METHODOLOGY BOOK FOR MSCI EMU ESG SCREENED INDEX, MSCI USA ESG SCREENED INDEX,MSCI EUROPE ESG SCREENED INDEX, MSCI WORLD ESG SCREENED INDEX, MSCI JAPAN ESGSCREENED INDEX AND MSCI EMERGING MARKETS IMI ESG SCREENED INDEX| SEPTEMBER 2018

METHODOLOGY BOOK FOR:
- MSCI EMU ESG SCREENED INDEX- MSCI USA ESG SCREENED INDEX- MSCI EUROPE ESG SCREENED INDEX- MSCI WORLD ESG SCREENED INDEX- MSCI JAPAN ESG SCREENED INDEX- MSCI EMERGING MARKETS IMI ESGSCREENED INDEX
September 2018

SEPTEMBER 2018

METHODOLOGY BOOK FOR MSCI EMU ESG SCREENED INDEX, MSCI USA ESG SCREENED INDEX,MSCI EUROPE ESG SCREENED INDEX, MSCI WORLD ESG SCREENED INDEX, MSCI JAPAN ESGSCREENED INDEX AND MSCI EMERGING MARKETS IMI ESG SCREENED INDEX| SEPTEMBER 2018

CONTENTS

1Introduction ................................................................................ 3

2

MSCI ESG Research ..................................................................... 4

3

4

2.1

MSCI ESG Controversies ........................................................................... 4

2.2

MSCI ESG Business Involvement Screening Research.............................. 4

Constructing the MSCI ESG Screened Indexes ............................. 5
3.1

Eligible Universe ....................................................................................... 5

3.2

ESG Exclusions .......................................................................................... 5

3.3

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

Maintaining the MSCI ESG Screened Indexes .............................. 7
4.1

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

4.2

Ongoing Event Related changes............................................................... 7

Appendix 1 – ESG Exclusion Criteria ................................................... 9© 2018 MSCI Inc. All rights reserved. Please refer to the disclaimer at the end of this document.

MSCI.COM | PAGE 2 OF 13

METHODOLOGY BOOK FOR MSCI EMU ESG SCREENED INDEX, MSCI USA ESG SCREENED INDEX,MSCI EUROPE ESG SCREENED INDEX, MSCI WORLD ESG SCREENED INDEX, MSCI JAPAN ESGSCREENED INDEX AND MSCI EMERGING MARKETS IMI ESG SCREENED INDEX| SEPTEMBER 2018

1

INTRODUCTION
The MSCI EMU ESG Screened Index, the MSCI USA ESG Screened Index, the MSCI Europe
ESG Screened Index, the MSCI World ESG Screened Index, the MSCI Japan ESG Screened
Index and the MSCI Emerging Markets IMI ESG Screened Index (herein, ‘MSCI ESG Screened
Indexes’) aim to represent the performance of a free float adjusted market capitalization
weighted investment strategy that excludes companies:that are associated with controversial, civilian and nuclear weapons and tobacco

that derive revenues from thermal coal and oil sands extraction orthat are not in compliance with the United Nations Global Compact principles© 2018 MSCI Inc. All rights reserved. Please refer to the disclaimer at the end of this document.

MSCI.COM | PAGE 3 OF 13

METHODOLOGY BOOK FOR MSCI EMU ESG SCREENED INDEX, MSCI USA ESG SCREENED INDEX,MSCI EUROPE ESG SCREENED INDEX, MSCI WORLD ESG SCREENED INDEX, MSCI JAPAN ESGSCREENED INDEX AND MSCI EMERGING MARKETS IMI ESG SCREENED INDEX| SEPTEMBER 2018

2

MSCI ESG RESEARCH
The MSCI ESG Screened Indexes use company research provided by MSCI ESG Research. In
particular, these indexes use the following MSCI ESG Research products: MSCI ESG
Controversies and MSCI Business Involvement Screening Research.
For details on MSCI ESG Research’s full suite of ESG products, please refer to:
http://www.msci.com/products/esg/about_msci_esg_research.html

2.1

MSCI ESG CONTROVERSIESMSCI ESG Controversies provides assessments of controversies concerning the negativeenvironmental, social, and/or governance impact of company operations, products andservices. The evaluation framework used in MSCI ESG Controversies is designed to beconsistent with international 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.
For more details on MSCI ESG Controversies Score, please referhttps://www.msci.com/documents/10199/acbe7c8a-a4e4-49de-9cf8-5e957245b86b.

