Consultation on Potential
Enhancements to SelectMSCI ESG Indexes
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 Enhancements
MSCI proposes methodology changes aiming to enhance the climate risk profile and align thecontroversial business involvement criteria of select MSCI ESG Indexes focused on U.S. market
Proposed Enhancements
1. Incorporate
Climate Risk
2. BusinessInvolvement
Criteria

KLD 400 Social / USA Catholic Values:• Exclude companies with fossil fuel reserves (new)• Exclude companies involved in thermal coal and unconventional oil and gas businesses (new)USA ESG Select:• Exclude companies involved in thermal coal and unconventional oil and gas businesses (new)KLD 400 Social / USA Catholic Values:• Align with restriction level applied to MSCI SRI Indexes
USA ESG Select• Align with restriction level applied to MSCI ESG Focus Indexes• MSCI invites feedback from market participants on or before October 01, 2021 and will announce the results of theconsultation as well as the implementation timeline on or before October 08, 2021.

Information Classification: GENERAL

2

Summary of Current Methodologies
KLD 400 Social
Parent Index

USA Catholic Values

MSCI USA Investable Market Index (IMI)
Large, Mid & Small Caps

USA ESG SelectMSCI USA Index
Large & Mid Caps

Market capitalization

Weighting scheme
Key objectives• Best-in-class selection using ESG Rating• Targets 400 companies• Min ESG Rating BBB, min ESG Controversies
Score 3 (new constituents)

Business
Exclusions

•
•
•
•
•
•
•
•
•
•

Controversial Weapons
TobaccoCivilian Firearms
Nuclear Weapons
Alcohol
Gambling
Conventional Weapons
Nuclear Power
Adult Entertainment
GMO

Same as KLD 400 Social, withfollowing catholic screens
added:• Abortion Providers• Abortifacients• Contraceptives• Stem Cells

Tilted (optimization)
Aims to achieve highest ESG
Score under a set of
constraints (tracking error,
turnover, sector weights, etc.)
•
•
•
•
•
•
•
•

Controversial Weapons
TobaccoCivilian Firearms
Nuclear Weapons
Alcohol
Gambling
Conventional Weapons
Nuclear Power

More details are available in the respective index methodology books at: https://www.msci.com/index-methodology

Information Classification: GENERAL

3

Proposal 1 – Incorporate Climate Risk

Information Classification: GENERAL

Incorporating Climate Risk in ESG Indexes
Strengthening the index climate profile:•

Incorporating Climate Risk may support investors in their ESG integration strategies.

•

Some institutional ESG investors are seeking greater climate awareness to support their use of ESG Indexes.

•

Regulatory scrutiny on climate risk considerations are increasing and may impose a significant short-term risk for some investors.

Index

ESG Approach

Enhancement Proposals

Rationale for Proposal

Values• Exclude companies with Fossil Fuel (FF)reserves• Exclude companies involved in thermal
coal and unconventional oil and gas
businesses• Apply a fossil fuel divestment strategy
to mitigate stranded asset risk*• Additional revenue screen ensures
exclusion of power generationcompanies that do not own FF reserves

Integration +Values• Exclude companies involved in thermal
coal and unconventional oil and gas
businesses• Relatively fewer exclusions to reflect the
Integration approach and maintain asimilar overall ESG profile

KLD 400
Social
USA Catholic
ValuesUSA ESG
Select* Stranded assets are now generally accepted to be those assets that at some time prior to the end of their economic life (as assumed at the investment decision point), are no longer
able to earn an economic return (i.e. meet the company’s internal rate of return), as a result of changes associated with the transition to a low-carbon economy (lower than anticipateddemand / prices).

Information Classification: GENERAL

5

Proposed Enhancements
The rationale for the proposal is to have a set of exclusions1 which –• Help reduce index carbon footprint and exposure to stranded assets• Are sensible and consistent with ESG objective of the index• Would maintain similar risk-return characteristics and overall ESG profile of the index
Exclusion Thresholds2
Thermal Coal (Mining andSale) + Unconventional Oil& Gas (Extraction)

Thermal Coal
(Power
Generation)

Fossil Fuel
Reserves
Ownership

KLD 400 Social /USA Catholic Values>0% revenue>=5% revenue

Any evidence ofownership (zerothreshold)

USA ESG Select>=5% revenue>=5% revenue

N/A→ Aligned with MSCI SRI Indexes→ Aligned with MSCI ESG Focus and
MSCI ESG Leaders Indexes

1. Implemented as additional screens in the above methodologies. Other aspects of index methodologies like – ranking, sorting, weighting, are not changed.
2. Exact definitions of screens are provided in Appendix.

