Historical Volatility
The volatility of the Gender Diversity Scores for securities in the parent index has decreased in previous
years.
2018*

2019*

2020*

2021*

Frequency of Gender Diversity Score changes

83%

87%

78%

81%

Average absolute score changes

0.94

0.87

0.82

0.73

Score increases (% of total no. of changes)

64%

70%

69%

69%

Score decreases (% of total no. of changes)

36%

30%

31%

31%

* Score changes within a one-year period until end of April of the respective year.

Information Classification: GENERAL

18

Largest Additions – May 2021 Semi-Annual Index Review
The level of index turnover at the May 2021 Semi-Annual Index Review (~25%) was mostly due tolarge additions following increases in the securities’ Gender Diversity Score• Four of the five top additions to WIN at the May 2021 Semi-Annual Index Review were due to an increase in
the Gender Diversity Score. The top five additions had an aggregate pro forma weight of 16.9% in the WIN
index, hence explaining approx. 2/3rd of the index turnover
Security Name

Proforma Weight

Reason for Addition

TOYOTA MOTOR CORP

4.91%

Increase in Gender Diversity Score from 4.88 to 6.1 following the
introduction of an Advisory Committee specifically to address
Gender Diversity initiatives and provisions of the firm.

HOYA CORP

3.75%

Increase in Gender Diversity Score from 6.06 to 7.61 following
the provision of diversity targets with material benefits (e.g.
performance bonus) for the 2020 disclosure.

SHIN-ETSU CHEMICAL CO

3.39%

Increase in Gender Diversity Score from 5.05 to 5.88 following an
increase in the percentage of women in total workforce

NINTENDO CO

3.12%

Increase in Gender Diversity Score from 5.72 to 6.28 following an
increase in the percentage of women in senior management.

FUJITSU

1.73%

Increase in the Labor Rights Controversies Score from 2 to 5.
Information Classification: GENERAL

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Historical Deletions due to ESG Controversies• In the period from Nov 2019 to May 2021 Semi-Annual Index Review, there were six
companies deleted due to Labor Rights or Human Rights controversies–Four of the six deletions had a Labor Rights Controversy Score of 4 (just below the minimum
requirement of 5) or a Human Rights Controversy Score of 2 (just below the minimum
requirement of 3)
Name

Sector Name

Deletion reason

MITSUBISHI UFJ FIN GRP
Financials
LR Controversy Score = 2
KYUSHU ELECTRIC POWER CO
Utilities
LR Controversy Score = 4
MITSUI OSK LINES
Industrials
HR Controversy Score = 2
SONY GROUP CORP
Consumer Discretionary LR Controversy Score = 4
YAMAHA CORP
Consumer Discretionary LR Controversy Score = 2
JFE HOLDINGS
Materials
LR Controversy Score = 4

Information Classification: GENERAL

Deletion Index Review
May 21 SAIRMay 21 SAIRMay 21 SAIR
Nov 20 SAIRAug 20 QIR
Feb 20 QIR

20

MSCI ESG Controversies – Case Level Scoring Criteria

Information Classification: GENERAL

21

Historical Turnover for Select MSCI Japan Factor Indexes

Information Classification: GENERAL

22

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