CONSULTATION ON POTENTIAL
ENHANCEMENTS TO THE MSCIEX FOSSIL FUELS AND MSCI EX
COAL INDEXES
March 2019
Note that this consultation may or may not lead to the implementation of any or all of
the proposed changes in the highlighted or any other MSCI indexes. Consultation
feedback will remain confidential. MSCI may publicly disclose feedback if specificallyrequested by specific market participants. In that case, the relevant feedback would be
published together with the final results of the consultation.
© 2019 MSCI Inc. All rights reserved.
Please refer to the disclaimer at the end of this document.

OVERVIEW
The MSCI Global Fossil Fuels Exclusion Indexes(*) aim to exclude companies thathave proved & probable fossil fuels or coal reserves used for energy purposes─ Proposal 1: Enhance the exclusion criteria• Use business segment revenues (instead of only GICS®) to determine if fossil
fuels or coal reserves are used for energy purposes• Exclude companies that hold unknown volume of fossil fuels or coal reserves• Avoid potential exclusion of pure metallurgical coal companies

─ Proposal 2: Apply data coverage requirement• Include companies only when fossil fuels data is available from MSCI ESG
Research

MSCI welcomes feedback from market participants until April 19, 2019 and will
announce the results of the consultation as well as the potential implementation
timeline on or before April 30, 2019(*) include the MSCI ex Fossil Fuels Indexes and the MSCI ex Coal Indexes

2

BETTER ACHIEVING THE INDEX OBJECTIVE• The proposed enhancements aim to better identify and exclude
companies that own fossil fuels or coal reserves used for energy
purposes, in line with the index objective

Considerations in establishing a fossil fuel divestment strategy

Source: “Fossil Fuel Divestment: A Practical Introduction”, MSCI, Jan 2019

Applies to MSCI ex Fossil Fuels and MSCI ex Coal Indexes
Applies to MSCI ex Fossil Fuels Indexes

PROPOSAL 1
Enhance the exclusion criteria

4

CURRENT VS. PROPOSED EXCLUSION CRITERIACURRENTPROPOSED"High Intensity" GICS

Exclude companies that:• Own fossil fuels or coal reserves
AND• Reserves volume can be determined

Exclude companies that:• Own fossil fuels or coal reserves
EXCEPT metallurgical coal companies"Low Intensity" GICS

No exclusions

Exclude companies that:• Own fossil fuels or coal reserves
EXCEPT metallurgical coal companies
AND• Generate revenue from business segments
associated with energy application of fossil fuels (*)(*) Includes revenue from thermal coal mining, oil & gas exploration & production and downstream activities e.g. refining; distribution & retail; pipeline& transportation; trading and fossil fuel based power generation.

•“High Intensity” Global Industry Classification Standard (GICS®) refers to high carbon intensity industries,
specifically the following GICS classifications:
─
─
─

•

Energy Sector
Utilities Sector
Diversified Metals & Mining Sub-Industry

Any other GICS classification corresponds to “Low Intensity” GICS
5

POTENTIAL BENEFITSThe proposed exclusion criteria could bring the following benefits:Companies that use their fossil fuels or coal reserves for energy purposes
would be excluded irrespective of their GICS classification➢ Enhances the current screen which assumes that companies with “low intensity” GICS
do not use their fossil fuels or coal reserves for energy purposes➢ In line with the index objective➢ Leverages the data on fossil fuels revenue available from MSCI ESG ResearchCompanies that do not disclose their volume of fossil fuels or coal reserves
would be excluded➢ In line with the index objective

Avoid potential exclusion of pure metallurgical coal companies➢ Currently, metallurgical coal companies could be excluded if classified in “highintensity” GICS (note: there are currently no such companies in MSCI ACWI Index)

SUMMARY OF IMPACT (EXCLUSIONS)The enhanced screens would result in 60 (respectively 44) securities being newly ineligible
relative to the existing fossil fuels (respectively coal) screen for the MSCI ACWI universe
PARENT INDEX (ACWI)CURRENT INDEX
weight of# exclusions exclusions# newlyineligible

SIMULATED INDEX# newly
weight ofeligible # exclusions
exclusions# constituentsweightACWI ex Fossil Fuels