2.2

to

MSCI ESG BUSINESS INVOLVEMENT SCREENING RESEARCHMSCI ESG Business Involvement Screening Research (BISR) aims to enable institutional
investors to manage environmental, social and governance (ESG) standards and restrictions
reliably and efficiently.
For more details on MSCI ESG Business Involvement Screening Research, please refer tohttp://www.msci.com/resources/factsheets/MSCI_ESG_BISR.pdf.

© 2018 MSCI Inc. All rights reserved. Please refer to the disclaimer at the end of this document.

MSCI.COM | PAGE 4 OF 13

METHODOLOGY BOOK FOR MSCI EMU ESG SCREENED INDEX, MSCI USA ESG SCREENED INDEX,MSCI EUROPE ESG SCREENED INDEX, MSCI WORLD ESG SCREENED INDEX, MSCI JAPAN ESGSCREENED INDEX AND MSCI EMERGING MARKETS IMI ESG SCREENED INDEX| SEPTEMBER 20183

CONSTRUCTING THE MSCI ESG SCREENED INDEXES

3.1

ELIGIBLE UNIVERSE
The eligible universe for MSCI ESG Screened Indexes includes all the constituents of theirrespective MSCI parent index (the “Parent Index”), as shown in the table below.

3.2

Index Name

Parent Index

MSCI EMU ESG Screened Index

MSCI EMU Index

MSCI USA ESG Screened Index

MSCI USA Index

MSCI Europe ESG Screened Index

MSCI Europe Index

MSCI World ESG Screened Index

MSCI World Index

MSCI Japan ESG Screened Index

MSCI Japan Index

MSCI Emerging Markets IMI ESG Screened
Index

MSCI Emerging Markets
IMI

ESG EXCLUSIONSThe MSCI ESG Screened Indexes use MSCI ESG Business Involvement Screening Research toidentify companies that are involved in the following business activities. Companies thatmeet the business involvement criteria are excluded from the MSCI ESG Screened Indexes.
Controversial Weapons

Nuclear Weapons

Civilian FirearmsTobacco

Thermal Coal

Oil Sands

In addition to the above, companies that fail to comply with the United Nations Global
Compact Principles are also excluded from the MSCI ESG Screened Indexes.
Please refer to Appendix 1 for details on these criteria.

© 2018 MSCI Inc. All rights reserved. Please refer to the disclaimer at the end of this document.

MSCI.COM | PAGE 5 OF 13

METHODOLOGY BOOK FOR MSCI EMU ESG SCREENED INDEX, MSCI USA ESG SCREENED INDEX,MSCI EUROPE ESG SCREENED INDEX, MSCI WORLD ESG SCREENED INDEX, MSCI JAPAN ESGSCREENED INDEX AND MSCI EMERGING MARKETS IMI ESG SCREENED INDEX| SEPTEMBER 2018

3.3

WEIGHTING SCHEME
The remaining securities, after the exclusions based on section 3.2, are weighted inproportion of their free float-adjusted market capitalization.

© 2018 MSCI Inc. All rights reserved. Please refer to the disclaimer at the end of this document.

MSCI.COM | PAGE 6 OF 13

METHODOLOGY BOOK FOR MSCI EMU ESG SCREENED INDEX, MSCI USA ESG SCREENED INDEX,MSCI EUROPE ESG SCREENED INDEX, MSCI WORLD ESG SCREENED INDEX, MSCI JAPAN ESGSCREENED INDEX AND MSCI EMERGING MARKETS IMI ESG SCREENED INDEX| SEPTEMBER 2018