Information Classification: GENERAL

6

Simulated Impact - MSCI KLD 400 Social Index
The proposed exclusion screens would result in ~27% lower Carbon Intensity while
maintaining similar characteristics compared to the current indexes
Key Metrics¹

MSCI USA IMI Index

MSCI KLD 400 Social Index
Current index²

MSCI KLD 400 Social Index
Simulated index

Total return* (%)

16.3

17.5

18.3

Total risk (%)

15.4

14.9

14.7

2.1

2.2

Number of constituents***

2428

402

402

Turnover** (%)

2.4

9.5

8.9

Tracking error (%)

Transition Turnover (%)

4

3.6

Included in transition

19

Removed in transition

17

Additions – 1.7%
Deletions – 1.0%
Maintenance – 0.9%

ESG Metrics3
ESG score

5.6

7.0

7.1

ESG leaders (AAA-AA) (%)

22.0

45.6

47.6

ESG laggards (B-CCC) (%)

7.3

0.0

0.0

Environmental pillar score

5.8

6.5

6.6

Wtd. Avg. Carbon Intensity

128

104

75

Fossil fuel reserves (%)

3.4

1.3

0.0

¹ Period: 30th Dec 2015 to 30th June 2021 , ² Simulated index as per current MSCI KLD 400 Social Index Methodology, 3As of 30h Jun 2021, 4 Transition of current index to proposal as of

28th May 2021, * Gross returns annualized in USD ** Annualized one-way index turnover over index reviews *** Monthly averages

Information Classification: GENERAL

7

Simulated Impact - MSCI USA Catholic Values Index
The proposed exclusion screens would result in ~29% lower Carbon Intensity while maintaining
similar characteristics compared to the current indexes
Key Metrics¹

MSCI USA IMI Index

MSCI USA Catholic Values Index
Current index²

MSCI USA Catholic Values Index
Simulated index

Total return* (%)

16.3

18.1

18.8

Total risk (%)

15.4

15.3

15.2

1.9

2.1

Number of constituents***

2428

402

402

Turnover** (%)

2.4

10.1

10.2

Tracking error (%)

Transition Turnover (%)

4

8.4

Included in transition

29

Removed in transition

27

Additions – 3.9%
Deletions – 4.0%
Maintenance – 0.9%

ESG Metrics3
ESG score

5.6

7.1

7.1

ESG leaders (AAA-AA) (%)

22.0

47.9

48.4

ESG laggards (B-CCC) (%)

7.3

0.0

0.0

Environmental pillar score

5.8

6.5

6.6

Wtd. Avg. Carbon Intensity

128

109

77

Fossil fuel reserves (%)

3.4

1.4

0.0

¹ Period: 30th Dec 2015 to 30th June 2021 , ² Simulated index as per current MSCI USA Catholic Values Index Methodology, 3As of 30h Jun 2021, 4 Transition of current index to proposal asof 28th May 2021, * Gross returns annualized in USD ** Annualized one-way index turnover over index reviews *** Monthly averages

Information Classification: GENERAL

8

Simulated Impact - MSCI USA ESG Select Index
The proposed exclusion screens resulted in ~47% lower Carbon Intensity while
maintaining similar characteristics compared to the current indexes
Key Metrics¹

MSCI USA IMI Index

MSCI USA ESG Select Index
Current index²

MSCI USA ESG Select Index
Simulated index

Total return* (%)

16.5

18.1

17.9

Total risk (%)

15.0

14.9

14.9

2.2

2.2

Number of constituents***

627

162

165

Turnover** (%)

2.7

18.4

18.6

Tracking error (%)

Transition Turnover (%)

4

7.5

Included in transition

9

Removed in transition

22

Additions – 1.1%
Deletions – 2.3%
Maintenance – 4.1%

ESG Metrics3
ESG score

5.8

7.4

7.4

ESG leaders (AAA-AA) (%)

23.8

64.0

62.8

ESG laggards (B-CCC) (%)

6.2

1.5

1.5

Environmental pillar score

6.0

6.6

6.6

Wtd. Avg. Carbon Intensity

127

113

60

Fossil fuel reserves (%)

3.4

2.2

1.1

¹ Period: 30th Dec 2015 to 30th June 2021 , ² Simulated index as per current MSCI USA ESG Select Index Methodology, 3As of 30h Jun 2021, 4 Transition of current index to proposal as of

28th May 2021, * Gross returns annualized in USD ** Annualized one-way index turnover over index reviews *** Monthly averages

Information Classification: GENERAL

9Proposal 2 – Enhance the BusinessInvolvement Criteria

Information Classification: GENERAL

Basis for Screen Migration• Objective:
To adjust the current exclusion screens to be consistent with MSCI ESG Research’s Exclusions Framework• Advantages of Migration to Latest Framework
Clearer focus on the intent of exclusion (primary vs. secondary involvement – e.g., tobacco producer vs.
retailer)
Remove absolute thresholds and categorize activities based on the level of involvement

Information Classification: GENERAL

11

Proposed Enhancements• Align the business involvement screens to be consistent with MSCI ESG Research’s Exclusions Framework• Align the catholic screens for the MSCI USA Catholic Values Index with ESG Research’s Catholic Values Screening
Research for USCCB guidelines, including the addition of a “Predatory Lending” screen
Most Restrictive1

Highly Restrictive1

Moderately Restrictive1

KLD 400 Social•

Controversial
Weapons•••

TobaccoCivilian Firearms
Nuclear Weapons

•
•
•
•
•
•

Alcohol
Gambling
Adult Entertainment
Conventional Weapons
GMO
Nuclear PowerUSA Catholic
Values•Controversial
Weapons
Abortion Providers2
Abortifacients2
Contraceptives2