2,767

100.00%

119

6.24%

60

-

179

8.62%

ACWI ex Coal

2,767

100.00%

33

0.86%

44

-

77

2.68%

Data as of the November 2018 Semi-Annual Index Review

Simulated top 10 newly ineligible securities – MSCI ACWI ex Fossil Fuels Index (full list available in Appendix)
Security
BERKSHIRE HATHAWAY B
BASF
SCHLUMBERGER
SOUTHERN COMPANY (THE)VALE ONAMERICAN ELECTRIC POWER
MITSUBISHI CORPBROOKFIELD ASSET MAN ACK HUTCHISON HOLDINGSMITSUI & COCountryUSA
GERMANYUSA
USA
BRAZILUSA
JAPAN
CANADA
HONG KONG
JAPAN

ACWI
Weight0.643%
0.163%
0.153%
0.111%
0.110%
0.090%
0.086%
0.085%
0.066%
0.062%

SectorFinancials
Materials
EnergyUtilities
Materials
Utilities
Industrials
Financials
Industrials
Industrials

Sub-Industry
Multi-Sector Holdings
Diversified Chemicals
Oil & Gas Equip. & Services
Electric Utilities
SteelElectric Utilities
Trading Companies & Distr.
Asset Mgmt & Custody Banks
Industrial Conglomerates
Trading Companies & Distr.

Data as of the November 2018 Semi-Annual Index Review(*) Companies not classified in either the Energy Sector, Utilities Sector or Diversified Metals & Mining Sub-Industry of the GICS

"Low Intensity"
GICS (*)
X
X

Reserves Volume
Not Available

X
X
X
X
X
X
X
X

X

SIMULATED HISTORICAL IMPACT• The comparison of MSCI ACWI ex Fossil Fuels Index with current screen vs.
simulated MSCI ACWI ex Fossil Fuels Index with new screen shows only a marginal
difference in Risk and Return profile (same applies to MSCI ACWI ex Coal Index)
Key Metrics
MSCI ACWI ex
MSCI ACWI Index
Fossil Fuels Index
Total Return* (%)
Total Risk (%)
Return/Risk
Sharpe Ratio
Active Return (%)
Tracking Error (%)
Information Ratio
Historical Beta
No of Stocks***
Turnover** (%)

8.8
11.2
0.78
0.68
0.0
0.0
NaN
1.00
2547
2.8

8.7
11.3
0.77
0.67
-0.1
0.8
-0.09
1.00
2424
3.0

MSCI ACWI ex
Fossil Fuels(Simulated) Index

MSCI ACWI ex
Coal Index

MSCI ACWI ex
Coal (Simulated)
Index

8.7
11.3
0.77
0.67
0.0
0.9
-0.06
1.01
2371
3.2

8.6
11.2
0.77
0.66
-0.1
0.2
-0.74
1.00
2511
2.9

8.6
11.3
0.76
0.65
-0.2
0.2
-0.85
1.01
2474
2.9

Period: 30-Nov-2015 to 31-Jan-2019
The additional exclusions due to the new screens were determined as of the November 2018 Semi-Annual Index Review and applied throughout the full period* Gross returns annualized in USD** Annualized one-way index turnover over index reviews*** Monthly averages

8

PROPOSAL 2
Apply data coverage requirement

9DATA COVERAGE PROPOSAL
Proposal: Consider companies for inclusion in MSCI Global Fossil Fuels Exclusion
Indexes only once they are covered by MSCI ESG Research for fossil fuels data
• During an Index Review, securities may not yet be covered by MSCI ESG Research forfossil fuels data if they are added to the parent index as part of the Index Review or ifthey were recently added to the parent index due to corporate events (e.g., IPOs)• Under the proposal, such companies would be considered for inclusion in the MSCI
Global Fossil Fuels Exclusion Indexes only when fossil fuels data is available from MSCIESG Research (typically by the next Quarterly Index Review)

10

SIMULATED HISTORICAL IMPACT• The table below shows securities in the MSCI ACWI Index not covered for fossil
fuels data during the Index Reviews in 2018:
Index Review# Securities

ACWI WeightNov-2018

19

0.086%

Aug-2018

90.034%

May-201839

0.156%

Feb-2018

1

0.002%• All such securities started to be covered for fossil fuels data by the next Index
Review, hence becoming eligible for index inclusion under the proposal─

Example: the 39 securities not covered for fossil fuels data at the May 2018 Index
Review would have been considered for addition to the MSCI Global Fossil Fuels
Exclusion Indexes at the August 2018 Index Review

11

DISCUSSION POINTS

12DISCUSSION POINTS• Do you agree that companies with “low intensity” GICS should be
excluded if their business segment revenues indicate that they use theirfossil fuels or coal reserves for energy purposes?
• Is it appropriate to exclude companies that own fossil fuels reserves used
for energy purposes but do not disclose their volume of reserves?
• Do you agree to include companies only once fossil fuels data is available
from MSCI ESG Research?