4

MAINTAINING THE MSCI ESG SCREENED INDEXES

4.1

QUARTERLY INDEX REVIEWSThe MSCI ESG Screened Indexes are reviewed on a quarterly basis to coincide with theregular Semi-Annual and Quarterly Index Reviews of the MSCI Global Investable Market
Indexes. The changes are implemented as of the close of the last business day of February,
May, August and November.
In general, MSCI uses MSCI ESG Research data (including MSCI ESG Ratings, MSCI ESG
Controversies Scores and MSCI Business Involvement Screening Research) as of the end of
the month preceding the Index Reviews for the rebalancing of the Index. For somesecurities, such data may not be published by MSCI ESG Research by the end of the month
preceding the Index Review. For such securities, MSCI will use ESG data published after theend of month, when available, for the rebalancing of the Index.
The pro forma Indexes are in general announced nine business days before the effective
date.

4.2

ONGOING EVENT RELATED CHANGESThe general treatment of corporate events in the MSCI ESG Screened Indexes aims tominimize 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.
The following section briefly describes the treatment of common corporate events within
the MSCI ESG Screened Indexes.
No new securities will be added (except where noted below) to the Indexes between Index
Reviews. For cases where additions are noted below, securities will be added to the index
only if added to the parent index.
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 the index.

© 2018 MSCI Inc. All rights reserved. Please refer to the disclaimer at the end of this document.

MSCI.COM | PAGE 7 OF 13

METHODOLOGY BOOK FOR MSCI EMU ESG SCREENED INDEX, MSCI USA ESG SCREENED INDEX,MSCI EUROPE ESG SCREENED INDEX, MSCI WORLD ESG SCREENED INDEX, MSCI JAPAN ESGSCREENED INDEX AND MSCI EMERGING MARKETS IMI ESG SCREENED INDEX| SEPTEMBER 2018

Spin-Offs

All securities created as a result of thespin-off of an existing index constituent
will not be added to the index at the timeof event implementation.

Merger/Acquisition

For Mergers and Acquisitions, theacquirer’s post event weight will accountfor the proportionate amount of shares
involved in deal consideration, while cash
proceeds will be invested across theIndex.
If an existing Index constituent is acquiredby a non-Index constituent, the existing
constituent will be deleted from the Index
and the acquiring non-constituent will not
be added to the Index.

Changes in Security Characteristics

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

Further detail and illustration regarding specific treatment of corporate events relevant tothis Index can be found in the MSCI Corporate Events Methodology book.
The MSCI Corporate Events methodology book is available at: https://www.msci.com/indexmethodology.

© 2018 MSCI Inc. All rights reserved. Please refer to the disclaimer at the end of this document.

MSCI.COM | PAGE 8 OF 13

METHODOLOGY BOOK FOR MSCI EMU ESG SCREENED INDEX, MSCI USA ESG SCREENED INDEX,MSCI EUROPE ESG SCREENED INDEX, MSCI WORLD ESG SCREENED INDEX, MSCI JAPAN ESGSCREENED INDEX AND MSCI EMERGING MARKETS IMI ESG SCREENED INDEX| SEPTEMBER 2018

APPENDIX 1 – ESG EXCLUSIONS CRITERIAMSCI ESG Research has developed a framework designed to define significant involvement
in controversial activities. According to this framework, there are three tolerance levels:
Zero Tolerance, Minimal Tolerance and Low Tolerance.
Each controversial activity screened by the MSCI ESG Screened Indexes (except Thermal
Coal, Oil Sands and Global Norms) is assigned to one of these tolerance levels:
Activities classified under “Zero Tolerance”
Controversial Weapons-

All companies with any tie to Controversial Weapons (cluster munitions,landmines, depleted uranium weapons, biological/chemical weapons,
blinding lasers, non-detectable fragments and incendiary weapons), as
defined by the methodology of the MSCI Ex-Controversial Weapons Indexes
available at https://www.msci.com/index-methodology.

Activities classified under “Minimal Tolerance”


Nuclear Weapons-

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

-All companies that manufacture components that were developed or are
significantly modified for exclusive use in nuclear weapons (warheads andmissiles).

-All companies that manufacture or assemble delivery platforms that weredeveloped or significantly modified for the exclusive delivery of nuclear
weapons.

-

All companies that provide auxiliary services related to nuclear weapons.