•
•
•
•
•

TobaccoCivilian Firearms
Nuclear Weapons
Adult Entertainment2
Stem Cells2

•
•
•
•
•

Alcohol
Gambling
Conventional Weapons
GMO
Nuclear PowerUSA ESG
Select•Controversial
Weapons••

Nuclear Weapons
Tobacco•Civilian Firearms•••

Least Restrictive1

Other1•••••

Predatory
Lending2(new screen)

Alcohol
Gambling
Nuclear Power
Conventional Weapons

1. Detailed screens / formulas are provided in Appendix.
2. Catholic screens. The MSCI USA Catholic Values Index aims to screen areas targeted by USCCB (United States Conference of Catholic Bishops) guidelines

Information Classification: GENERAL

12

Simulated Impact on Eligible Universe – KLD 400 Social• The table shows the impact of Proposal 2 on the MSCI USA IMI (parent index for MSCI KLD 400 Social Index)

ScreenAlcohol
Gambling
TobaccoAdult Entertainment
Nuclear Power
Controversial Weapons
Conventional Weapons
Nuclear Weapons
All Weapons
Civilian Firearms
Genetically Modified
Organisms (GMO)
OverallCurrent Screen
Count
Weight
8
0.42%
18
0.31%
8
0.59%
0
0.00%
23
3.12%
6
0.79%
38
3.16%
15
2.02%
38
3.16%
11
0.71%

Proposed Screen
Count
Weight
9
0.21%
17
0.31%
13
0.75%
0
0.00%
19
1.53%
6
0.79%
22
1.38%
14
1.64%
26
1.82%
6
0.16%

4

0.31%

3

0.31%

102

6.47%

90

4.73%

Unchanged(already aligned)

Simulation as of the May 2021 Semi-Annual Index Review.
Please refer to the Appendix for the simulated list of additions and deletions for the MSCI KLD 400 Social Index.

Information Classification: GENERAL

13

Simulated Impact on Eligible Universe – KLD 400 Social(Top Changes)• Simulated newly eligible companies (Top 3 by weight)
Security Name

Weight in USA IMIWALMART

0.51%

GENERAL ELECTRIC CO

0.29%

TELEDYNE TECHNOLOGIES

0.05%

Prior Exclusion Reason

Simulated KLD 400
Social constituent*

Civilian Firearms: Walmart retails rifles, shotguns, pistols, and ammunition for hunting
and sports shooting. The company is excluded under the current screen as its civilian
firearms retail revenue was above USD 20 million. Under the proposal Walmart would
be eligible as its aggregated civilian firearms revenue is below 5% of its total revenue.
Nuclear Power: GE designs and manufactures nuclear reactors, such as boiling water
reactors and fast breeder reactors. Under the proposal GE would be eligible as thefocus is on primary involvement in nuclear power generation.
Conventional Weapons: Under the current screen GE is excluded as it derived morethan USD 500 million revenue from Conventional Weapons. Under the proposal GE
would be eligible as its aggregated revenue from weapons businesses is below 15%.
Conventional Weapons: Under the proposal Teledyne Technologies would be eligible
as its conventional weapons revenue is below 15% (excluded under the current 5%threshold).

No

No

Yes

• Simulated newly ineligible companies (Top 3 by weight)
Security Name

Weight in USA IMI

Exclusion Reason

Current KLD 400 Social
Constituent**

AMCOR

0.04%

TobaccoYes

CELANESE CORP

0.04%

TobaccoYes

EASTMAN CHEMICAL CO

0.04%

TobaccoNo*Based on simulation as of the May 2021 Semi-Annual Index Review, reflecting both Proposal 1 and Proposal 2.
**Based on simulated MSCI KLD 400 Social Index constituents. Please refer to the Appendix for the full simulated list of additions and deletions
for the MSCI KLD 400 Social Index.

Information Classification: GENERAL

14

Simulated Impact on Eligible Universe – USA Catholic Values• The table shows the impact of Proposal 2 on the MSCI USA IMI (parent index for the MSCI USA Catholic Values Index)• There is no impact of the adjustment of the five existing catholic screens to be consistent with MSCI ESG Research’s Exclusions Framework• The Predatory Lending screen aims to reflect USCCB Policy on affordable housing/banking 1 and would screen two companies in the parent index
Screen

Proposed newscreenAlcohol
Gambling
TobaccoNuclear Power
Controversial Weapons
Conventional Weapons
Nuclear Weapons
All Weapons
Civilian Firearms
Genetically Modified
Organisms (GMO)
Adult Entertainment
Abortifacient
AbortionContraceptives
Predatory Lending
Stem Cells
OverallCurrent Screen
Count
Weight
8
0.42%
18
0.31%
8
0.59%
23
3.12%
6
0.79%
38
3.16%
15
2.02%
38
3.16%
11
0.71%

Proposed Screen
Count
Weight
9
0.21%
17
0.31%
13
0.75%
19
1.53%
6
0.79%
22
1.38%
14
1.64%
26
1.82%
6
0.16%

4

0.31%

3

0.31%

2
7
8
16
48
171

0.09%
0.56%
1.20%
2.63%
6.84%
14.43%

2
7
8
16
2
48
162

0.09%
0.56%
1.20%
2.63%
0.01%
6.84%
12.99%

Unchanged(already aligned)