13

APPENDIX

14

IMPACT – NEW FOSSIL FUELS EXCLUSIONS (1/3)
Simulated newly ineligible securities – MSCI ACWI ex Fossil Fuels Index
Security
BERKSHIRE HATHAWAY B
BASF
SCHLUMBERGER
SOUTHERN COMPANY (THE)VALE ONAMERICAN ELECTRIC POWER
MITSUBISHI CORPBROOKFIELD ASSET MAN ACK HUTCHISON HOLDINGSMITSUI & CO
ITOCHU CORP
WESFARMERS
CLP HOLDINGSFIRSTENERGY CORP
SUMITOMO CORP
SASOL
JARDINE MATHESON (USD)
FRANCO-NEVADA CORP
MARUBENI CORP
ASTRA INTERNATIONALACWICountry
WeightUSA
0.643%GERMANY
0.163%
USA
0.153%
USA
0.111%BRAZIL
0.110%
USA
0.090%
JAPAN
0.086%CANADA
0.085%
HONG KONG 0.066%
JAPAN
0.062%
JAPAN
0.061%
AUSTRALIA
0.058%
HONG KONG 0.044%
USA
0.043%
JAPAN
0.041%
SOUTH AFRICA 0.041%
HONG KONG 0.033%
CANADA
0.030%
JAPAN
0.028%INDONESIA
0.028%

SectorFinancials
Materials
EnergyUtilities
Materials
Utilities
Industrials
Financials
Industrials
Industrials
Industrials
Consumer Discr.
Utilities
Utilities
Industrials
Materials
Industrials
Materials
Industrials
Consumer Discr.

Sub-Industry
Multi-Sector Holdings
Diversified Chemicals
Oil & Gas Equip. & Services
Electric Utilities
SteelElectric Utilities
Trading Companies & Distr.
Asset Mgmt & Custody Banks
Industrial Conglomerates
Trading Companies & Distr.
Trading Companies & Distr.
General Merchandise StoresElectric Utilities
Electric Utilities
Trading Companies & Distr.
Diversified Chemicals
Industrial Conglomerates
Gold
Trading Companies & Distr.
Automobile Manufacturers

Data as of the November 2018 Semi-Annual Index Review(*) All GICS classifications except Energy Sector, Utilities Sector and Diversified Metals & Mining Sub-Industry"Low Intensity"
GICS (*)
X
X

Reserves Volume
Not Available

X
X
X
X
X
X
X
X
X
X

X
X
X
X
X
X

X

X
X
X
X
X

IMPACT – NEW FOSSIL FUELS EXCLUSIONS (2/3)
Simulated newly ineligible securities – MSCI ACWI ex Fossil Fuels Index
SecurityRWE STAMM
TOKYO GAS CO
CHUBU ELECTRIC POWER CO
CITIC
NATURGY ENERGY GROUPSK HOLDINGSJARDINE STRATEGIC (USD)
TOYOTA TSUSHOVISTRA ENERGYGRUPO MEXICO B
OSAKA GAS CO
KEPPEL CORPKEPCO KOREA ELECT. POWER
CHINA GAS HOLDINGSKEYERAFORMOSA PETROCHEMICALALROSA (RUB)
JSW STEELGENTING
BHARAT PETROLEUM CORP

Country
GERMANY
JAPAN
JAPAN
CHINA
SPAIN
KOREA
HONG KONGJAPANUSA
MEXICOJAPANSINGAPORE
KOREA
CHINA
CANADATAIWANRUSSIAINDIA
MALAYSIA
INDIA

ACWI
Weight
0.027%
0.023%
0.022%
0.022%
0.022%
0.019%
0.018%
0.018%
0.018%
0.017%
0.017%
0.015%
0.015%
0.013%
0.011%
0.011%
0.009%
0.009%
0.008%
0.008%