-

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

-All companies that manufacture or assemble delivery platforms that were
not developed or not significantly modified for the exclusive delivery of
nuclear weapons.

-

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

© 2018 MSCI Inc. All rights reserved. Please refer to the disclaimer at the end of this document.

MSCI.COM | PAGE 9 OF 13

METHODOLOGY BOOK FOR MSCI EMU ESG SCREENED INDEX, MSCI USA ESG SCREENED INDEX,MSCI EUROPE ESG SCREENED INDEX, MSCI WORLD ESG SCREENED INDEX, MSCI JAPAN ESGSCREENED INDEX AND MSCI EMERGING MARKETS IMI ESG SCREENED INDEX| SEPTEMBER 2018



Civilian Firearms-

All companies classified as “Producer” of firearms and small arms
ammunitions for civilian markets. It does not include companies that caterto the military, government, and law enforcement markets.

-

All companies deriving 5% or more revenue from the distribution(wholesale or retail) of firearms or small arms ammunition intended for
civilian use.

Tobacco-All companies classified as a “Producer”-

All companies deriving 5% or more aggregate revenue from the production,
distribution, retail and supply of tobacco-related products.

Activities not classified under any specific tolerance level

Thermal Coal-All companies deriving 5% or more revenue (either reported or estimated)from the mining of thermal coal (including lignite, bituminous, anthracite
and steam coal) and its sale to external parties. It excludes: revenue frommetallurgical coal; coal mined for internal power generation (e.g. in thecase of vertically integrated power producers); intra-company sales ofmined thermal coal; and revenue from coal trading.

-

All companies deriving 5% or more revenue (either reported or estimated)from the thermal coal based power generation.

Oil Sands-All companies deriving 5% or more revenue from oil sands extraction,
which own oil sands reserves and disclose evidence of deriving revenue
from oil sands extraction. Companies that derive revenue from nonextraction activities (e.g. exploration, surveying, processing, refining) or
intra-company sales are not excluded. Additionally, companies that own oilsands reserves with no associated revenue are also not excluded.

Global Norms – United Nations Global Compact Compliance-

All companies that fail to comply with the United Nations Global Compact
principles.

© 2018 MSCI Inc. All rights reserved. Please refer to the disclaimer at the end of this document.

MSCI.COM | PAGE 10 OF 13

METHODOLOGY BOOK FOR MSCI EMU ESG SCREENED INDEX, MSCI USA ESG SCREENED INDEX,MSCI EUROPE ESG SCREENED INDEX, MSCI WORLD ESG SCREENED INDEX, MSCI JAPAN ESGSCREENED INDEX AND MSCI EMERGING MARKETS IMI ESG SCREENED INDEX| SEPTEMBER 2018CONTACT US
clientservice@msci.com

AMERICAS
AmericasAtlanta
BostonChicagoMonterrey
New York
San Francisco
Sao Paulo
Toronto

ABOUT MSCI
1 888 588 4567 *+ 1 404 551 3212
+ 1 617 532 0920
+ 1 312 675 0545
+ 52 81 1253 4020
+ 1 212 804 3901
+ 1 415 836 8800
+ 55 11 3706 1360
+ 1 416 628 1007

EUROPE, MIDDLE EAST & AFRICA
Cape Town
Frankfurt
GenevaLondonMilan
Paris+ 27 21 673 0100
+ 49 69 133 859 00+ 41 22 817 9777
+ 44 20 7618 2222
+ 39 02 5849 0415
0800 91 59 17 *For more than 40 years, MSCI’s researchbased indexes and analytics have helped
the world’s leading investors build andmanage better portfolios. Clients rely on
our offerings for deeper insights into thedrivers of performance and risk in theirportfolios, broad asset class coverage andinnovative research.
Our line of products and services includes
indexes, analytical models, data, real estatebenchmarks and ESG research.
MSCI serves 98 of the top 100 largest
money managers, according to the mostrecent P&I ranking.
For more information, visit us atwww.msci.com.