Catholic screens

Simulation as of the May 2021 Semi-Annual Index Review.
Please refer to the Appendix for the simulated list of additions and deletions for the MSCI USA Catholic Values Index.
1USCCB Socially Responsible Investment Guidelines are available at: https://www.usccb.org/about/financial-reporting/socially-responsible-investment-guidelines

Information Classification: GENERAL

15

Simulated Impact on Eligible Universe – USA Catholic Values(Top Changes)• Simulated newly eligible companies (Top 3 by weight)
Weight in USA IMIPrior Exclusion Reason

Simulated USA Catholic
Values constituent*

WALMART

0.51%

Civilian Firearms: Walmart retails rifles, shotguns, pistols, and ammunition for hunting
and sports shooting. The company is excluded under the current screen as its civilian
firearms retail revenue was above USD 20 million. Under the proposal Walmart would
be eligible as its aggregated civilian firearms revenue is below 5% of its total revenue.

No

TELEDYNE TECHNOLOGIES

0.05%

Conventional Weapons: Under the proposal Teledyne Technologies would be eligible
as its conventional weapons revenue is below 15% (excluded under the current 5%threshold).

Yes

BOOZ ALLEN HAMILTON A

0.03%

Conventional Weapons: Under the proposal Booz Allem Hamilton would be eligible asits conventional weapons revenue is below 15% (excluded under the current 5%threshold).

No

Security Name

• Simulated newly ineligible companies (Top 3 by weight)
Security Name

Weight in USA IMI

Exclusion Reason

Current USA Catholic
Values constituent**

AMCOR

0.04%

TobaccoYes

CELANESE CORP

0.04%

TobaccoYes

EASTMAN CHEMICAL CO

0.04%

TobaccoNo*Based on simulation as of the May 2021 Semi-Annual Index Review, reflecting both Proposal 1 and Proposal 2.
**Based on simulated MSCI USA Catholic Values Index constituents. Please refer to the Appendix for the full simulated list of additions anddeletions for the MSCI USA Catholic Values Index.

Information Classification: GENERAL

16

Simulated Impact on Eligible Universe – USA ESG Select• The table shows the impact of Proposal 2 on the MSCI USA Index (parent index for MSCI USA ESG Select Index)
ScreenAlcohol
Gambling
TobaccoNuclear Power
Controversial Weapons
Conventional Weapons
Nuclear Weapons
All Weapons
Civilian Firearms
OverallCurrent Screen
Count
Weight
4
0.23%
5
0.22%
4
0.68%
6
1.50%
4
0.89%
6
1.27%
12
2.26%
12
2.26%
1
0.15%
30
4.14%

Proposed Screen
Count
Weight
4
0.23%
5
0.22%
5
0.78%
13
1.45%
4
0.89%
7
1.31%
10
1.81%
10
1.81%
0
0.00%
38
4.49%

Unchanged(already aligned)

Simulation as of the May 2021 Semi-Annual Index Review.
Please refer to the Appendix for the simulated list of additions and deletions for the MSCI USA ESG Select Index.

Information Classification: GENERAL

17

Simulated Impact on Eligible Universe – USA ESG Select(Top Changes)• Simulated newly eligible companies (Top 3 by weight)
Security Name

Weight in USA

GENERAL ELECTRIC CO

0.32%

L3HARRIS TECHNOLOGIES

0.12%

APOLLO GLOBAL MGMT A

0.03%

Simulated USA ESG
Select constituent*

Prior Exclusion Reason
Nuclear Power: GE designs and manufactures nuclear reactors, such as boiling water
reactors and fast breeder reactors. Under the proposal GE would be eligible as thefocus is on primary involvement in nuclear power generation.
Nuclear Weapons: L3Harris Technologies has been excluded due to its involvement in
nuclear weapons components. Since these components are not manufactured
exclusively for nuclear weapons, L3Harris Technologies would be eligible as per the
proposed screen.
Tobacco: Apollo Global Management owns ClubCorp Holdings Inc., which is involved
in retailing tobacco products. Under the proposal the company would be eligible as thefocus is on primary involvement in Tobacco business.

No

Yes

No

• Simulated newly ineligible companies (Top 3 by weight)
Security Name

Weight in USA

Exclusion Reason

Current USA ESG
Select constituent**

PUBLIC SERVICE ENT GRP

0.08%

Nuclear PowerYes

CELANESE CORP

0.05%

Tobacco

No

AMCOR

0.05%

TobaccoYes*Based on simulation as of the November 2020 Semi-Annual Index Review, reflecting both Proposal 1 and Proposal 2.
**Based on simulated MSCI USA ESG Select Index constituents. Please refer to the Appendix for the full simulated list of additions anddeletions for the MSCI USA ESG Select Index.

Information Classification: GENERAL

18

Discussion Points
Applicable toKLD 400
Social

USA Catholic
ValuesUSA ESG
Select• Do you agree with the introduction of Climate related screens?

✓

✓

✓

• Do you agree with exclusion of thermal coal and unconventional oil
and gas companies?

✓

✓

✓

• Do you agree with further excluding fossil fuel reserves, in line withMSCI SRI Indexes?