SectorUtilities
Utilities
Utilities
Industrials
Utilities
Industrials
Industrials
Industrials
Utilities
Materials
Utilities
Industrials
Utilities
Utilities
EnergyEnergyMaterials
Materials
Consumer Discr.
EnergySub-Industry
Multi-Utilities
Gas Utilities
Electric Utilities
Industrial Conglomerates
Gas Utilities
Industrial Conglomerates
Industrial Conglomerates
Trading Companies & Distr.
Indt Power Prod. & Energy Traders
Diversified Metals & Mining
Gas Utilities
Industrial Conglomerates
Electric Utilities
Gas Utilities
Oil & Gas Storage & Transp.
Oil & Gas Refining & Mkg
Precious Metals & Minerals
Steel
Casinos & Gaming
Oil & Gas Refining & Mkg

Data as of the November 2018 Semi-Annual Index Review(*) All GICS classifications except Energy Sector, Utilities Sector and Diversified Metals & Mining Sub-Industry"Low Intensity"
GICS (*)

Reserves Volume
Not Available
X
X
X

X
X
X
X

X
X
X
X
X
X

X
X
X
X
X
X
X
X

X
X

IMPACT – NEW FOSSIL FUELS EXCLUSIONS (3/3)
Simulated newly ineligible securities – MSCI ACWI ex Fossil Fuels Index
Security
SEVERSTAL (RUB)
ALFA
ALTAGASTOHO GAS CO
MITSUBISHI MATERIALSJARDINE CYCLE & CARRIAGEPOLSKA GRUPA ENER
GS HOLDINGS CORP
KOC HOLDINGINTER RAO UES(RUB)
ALUMINUM CORP OF CHINA H
GRUPO ARGOS
KOREA GAS CORPORATIONJASTRZEBSKA SPOLKA WEGLCHINA POWER INTLDMCI HOLDINGSPOSCO DAEWOODATANG INTL POWER HTEBIAN ELEC APP A (HK-C)SHANXI XISHAN A (HK-C)

Country
RUSSIAMEXICOCANADAJAPANJAPAN
SINGAPORE
POLAND
KOREA
TURKEYRUSSIACHINACOLOMBIA
KOREA
POLANDCHINA
PHILIPPINES
KOREA
CHINA
CHINA
CHINA

ACWI
Weight0.008%
0.008%
0.007%
0.007%
0.007%
0.006%
0.006%
0.006%
0.005%
0.004%
0.003%
0.003%
0.003%
0.002%
0.002%
0.002%
0.002%
0.002%
0.000%
0.000%

SectorMaterials
Industrials
Utilities
Utilities
Materials
Consumer Discr.
Utilities
EnergyIndustrials
Utilities
Materials
Materials
Utilities
Materials
Utilities
Industrials
Industrials
Utilities
Industrials
EnergySub-Industry
Steel
Industrial Conglomerates
Gas Utilities
Gas Utilities
Diversified Metals & Mining
Distributors
Electric Utilities
Oil & Gas Refining & Mkg
Industrial Conglomerates
Electric Utilities
AluminumConstruction Materials
Gas Utilities
Steel
Indt Power Prod. & Energy Traders
Industrial Conglomerates
Trading Companies & Distr.
Indt Power Prod. & Energy Traders
Electrical Components & Equip.
Coal & Consumable Fuels

Data as of the November 2018 Semi-Annual Index Review(*) All GICS classifications except Energy Sector, Utilities Sector and Diversified Metals & Mining Sub-Industry"Low Intensity"
GICS (*)
X
X

Reserves Volume
Not Available
X
X
X
X

X

X
X
X

X
X
X
X
X
X
X

X
X
X
X
X

X
X
X
X

IMPACT – NEW COAL EXCLUSIONS (1/2)
Simulated newly ineligible securities – MSCI ACWI ex Coal Index
Security
BERKSHIRE HATHAWAY B
SOUTHERN COMPANY (THE)VALE ONAMERICAN ELECTRIC POWER
MITSUBISHI CORP
MITSUI & CO
ITOCHU CORP
WESFARMERS
CLP HOLDINGSFIRSTENERGY CORPHONGKONG CHINA GASSUMITOMO CORP
SASOL
JARDINE MATHESON (USD)
FRANCO-NEVADA CORP
MARUBENI CORP
ASTRA INTERNATIONAL
RWE STAMM
CHUBU ELECTRIC POWER CO
CITIC
NATURGY ENERGY GROUPSK HOLDINGSACWICountry
WeightUSA
0.643%
USA
0.111%BRAZIL
0.110%
USA
0.090%
JAPAN
0.086%
JAPAN
0.062%
JAPAN
0.061%
AUSTRALIA
0.058%
HONG KONG 0.044%
USA
0.043%
HONG KONG 0.042%
JAPAN
0.041%
SOUTH AFRICA 0.041%
HONG KONG 0.033%
CANADA
0.030%
JAPAN
0.028%INDONESIA
0.028%GERMANY
0.027%
JAPAN
0.022%
CHINA
0.022%
SPAIN
0.022%
KOREA
0.019%