ASIA PACIFIC
China North
China SouthHong Kong
Mumbai
Seoul
Singapore
SydneyTaipeiTokyo

10800 852 1032 *
10800 152 1032 *+ 852 2844 9333
+ 91 22 6784 9160
00798 8521 3392 *800 852 3749 *+ 61 2 9033 9333
008 0112 7513 *+ 81 3 5290 1555

* = toll free

SEPTEMBER 2018

METHODOLOGY BOOK FOR MSCI EMU ESG SCREENED INDEX, MSCI USA ESG SCREENED INDEX,MSCI EUROPE ESG SCREENED INDEX, MSCI WORLD ESG SCREENED INDEX, MSCI JAPAN ESGSCREENED INDEX AND MSCI EMERGING MARKETS IMI ESG SCREENED INDEX| SEPTEMBER 2018

NOTICE ANDDISCLAIMER

This document and all of the information contained in it, including without limitation all text, data, graphs, charts (collectively, the “Information”) is
the property of MSCI Inc. or its subsidiaries (collectively, “MSCI”), or MSCI’s licensors, direct or indirect suppliers or any third party involved in making
or compiling any Information (collectively, with MSCI, the “Information Providers”) and is provided for informational purposes only. The Information
may not be modified, reverse-engineered, reproduced or redisseminated in whole or in part without prior written permission from MSCI.
The Information may not be used to create derivative works or to verify or correct other data or information. For example (but without limitation),the Information may not be used to create indexes, databases, risk models, analytics, software, or in connection with the issuing, offering,sponsoring, managing or marketing of any securities, portfolios, financial products or other investment vehicles utilizing or based on, linked to,
tracking or otherwise derived from the Information or any other MSCI data, information, products or services.
The user of the Information assumes the entire risk of any use it may make or permit to be made of the Information. NONE OF THE INFORMATIONPROVIDERS MAKES ANY EXPRESS OR IMPLIED WARRANTIES OR REPRESENTATIONS WITH RESPECT TO THE INFORMATION (OR THE RESULTS TO BE
OBTAINED BY THE USE THEREOF), AND TO THE MAXIMUM EXTENT PERMITTED BY APPLICABLE LAW, EACH INFORMATION PROVIDER EXPRESSLYDISCLAIMS ALL IMPLIED WARRANTIES (INCLUDING, WITHOUT LIMITATION, ANY IMPLIED WARRANTIES OF ORIGINALITY, ACCURACY, TIMELINESS,NON-INFRINGEMENT, COMPLETENESS, MERCHANTABILITY AND FITNESS FOR A PARTICULAR PURPOSE) WITH RESPECT TO ANY OF THE
INFORMATION.
Without limiting any of the foregoing and to the maximum extent permitted by applicable law, in no event shall any Information Provider have any
liability regarding any of the Information for any direct, indirect, special, punitive, consequential (including lost profits) or any other damages even if
notified of the possibility of such damages. The foregoing shall not exclude or limit any liability that may not by applicable law be excluded or limited,
including without limitation (as applicable), any liability for death or personal injury to the extent that such injury results from the negligence orwillful default of itself, its servants, agents or sub-contractors.
Information containing any historical information, data or analysis should not be taken as an indication or guarantee of any future performance,
analysis, forecast or prediction. Past performance does not guarantee future results.
The Information should not be relied on and is not a substitute for the skill, judgment and experience of the user, its management, employees,
advisors and/or clients when making investment and other business decisions. All Information is impersonal and not tailored to the needs of any
person, entity or group of persons.
None of the Information constitutes an offer to sell (or a solicitation of an offer to buy), any security, financial product or other investment vehicle or
any trading strategy.
It is not possible to invest directly in an index. Exposure to an asset class or trading strategy or other category represented by an index is only
available through third party investable instruments (if any) based on that index. MSCI does not issue, sponsor, endorse, market, offer, review orotherwise express any opinion regarding any fund, ETF, derivative or other security, investment, financial product or trading strategy that is based on,linked to or seeks to provide an investment return related to the performance of any MSCI index (collectively, “Index Linked Investments”). MSCI
makes no assurance that any Index Linked Investments will accurately track index performance or provide positive investment returns. MSCI Inc. is
not an investment adviser or fiduciary and MSCI makes no representation regarding the advisability of investing in any Index Linked Investments.