✓✓• Do you agree to adjust the business involvement criteria to beconsistent with MSCI ESG Research’s Exclusions Framework?

✓✓✓• Do you agree to add a screen for Predatory Lending?
• Would you favor implementation of the changes, if any, as part of theNovember 2021 Index Review or the February 2022 Index Review?

✓✓To participate in the consultation, please provide your feedback through an online survey available on:https://www.msci.com/consultation-KLD_Catholic_SelectInformation Classification: GENERAL✓✓

Appendix

Information Classification: GENERAL

Definition of Climate Exclusion Screens•

THERMAL_COAL_MAX_REV_PCT - The maximum percentage of revenue (either reported or estimated) greater than 0% that acompany derives from the mining of thermal coal (including lignite, bituminous, anthracite and steam coal) and its sale toexternal 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; and revenue from coal trading.

•

GENERAT_MAX_REV_THERMAL_COAL - The maximum percentage of revenue (either reported or estimated) that a company
derives from the thermal coal based power generation.

•

UNCONV_OIL_GAS_MAX_REV_PCT – The maximum percentage of revenue (either reported or estimated) greater than 0% that acompany derives from unconventional oil and gas. It includes revenues from oil sands, oil shale (kerogen-rich deposits), shalegas, shale oil, coal seam gas, and coal bed methane. It excludes all types of conventional oil and gas production including Arctic
onshore/offshore, deepwater, shallow water and other onshore/offshore.

•

FF_RESERVES_ENERGY_APPLICATION – This screen identifies companies, regardless of their industries, with evidence ofowning fossil fuel reserves used most likely for energy applications. For high-intensity industries (belonging to Energy andUtilities GICS Sector & Diversified Metals & Mining GICS Sub-Industry), this factor flags companies with evidence of fossil fuelreserves (excluding Metallurgical Coal). For other industries, it flags companies with evidence of fossil fuel reserves (excluding
Metallurgical Coal) and deriving revenue from business segments associated with energy application of fossil fuels such as
Thermal Coal mining, Oil & Gas exploration & production and downstream activities e.g. refining; distribution & retail; pipeline &transportation; trading and fossil fuel- based power generation.

Information Classification: GENERAL

21

Carbon Footprint and Fossil Fuel Mix• Thermal Coal and Oil Sands/Oil Shale produce more carbon dioxide per unit of energy than other fossil fuels.
• Extraction and refining of Thermal Coal and Oil Sands are more carbon intensive than other fossil fuels.
• Exclusion of companies involved in Thermal Coal and Oil Sands business from an index lowered the index’s
footprints in simulated back-tests.
• Companies involved in extraction of thermal coal and oil sands/shale and also power generation fromthermal coal are exposed to significant climate risk.
Carbon Footprint of Thermal Coal and Oil
Sands/Shale Companies*

Oil Sand and Oil Shale

106.7

Thermal Coal

96.4

Metallurgical Coal

94.6

Crude Oil

73.3

Natural Gas

30

57
24

20
10

60

57

9

45
10

2

2

Upto 5%56.1

5% to 30%

% of WACI

20
0.4

0

40

Num. of Stks.

CO2 Content1 (kg per GJ)% WACI/Index Wt.

Fuel

0

More than 30%

Index Wt.

Stks

1 – https://www.msci.com/www/research-paper/fossil-fuel-divestment-a/0471389508* MSCI ACWI constituents as of 29th June 2019.

Information Classification: GENERAL

22

KLD 400 Social – Business Involvement Criteria
ScreenAlcohol
Gambling
TobaccoAdult Entertainment
Nuclear Power

Proposal

Current

Restrictiveness level≥5% or $ 500 Mil Producer≥5% or $ 500 Mil
Operation or Support
Producer or≥15% Distributor, Retailer, Supplier≥5% or $ 500 Mil Producer
1

Utility, Key Suppliers≥50% or 6000MW capacity

Controversial Weapons

Moderate
Moderate
High
Moderate
Moderate

Expression≥5% Producer or≥15% Production, Distribution, Retail, Supply≥5% Operations or≥15% Related Activities
Producer or≥5% Production, Distribution, Retail, Supply, Lincensing≥5% Production or≥15% Production, Distribution, Retail≥5% Power generated or≥5% Installed Capacity or ≥15% Revenue

Most Restrictive / Zero Tolerance≥5% or $ 500 Mil Weapons,Components, Services

Moderate≥5% Production or≥15% Production, Distribution, Retail

Nuclear Weapons

Nuclear Weapons and Components

High

Nuclear Warheads, Components, Delivery Platforms,
Auxiliary Services

Civilian Firearms

Producer or≥5% or $ 20 Mil Retailer

High

Producer or≥5% Production and Distribution>$0

Moderate≥5%

Conventional Weapons

Genetically Modified
Organisms (GMO)¹All companies involved in Uranium Mining, Nuclear Reactor design, Nuclear Fuel enrichment, classified as a “Supplier” tothe nuclear power industry that earn 15% or more in revenue

Information Classification: GENERAL

23

USA Catholic Values – Business Involvement Criteria
ScreenAlcohol
Gambling
TobaccoNuclear Power