SectorFinancials
Utilities
Materials
Utilities
Industrials
Industrials
Industrials
Consumer Discr.
Utilities
Utilities
Utilities
Industrials
Materials
Industrials
Materials
Industrials
Consumer Discr.
Utilities
Utilities
Industrials
Utilities
Industrials

Sub-Industry
Multi-Sector Holdings
Electric Utilities
SteelElectric Utilities
Trading Companies & Distr.
Trading Companies & Distr.
Trading Companies & Distr.
General Merchandise StoresElectric Utilities
Electric Utilities
Gas Utilities
Trading Companies & Distr.
Diversified Chemicals
Industrial Conglomerates
Gold
Trading Companies & Distr.
Automobile Manufacturers
Multi-Utilities
Electric Utilities
Industrial Conglomerates
Gas Utilities
Industrial Conglomerates

Data as of the November 2018 Semi-Annual Index Review(*) All GICS classifications except Energy Sector, Utilities Sector and Diversified Metals & Mining Sub-Industry"Low Intensity"
GICS (*)
X

Reserves Volume
Not Available
X

X
X
X
X
X
X

X
X
X
X
X
X

X
X

X
X
X
X
X
X
X
X
X
X
X
X

IMPACT – NEW COAL EXCLUSIONS (2/2)
Simulated newly ineligible securities – MSCI ACWI ex Coal Index
Security
JARDINE STRATEGIC (USD)
TOYOTA TSUSHOVISTRA ENERGYGRUPO MEXICO B
KEPCO KOREA ELECT. POWERIDEMITSU KOSAN COJSW STEELSEVERSTAL (RUB)
MITSUBISHI MATERIALSJARDINE CYCLE & CARRIAGEPOLSKA GRUPA ENER
KOC HOLDINGINTER RAO UES(RUB)
ALUMINUM CORP OF CHINA H
GRUPO ARGOSJASTRZEBSKA SPOLKA WEGLCHINA POWER INTLDMCI HOLDINGSPOSCO DAEWOODATANG INTL POWER HTEBIAN ELEC APP A (HK-C)SHANXI XISHAN A (HK-C)

Country
HONG KONGJAPANUSA
MEXICO
KOREA
JAPAN
INDIA
RUSSIAJAPANSINGAPORE
POLAND
TURKEYRUSSIACHINACOLOMBIAPOLANDCHINA
PHILIPPINES
KOREA
CHINA
CHINA
CHINA

ACWI
Weight0.018%
0.018%
0.018%
0.017%
0.015%
0.011%
0.009%
0.008%
0.007%
0.006%
0.006%
0.005%
0.004%
0.003%
0.003%
0.002%
0.002%
0.002%
0.002%
0.002%
0.000%
0.000%

SectorIndustrials
Industrials
Utilities
Materials
Utilities
EnergyMaterials
Materials
Materials
Consumer Discr.
Utilities
Industrials
Utilities
Materials
Materials
Materials
Utilities
Industrials
Industrials
Utilities
Industrials
EnergySub-Industry
Industrial Conglomerates
Trading Companies & Distr.
Indt Power Prod. & Energy Traders
Diversified Metals & Mining
Electric Utilities
Oil & Gas Refining & Marketing
Steel
Steel
Diversified Metals & Mining
Distributors
Electric Utilities
Industrial Conglomerates
Electric Utilities
AluminumConstruction Materials
Steel
Indt Power Prod. & Energy Traders
Industrial Conglomerates
Trading Companies & Distr.
Indt Power Prod. & Energy Traders
Electrical Components & Equip.
Coal & Consumable Fuels

Data as of the November 2018 Semi-Annual Index Review(*) All GICS classifications except Energy Sector, Utilities Sector and Diversified Metals & Mining Sub-Industry"Low Intensity"
GICS (*)
X
X