Index returns do not represent the results of actual trading of investible assets/securities. MSCI maintains and calculates indexes, but does not
manage actual assets. Index returns do not reflect payment of any sales charges or fees an investor may pay to purchase the securities underlying theindex or Index Linked Investments. The imposition of these fees and charges would cause the performance of an Index Linked Investment to bedifferent than the MSCI index performance.
The Information may contain back tested data. Back-tested performance is not actual performance, but is hypothetical. There are frequently
material differences between back tested performance results and actual results subsequently achieved by any investment strategy.
Constituents of MSCI equity indexes are listed companies, which are included in or excluded from the indexes according to the application of therelevant index methodologies. Accordingly, constituents in MSCI equity indexes may include MSCI Inc., clients of MSCI or suppliers to MSCI. Inclusionof a security within an MSCI index is not a recommendation by MSCI to buy, sell, or hold such security, nor is it considered to be investment advice.
Data and information produced by various affiliates of MSCI Inc., including MSCI ESG Research LLC and Barra LLC, may be used in calculating certain
MSCI indexes. More information can be found in the relevant index methodologies on www.msci.com.
MSCI receives compensation in connection with licensing its indexes to third parties. MSCI Inc.’s revenue includes fees based on assets in Index
Linked Investments. Information can be found in MSCI Inc.’s company filings on the Investor Relations section of www.msci.com.
MSCI ESG Research LLC is a Registered Investment Adviser under the Investment Advisers Act of 1940 and a subsidiary of MSCI Inc. Except withrespect to any applicable products or services from MSCI ESG Research, neither MSCI nor any of its products or services recommends, endorses,
approves or otherwise expresses any opinion regarding any issuer, securities, financial products or instruments or trading strategies and MSCI’s
products or services are not intended to constitute investment advice or a recommendation to make (or refrain from making) any kind of investment
decision and may not be relied on as such. Issuers mentioned or included in any MSCI ESG Research materials may include MSCI Inc., clients of MSCI
or suppliers to MSCI, and may also purchase research or other products or services from MSCI ESG Research. MSCI ESG Research materials, including
materials utilized in any MSCI ESG Indexes or other products, have not been submitted to, nor received approval from, the United States Securities
and Exchange Commission or any other regulatory body.
Any use of or access to products, services or information of MSCI requires a license from MSCI. MSCI, Barra, RiskMetrics, IPD, InvestorForce, andother MSCI brands and product names are the trademarks, service marks, or registered trademarks of MSCI or its subsidiaries in the United Statesand other jurisdictions. The Global Industry Classification Standard (GICS) was developed by and is the exclusive property of MSCI and Standard &Poor’s. “Global Industry Classification Standard (GICS)” is a service mark of MSCI and Standard & Poor’s.

© 2018 MSCI Inc. All rights reserved.

MSCI.COM | PAGE 12 OF 13

METHODOLOGY BOOK FOR MSCI EMU ESG SCREENED INDEX, MSCI USA ESG SCREENED INDEX,MSCI EUROPE ESG SCREENED INDEX, MSCI WORLD ESG SCREENED INDEX, MSCI JAPAN ESGSCREENED INDEX AND MSCI EMERGING MARKETS IMI ESG SCREENED INDEX| SEPTEMBER 2018

MIFID2/MIFIR notice: MSCI ESG Research LLC does not distribute or act as an intermediary for financial instruments or structured deposits, nor does
it deal on its own account, provide execution services for others or manage client accounts. No MSCI ESG Research product or service supports,
promotes or is intended to support or promote any such activity. MSCI ESG Research is an independent provider of ESG data, reports and ratings
based on published methodologies and available to clients on a subscription basis. We do not provide custom or one-off ratings or recommendationsof securities or other financial instruments upon request.
Privacy notice: For information about how MSCI ESG Research LLC collects and uses personal data concerning officers and directors, please refer toour Privacy Notice at https://www.msci.com/privacy-pledge.

© 2018 MSCI Inc. All rights reserved.

MSCI.COM | PAGE 13 OF 13