Proposal

Current

Restrictiveness level≥5% or $ 500 Mil Producer≥5% or $ 500 Mil
Operation or Support
Producer or≥15% Distributor, Retailer, Supplier
Utility, Key Suppliers1≥50% or 6000MW capacity

Controversial Weapons

Moderate
Moderate
High
Moderate

Most Restrictive / Zero Tolerance≥5% or $ 500 Mil Weapons,Components, Services

Moderate

Nuclear Weapons

Nuclear Weapons and Components

High

Civilian Firearms

Producer or≥5% or $ 20 Mil Retailer

High

>$0

Moderate

Conventional Weapons

Genetically Modified
Organisms (GMO)
Abortion
Abortifacients
Adult Entertainment
Contraceptives
Stem Cells
Predatory Lending

Expression≥5% Producer or≥15% Production, Distribution, Retail, Supply≥5% Operations or≥15% Related Activities
Producer or≥5% Production, Distribution, Retail, Supply, Lincensing≥5% Power generated or≥5% Installed Capacity or ≥15% Revenue

Abortion Provider or Acute Care
Facilities

Most≥5% Production or≥15% Production, Distribution, Retail
Nuclear Warheads, Components, Delivery Platforms,
Auxiliary Services
Producer or≥5% Production and Distribution≥5%
Abortion Provider or Acute Care Facilities or Ownership
By/Of
Producer or Inteded use by Producer or Ownership
By/Of

Producer

Most

Producer or≥15% Distributor, Retailer

High

Producer or ≥5% Production, Distribution, Retail

Producer

Most

Producer or Licensor or Ownership By/Of

Stem Cell/Fetal Tissue Reearch, Useof Fetal Cell Line, Enabling Tech

High

-

None

Catholic screens

Stem Cell/Fetal Tissue Reearch, Use of Fetal Cell Line,
Enabling Tech, Human stem cell cloning
Financial institutions that received rating of "Needs toimprove" and "Substantial Noncompliance" after taking
Community Reinvestment Act* examination¹All companies involved in Uranium Mining, Nuclear Reactor design, Nuclear Fuel enrichment, classified as a “Supplier” tothe nuclear power industry that earn 15% or more in revenue

Information Classification: GENERAL

24

USA ESG Select – Business Involvement Criteria
ScreenAlcohol
Gambling
Nuclear Power

Proposal

Current≥50% or $ 1 Bil Producer≥50% or $ 1 Bil
Operation or Support
Nuclear Fuel Enrichment, Uranium Mining,
Reactor Design, ≥50% or 6000MW capacity

Controversial Weapons
Conventional Weapons
Civilian Firearms
Nuclear Weapons
TobaccoRestrictiveness level

Expression

Least≥10% Production

Least≥10% Operations

Least≥10% revenue from ownership, operation of
nuclear power plants

Most Restrictive / Zero Tolerance≥50% or $ 3 Bil Weapons, Components

Least≥50% or $ 100 Mil Producer

Moderate

Nuclear Weapons component or systemmanufacturers
Producer or Licensor,≥15% Production, Distribution, Retail,Supply, Ownership by/of

High
High

Information Classification: GENERAL≥10% Production of Weapons, Components≥5% Producer or≥15% Production, Distribution, Retail
Nuclear Warheads, Components, Delivery
Platforms, Auxiliary Services
Producer or≥5% Production, Distribution, Retail, Supply,
Lincensing

25

KLD 400 Social Index – Simulated Additions
Security Short Name

SectorMORGAN STANLEYCROWN CASTLE INTL CORP
DUPONT DE NEMOURSEBAYSYNOPSYSCARRIER GLOBAL
LYONDELLBASELL INDS ASKYWORKS SOLUTIONSKEURIG DR PEPPER
INTERNATIONAL PAPER
HUBSPOTGENERAC HOLDINGSTELEDYNE TECHNOLOGIESCONAGRA BRANDSINSULET CORPZENDESKPTC
FAIR ISAAC CORP
INTERPUBLIC GROUP OF COS
CABLE ONEGUIDEWIRE SOFTWARE

Financials
Real Estate
Materials
Consumer Discretionary
Information Technology
Industrials
Materials
Information Technology
Consumer Staples
Materials
Information Technology
Industrials
Industrials
Consumer Staples
Health Care
Information Technology
Information Technology
Information Technology
Communication Services
Communication Services
Information Technology

Weight in simulated
index
0.69%
0.44%
0.24%
0.22%
0.21%
0.20%
0.16%
0.15%
0.14%
0.13%
0.12%
0.11%
0.10%
0.10%
0.10%
0.09%
0.08%
0.08%
0.07%
0.05%
0.04%

Simulation as of the May 2021 Semi-Annual Index Review.