X
X

Reserves Volume
Not Available
X
X
X
X
X
X
X

X
X
X
X
X

X
X
X
X
X
X

X
X
X

X
X
X
X

SCREENING FORMULAS• The MSCI Global ex Fossil Fuels Indexes use data from MSCI ESG Research toscreen out companies with fossil fuels or coal reserves
Screening formulas

MSCI ex Fossil Fuels Indexes

MSCI ex Coal Indexes

Current

Proposed
Fossil Fuel Reserves – Energy Application = TRUE

AND

Industry - Energy Application = TRUE
Total Potential Emissions (MtCO2) > 0

AND

Industry - Energy Application = TRUE
Total Coal - Potential Emissions (MtCO2) > 0

AND

Fossil Fuel Reserves – Energy Application = TRUE
Evidence of Total Coal Reserves = TRUE

20

NEW MSCI ESG RESEARCH FACTOR“Fossil Fuel Reserves – Energy Application”• Launched by MSCI ESG Research in October 2018
• Used in the proposed screening formula• For companies with “low intensity” GICS, the factor considers revenues from thefollowing activities to determine if fossil fuels reserves are used for energy
application:✓ Thermal coal mining✓ Oil & Gas exploration & production and downstream activities e.g. refining; distribution& retail; pipeline & transportation; trading.
✓ Fossil fuel based power generation• Revenues from other activities are not considered:✓ Oil & Gas equipment & services✓ Oil & Gas petrochemicals✓ Other activities not related to Fossil fuel businesses

ESG DATA DEFINITIONS
Factor Name

Industry - Energy Application

Fossil Fuel Reserves – Energy Application

Total Potential Emissions (MtCO2)

Total Coal - Potential Emissions (MtCO2)

Evidence of Total Coal Reserves

Description

Companies with fossil fuel reserves used for energy application. This includes companies with reservesin the Oil & Gas industries, Utilities and Diversified Metals and Mining.
This factor identifies companies, regardless of their industries, with evidence of owning fossil fuelreserves used most likely for energy applications. For high intensity industries (Energy, Utilities,
Diversified Metals & Mining), this factor flags companies with evidence of fossil fuel reserves(excluding metallurgical coal). For other industries, it flags companies with evidence of fossil fuelreserves (excluding metallurgical coal) and deriving revenue from business segments associated withenergy application of fossil fuels such as thermal coal mining, oil & gas exploration & production anddownstream activities e.g. refining; distribution & retail; pipeline & transportation; trading and fossil
fuel based power generation. Fossil fuel reserves are defined as proved and probable reserves (i.e. 2P)
for coal and proved reserves (i.e. 1P) for oil and natural gas. Evidence of owning reserves includes
companies providing the exact volume of reserves, and companies making a statement about theirownership of reserves.
This field represents the potential carbon emissions of the coal, oil and gas reserves owned by acompany. It is computed as the sum of the potential carbon emissions of the total coal, total oil andtotal gas reserves owned by the company.
This field represents the potential carbon emissions of the coal reserves owned by a company. It is
computed as the sum of the potential carbon emissions of the metallurgical coal reserves and thermal
coal reserves owned by the company.
This field identifies companies that provide evidence of owning coal reserves, including those that own
less than 50% of a reserves field. Evidence of owning reserves includes companies providing the exact
volume of reserves, and companies making a statement about their ownership of reserves.

22

ESG METRICS (ACWI EX FOSSIL FUELS)ESG Metrics
MSCI ACWI
Index
Integration
Key Integration Metrics
ESG Score
ESG Leaders (AAA-AA) (%)
ESG Laggards (B-CCC) (%)
ESG Trend Positive (%)
ESG Trend Negative (%)
ESG Pillars
Environmental Score
Social Score
Governance Score
Key Governance Metrics
Lack of Independent Board Majority (%)
Deviation from One Share One Vote (%)
No Female Directors (%)
ValuesTobacco Producers (%)
Civilian Firearms Producers (%)
Ties to Controversial Weapons (%)
Global Compact Compliance Violation or Watch List (%)
Red Flag Controversies (%)
Orange Flag Controversies (%)

MSCI ACWI ex MSCI ACWI ex
Fossil Fuels
Fossil Fuels
Index
Index (Sim)

5.7
23.0
11.2
16.5
6.2

5.7
23.8
10.5
16.5
6.6

5.7
23.9
10.4
16.6
6.5

5.5
4.6
5.2

5.7
4.6
5.2

5.8
4.6
5.2

15.6
24.6
7.1

15.9
24.9
7.1

15.0
24.5
7.2

0.9
0.2
0.9
13.9
3.5
24.5

1.0
0.2
0.9
11.4
2.1
24.3

1.0
0.2
1.0
11.4
2.0
24.6

As of 31-Jan-2019
The definitions of all statistical parameters are available in the Appendix

23

CARBON EXPOSURE (ACWI EX FOSSIL FUELS)
Carbon Exposure
MSCI ACWI
Index
Carbon Emissions (t CO2e/$M Invested)
Carbon Intensity (t CO2e/$M Sales)
Wtd Avg Carbon Intensity (t CO2e/$M Sales)
Potential Carbon Emissions (t CO2e/$M Invested)
Fossil Fuel Reserves (%)
Coal Reserves (%)
Thermal Coal Mining (%)
Thermal Coal-based Power Generation (%)
Oil Sands Production (%)
Shale Oil & Gas Production (%)
Arctic Oil & Gas Production (%)

144
227
211
3320
6.2
0.9
1.7
3.3
3.3
3.6
1.8

MSCI ACWIMSCI ACWI
ex Fossil
ex Fossil
Fuels Index
Fuels Index
(Sim)
115
96
188
159
178
153
37
38
0.0
0.0
0.0
0.0
0.9
0.0
0.0
1.9
0.0
0.0
0.0
0.0
0.0
0.0

As of 31-Jan-2019
The definitions of all statistical parameters are available in the Appendix
Fossil Fuel Reserves (%) and Coal Reserves (%) metrics are based on the current screens used in the MSCI Global ex Fossil Fuels Indexes

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ESG METRICS (ACWI EX COAL)
ESG Metrics
MSCI ACWI
Index
Integration
Key Integration Metrics
ESG Score
ESG Leaders (AAA-AA) (%)
ESG Laggards (B-CCC) (%)
ESG Trend Positive (%)
ESG Trend Negative (%)
ESG Pillars
Environmental Score
Social Score
Governance Score
Key Governance Metrics
Lack of Independent Board Majority (%)
Deviation from One Share One Vote (%)
No Female Directors (%)
ValuesTobacco Producers (%)
Civilian Firearms Producers (%)
Ties to Controversial Weapons (%)
Global Compact Compliance Violation or Watch List (%)
Red Flag Controversies (%)
Orange Flag Controversies (%)

MSCI ACWI MSCI ACWI
ex Coalex CoalIndex
Index (Sim)

5.7
23.0
11.2
16.5
6.2

5.7
23.2
11.2
16.4
6.3

5.7
23.4
11.2
16.4
6.3

5.5
4.6
5.2

5.6
4.6
5.2

5.6
4.6
5.2

15.6
24.6
7.1

15.7
24.7
7.1

14.8
24.3
7.1

0.9
0.2
0.9
13.9
3.5
24.5

0.9
0.2
0.9
13.3
3.2
24.3

0.9
0.2
0.9
13.4
3.2
24.7

As of 31-Jan-2019
The definitions of all statistical parameters are available in the Appendix

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CARBON EXPOSURE (ACWI EX COAL)
Carbon Exposure
MSCI ACWI
Index
Carbon Emissions (t CO2e/$M Invested)
Carbon Intensity (t CO2e/$M Sales)
Wtd Avg Carbon Intensity (t CO2e/$M Sales)
Potential Carbon Emissions (t CO2e/$M Invested)
Fossil Fuel Reserves (%)
Coal Reserves (%)
Thermal Coal Mining (%)
Thermal Coal-based Power Generation (%)
Oil Sands Production (%)
Shale Oil & Gas Production (%)
Arctic Oil & Gas Production (%)

144
227
211
3320
6.2
0.9
1.7
3.3
3.3
3.6
1.8

MSCI ACWI
ex Coal
Index
134
214
201
2190
5.3
0.0
0.9
3.2
3.3
3.7
1.8

MSCI ACWI
ex CoalIndex (Sim)
117
188
178
2227
5.4
0.0
0.0
2.1
3.4
3.7
1.9

As of 31-Jan-2019
The definitions of all statistical parameters are available in the Appendix
Fossil Fuel Reserves (%) and Coal Reserves (%) metrics are based on the current screens used in the MSCI Global ex Fossil Fuels Indexes

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APPENDIXKey Metrics

Definition

Total Return

Annualized Total Return is a measure of gain or loss on the index.