Information Classification: GENERAL

Eligible as per current screen
✓
✓
✓
✓
✓
✓
✓
✓
✓
✓
✓
✓
✘
✓
✓
✓
✓
✓
✓
✓
✓

1 newly eligible
security added

26

KLD 400 Social Index – Simulated Deletions
Security Short Name

SectorCurrent weight in Index

CONOCOPHILLIPSSCHLUMBERGERNUCOR CORPWEC ENERGY GROUPOCCIDENTAL PETROLEUMHESS
PPL CORPFIRSTENERGY CORPCELANESE CORPAMCORCMS ENERGY CORPAES CORP
DEVON ENERGY CORP
ALLIANT ENERGY CORPNISOURCE (NEW)MARATHON OIL CORPAPA CORPORATION
OGE ENERGY CORP
EQTEnergyEnergyMaterials
Utilities
EnergyEnergyUtilities
Utilities
Materials
Materials
Utilities
Utilities
EnergyUtilities
Utilities
EnergyEnergyUtilities
Energy

0.41%
0.24%
0.17%
0.16%
0.13%
0.13%
0.12%
0.11%
0.11%
0.10%
0.10%
0.09%
0.09%
0.08%
0.05%
0.05%
0.04%
0.04%
0.03%

Deletion Reason
Proposal 1
Fossil Fuel Reserves and Fossil Fuel Extratction
Fossil Fuels
Fossil Fuel Extraction
Thermal Coal Power
Fossil Fuel Reserves and Fossil Fuel Extratction
Fossil Fuel Reserves and Fossil Fuel Extratction
Thermal Coal Power
Fossil Fuel reserves and Thermal Coal Power
Thermal Coal Power
Thermal Coal Power
Fossil Fuel Reserves and Fossil Fuel Extratction
Thermal Coal Power
Thermal Coal Power
Fossil Fuel Reserves and Fossil Fuel Extratction
Fossil Fuel Reserves and Fossil Fuel Extratction
Thermal Coal Power
Fossil Fuel Reserves and Fossil Fuel Extratction

Proposal 2
TobaccoTobacco-Simulation as of the May 2021 Semi-Annual Index Review.

Information Classification: GENERAL

27

USA Catholic Values Index - Simulated Additions
Security Name

SectorVISA AMORGAN STANLEYEMERSON ELECTRIC CO
DUPONT DE NEMOURSSYNOPSYS
LYONDELLBASELL INDS AMAXIM INTEGRATED PRDCTS
KEURIG DR PEPPER
INTERNATIONAL PAPERSLACK TECHNOLOGIES A
GENERAC HOLDINGSTELEDYNE TECHNOLOGIESCONAGRA BRANDSON SEMICONDUCTOR CORP
FAIR ISAAC CORP
INTERPUBLIC GROUP OF COS
ANNALY CAPITAL MGMTPENTAIR PLCNOVAVAXWESTERN UNIONCABLE ONEInformation Technology
Financials
Industrials
Materials
Information Technology
Materials
Information Technology
Consumer Staples
Materials
Information Technology
Industrials
Industrials
Consumer Staples
Information Technology
Information Technology
Communication Services
Financials
Industrials
Health Care
Information Technology
Communication Services

Weight in simulated
index
2.19%
0.73%
0.33%
0.26%
0.22%
0.17%
0.16%
0.15%
0.13%
0.12%
0.12%
0.11%
0.11%
0.09%
0.08%
0.07%
0.07%
0.07%
0.06%
0.06%
0.06%

Simulation as of the May 2021 Semi-Annual Index Review.

Information Classification: GENERAL

Eligible as per current screen
✓
✓
✓
✓
✓
✓
✓
✓
✓
✓
✓
✘
✓
✓
✓
✓
✓
✓
✓
✓
✓

1 newly eligible
security added28

USA Catholic Values Index - Simulated Deletions
Security Short Name

SectorCurrent weight in Index

CONOCOPHILLIPSSCHLUMBERGERNUCOR CORPWEC ENERGY GROUPOCCIDENTAL PETROLEUMHESS
PPL CORPFIRSTENERGY CORPCELANESE CORPAMCORCMS ENERGY CORPAES CORP
DEVON ENERGY CORP
ALLIANT ENERGY CORPNISOURCE (NEW)MARATHON OIL CORPAPA CORPORATION
OGE ENERGY CORP
EQTEnergyEnergyMaterials
Utilities
EnergyEnergyUtilities
Utilities
Materials
Materials
Utilities
Utilities
EnergyUtilities
Utilities
EnergyEnergyUtilities
Energy

0.44%
0.26%
0.18%
0.17%
0.14%
0.14%
0.13%
0.12%
0.11%
0.11%
0.10%
0.10%
0.09%
0.08%
0.06%
0.06%
0.05%
0.04%
0.03%

Deletion Reason
Proposal 1
Fossil Fuel Reserves and Fossil Fuel Extratction
Fossil Fuels
Fossil Fuel Extraction
Thermal Coal Power
Fossil Fuel Reserves and Fossil Fuel Extratction
Fossil Fuel Reserves and Fossil Fuel Extratction
Thermal Coal Power
Fossil Fuel reserves and Thermal Coal Power
Thermal Coal Power
Thermal Coal Power
Fossil Fuel Reserves and Fossil Fuel Extratction
Thermal Coal Power
Thermal Coal Power
Fossil Fuel Reserves and Fossil Fuel Extratction
Fossil Fuel Reserves and Fossil Fuel Extratction
Thermal Coal Power
Fossil Fuel Reserves and Fossil Fuel Extratction

Proposal 2
TobaccoTobacco-Simulation as of the May 2021 Semi-Annual Index Review.