Total Risk

Total Risk (also called Volatility) is a measure of index return dispersion. Annualized volatility is computed as the standard deviation of monthly index Total Returns.

Return/Risk

Return/Risk is the index return per unit of index risk, computed as the ratio of Total Return to Total Risk.

Sharpe Ratio

The Sharpe Ratio is computed as the ratio of index Excess Return to risk where Excess Return is the difference between the Total Index Return (annualized) and thecorresponding risk-free rate.

Active Return

Active return is the Total Return of a factor index relative to its parent.

Tracking Error

Tracking Error (also called Active Risk) measures the dispersion of Active Returns between a factor index and its parent, and is calculated as the annualized standard
deviation of Active Returns.

Information Ratio

Information Ratio measures Return/Risk in Active space, calculated as the ratio of Active Return to Tracking Error.

Historical Beta

Beta is a measure of the level of co-movement between a factor index and its parent.

TurnoverTurnover measures the percentage change in the composition of an index at each index rebalancing.

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APPENDIX
ESG Metrics

Definition

ESG Score

The ESG Score indicates how well the index companies manage their most material ESG risks relative to sector peers. Scores range from 10 (best) to 0 (worst).

ESG Leaders (AAA-AA) (%)

Exposure to companies with an ESG rating of AAA or AA (best in class relative to peers).

ESG Laggards (B-CCC) (%)

Exposure to companies with an ESG rating of B or CCC (worst in class relative to peers).

ESG Trend Positive (%)

Exposure to companies with a rating upgrade in the year prior to the most recent ESG rating.

ESG Trend Negative (%)

Exposure to companies with a rating downgrade in the year prior to the most recent ESG rating.

Environmental Score

The Environmental Score indicates how well the index companies manage their most material environment risks. Scores range from 10 (best) to 0 (worst).

Social Score

The Social Score indicates how well the index companies manage their most material social risks. Scores range from 10 (best) to 0 (worst).

Governance Score

The Governance Score indicates how well the index companies manage their most material governance risks. Scores range from 10 (best) to 0 (worst).

Lack of Independent Board Majority (%) Exposure to companies lacking an independent board majority.
Deviation from One Share One Vote (%)

Exposure to companies flagged for limitations on voting rights.

No Female Directors (%)

Exposure to companies with no female directors.

Tobacco Producers (%)

Exposure to tobacco producers.

Civilian Firearms Producers (%)

Exposure to civilian firearms producers.

Ties to Controversial Weapons (%)

Exposure to companies with ties to controversial weapons.

Global Compact Compliance Violation or
Exposure to companies in violation of the UN Global Compact principles, or on MSCI's "Watch List" for potential violations.
Watch List (%)
Red Flag Controversies (%)

Exposure to companies with very severe customer, environment, governance, human rights, or labor controversies.

Orange Flag Controversies (%)

Exposure to companies with serious customer, environment, governance, human rights, or labor controversies.

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APPENDIX
Carbon Exposure

Definition

Carbon Emissions

Carbon emissions normalized for the size of the portfolio tracking the index. (Unit: tons of CO2/ million $ invested)

Carbon Emissions Intensity

Efficiency of a portfolio tracking the index in terms of total carbon emissions divided by total sales. (Unit: tons of CO2/ million $ of sales)

Weighted Average Carbon Intensity

Exposure to carbon intensive companies. (Unit: tons of CO2/ million $ of sales)

Potential Carbon Emissions

Carbon potential emissions normalized for the size of the portfolio tracking the index. (Unit: tons of CO2/ million $ invested)

Fossil Fuel Reserves (%)

Exposure to companies that own fossil fuel reserves

Coal Reserves (%)

Exposure to companies that own coal reserves.

Thermal Coal Mining (%)

Exposure to companies that derive more than 0% revenue from thermal coal mining.

Thermal Coal-based Power Generation(%)

Exposure to companies that derive more than 0% revenue from thermal coal-based power generation.

Oil Sands Production (%)

Exposure to companies that derive more than 0% revenue from oil sands extraction.

Shale Oil & Gas Production (%)

Exposure to companies that derive more than 0% revenue from shale oil & gas production.

Arctic Oil & Gas Production (%)

Exposure to companies that derive more than 0% revenue from offshore or onshore oil & gas production in the Arctic region.

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