Information Classification: GENERAL

29

USA ESG Select Index - Simulated Additions
Security Name

SectorMORGAN STANLEYLILLY (ELI) & COMPANY
PPG INDUSTRIESL3HARRIS TECHNOLOGIESDELTA AIR LINESANSYSHORMEL FOODS CORPCROWN CASTLE INTL CORPLAMB WESTON HOLDINGSFORTUNE BRANDS HOME & SE
INTERPUBLIC GROUP OF COS

Financials
Health Care
Materials
Industrials
Industrials
Information Technology
Consumer Staples
Real EstateConsumer Staples
Industrials
Communication Services

Weight in simulated
index
0.90%
0.31%
0.23%
0.19%
0.18%
0.17%
0.15%
0.14%
0.11%
0.11%
0.10%

Eligible as per current screen
✓
✓
✓
✘
✘
✓
✓
✓
✓
✓
✓

2 newly eligible
securities added

Simulation as of the May 2021 Semi-Annual Index Review.

Information Classification: GENERAL

30

USA ESG Select Index - Simulated Deletions
Security Short Name

SectorCurrent weight in Index

XCEL ENERGYHESSCONOCOPHILLIPSCMS ENERGY CORP
PUBLIC SERVICE ENT GRP
SOUTHERN COMPANY (THE)AMCOR
AXALTA COATING SYSTEMSQUALCOMMAES CORP
BROADCOMKINDER MORGAN POCCIDENTAL PETROLEUM
US BANCORPFRANKLIN RESOURCES
MODERNAWILLIS TOWERS WATSON
T-MOBILE US
DANAHER CORPHEICO CORP
ARAMARKSNOWFLAKE A
DOCUSIGN
PINTEREST A

Utilities
EnergyEnergyUtilities
Utilities
Utilities
Materials
Materials
Information Technology
Utilities
Information Technology
EnergyEnergyFinancials
Financials
Health Care
Financials
Communication Services
Health Care
Industrials
Consumer Discretionary
Information Technology
Information Technology
Communication Services

0.68%
0.59%
0.58%
0.33%
0.28%
0.22%
0.22%
0.22%
0.22%
0.21%
0.19%
0.18%
0.14%
0.14%
0.12%
0.11%
0.11%
0.11%
0.11%
0.10%
0.09%
0.09%
0.08%
0.08%

Deletion Reason
Proposal 1
Thermal Coal Power
Fossil Fuel Extraction
Fossil Fuel Extraction
Thermal Coal Power
Thermal Coal Power
Thermal Coal Power
Fossil Fuel Extraction
Fossil Fuel Extraction-

Proposal 2
Nuclear Power
Nuclear Power
Nuclear Power
Tobacco-Simulation as of the May 2021 Semi-Annual Index Review.

Information Classification: GENERAL

31

Simulated active sector exposures – KLD 400 Social(Proposal 1)
MSCI KLD 400 Social Sim Index (%)

MSCI KLD 400 Social Proposal Index (%)

Information Classification: GENERAL

32

Simulated active sector exposures – USA Catholic Values(Proposal 1)
MSCI USA Catholic Values Sim Index (%)

MSCI USA Catholic Values Proposal Index (%)

Information Classification: GENERAL

33

Simulated active sector exposures – USA ESG Select(Proposal 1)
MSCI USA ESG Select Sim Index (%)

MSCI USA ESG Select Proposal Index (%)

Information Classification: GENERAL

34

ESG Exclusions Framework(1/2)
The standard screens are based on MSCI ESG Research’s Exclusions framework and can be used to
implement values-based exclusions in indexes in a simple and consistent manner.
Restriction
LevelsAbsolute Tie
vs. Revenue
Threshold** Shaded cells refer to Aggregate Revenue including the relevant business activities

Information Classification: GENERAL

35

ESG Exclusions Framework(2/2)

Information Classification: GENERAL

36

Example of Revenue Screen: Alcohol

Most Restrictive/
Zero Tolerance

Revenue

Alcohol

Any Tie•
Producer•
Distributor•
Retailer•
Supplier•
Licensor•
Ownership

Moderately
Restrictive

Highly Restrictive

Alcohol Producer OR
5% Aggregate
Revenue

5% Production
Revenue OR
15% Aggregate
Revenue

Absolute Tie

Information Classification: GENERAL

Least Restrictive

10% Production
Revenue

Revenue
Threshold37

Example of Non-Revenue Screen: Animal Welfare

Non-Revenue

Animal
WelfareMost Restrictive/
Zero Tolerance

Highly Restrictive

Any Tie•
Non-medical Testing•
Medical Testing•
Factory Farming•
Licensed Breeder•
Licensed Exhibitor•
Ownership Of•
Ownership By

Non-medical TestingOR
Medical TestingOR
Factory FarmingOR
Licensed BreederOR
Licensed Exhibitor

Moderately
Restrictive

Non-medical TestingOR
Medical TestingOR
Factory Farming

Least Restrictive

Non-medical Testing

Absolute Tie

Information Classification: GENERAL

38

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Information Classification: GENERAL

39

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Information Classification: GENERAL

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Information Classification: GENERAL

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