METHODOLOGY DOCUMENT
MSCI ESG RESEARCH LLC

MSCI ESG
Controversies andGlobal Norms
Methodology
MSCI ESG Research
June 2024© 2024 MSCI Inc. All rights reserved. Please refer to the disclaimer at the end of this document.

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Contents
MSCI ESG Controversies overview .......................................................... 51

ESG controversy case assessment methodology ............................. 9
1.1

ESG controversy case assessment overview ................................ 9

1.2

Severity Assessment ..................................................................... 10

1.2.1

Nature of Harm ...................................................................... 10

1.2.2

Scale of Impact ...................................................................... 10

1.2.3

Combining Nature of Harm and Scale of Impact ................. 11

1.2.4

Exacerbating Circumstances ................................................ 12

1.2.5

Extenuating Circumstances .................................................. 12

1.3

Company Role assessment .......................................................... 13

1.3.1

Direct ...................................................................................... 13

1.3.2

Indirect.................................................................................... 14

1.4

Controversy Status assessment................................................... 14

1.4.1

Active Cases........................................................................... 15

1.4.2

Inactive Cases ........................................................................ 16

1.5

Determining Controversy Score and Flag .................................... 17

1.6

MSCI ESG Controversies methodology – transitional period ..... 18

1.6.1
2

Controversy Type Assessment ............................................. 19

ESG Controversy Scores aggregation............................................. 21
2.1

ESG Controversy Scores hierarchy ............................................... 21

2.2
Determination of Themes, Sub-Pillar, Pillar and Company Scoresand Flags ................................................................................................... 21
2.2.1
3Treatment of more than three cases within the same Theme
23

MSCI ESG Global Norms screens overview .................................... 25© 2024 MSCI Inc. All rights reserved. Please refer to the disclaimer at the end of this document.

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3.1

Scope of the MSCI ESG Global Norms screens ........................... 25

3.1.1
Global norms and conventions within the scope of the MSCIESG Global Norms screens .................................................................. 25
3.1.2
Recommendations outside the scope of the MSCI ESG
Global Norms screens .......................................................................... 26
3.2

Methodology .................................................................................. 27

3.2.1
Mapping ESG Controversy categories to Global Norms andConventions recommendations ........................................................... 27
3.2.2

Evaluation Types .................................................................... 29

Appendix A – ESG Controversy Pillars, Sub-Pillars and Thematic
Indicators ............................................................................................. 31
Environmental ........................................................................................... 32
Biodiversity & Land Use ........................................................................ 32
Toxic Emissions & Waste ..................................................................... 32
Energy & Climate Change ..................................................................... 32
Water Stress .......................................................................................... 33
Operational Waste (Non-Hazardous) ................................................... 33
Supply Chain Management .................................................................. 33
Other ...................................................................................................... 33
Social: Customers ..................................................................................... 34
Anticompetitive Practices .................................................................... 34
Marketing & Advertising ....................................................................... 34
Product Safety & Quality ....................................................................... 34
Customer Relations .............................................................................. 34
Privacy & Data Security ......................................................................... 34
Other ...................................................................................................... 35
Social: Human Rights & Community Impact ........................................... 35© 2024 MSCI Inc. All rights reserved. Please refer to the disclaimer at the end of this document.

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Impact on Communities ....................................................................... 35
Civil Liberties ......................................................................................... 35
Human Rights Concerns ....................................................................... 36
Other ...................................................................................................... 36
Social: Labor Rights & Supply Chain ........................................................ 36
Labor Management Relations .............................................................. 36
Health & Safety...................................................................................... 36
Collective Bargaining & Unions ............................................................ 36
Discrimination & Workforce Diversity .................................................. 37
Child Labor ............................................................................................ 37
Supply Chain Labor Standards ............................................................. 37
Other ...................................................................................................... 37
Governance ............................................................................................... 38
Bribery & Fraud ...................................................................................... 38
Governance Structures ......................................................................... 38
Controversial Investments ................................................................... 38
Other ...................................................................................................... 38
Appendix B – Criteria for determining Scale of Impact and Nature ofHarm .................................................................................................... 39
Environmental Pillar .................................................................................. 39
Social Pillar ............................................................................................... 41
Governance Pillar ...................................................................................... 43
Appendix C – Vulnerable Demographics ............................................... 45
Key Definitions .......................................................................................... 49
Key References ......................................................................................... 50© 2024 MSCI Inc. All rights reserved. Please refer to the disclaimer at the end of this document.

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MSCI ESG Controversies overview
MSCI ESG Controversies is designed to provide timely and consistent assessmentsof companies’ involvement in ESG-related controversies and incidents concerning
corporate entities in the MSCI ESG Controversies and Global Norms coverage
universe.
An ESG controversy case is defined as either an event or an ongoing situation inwhich company operations and/or products allegedly have a negative environmental,social and/or governance impact. MSCI ESG Controversies assessments aim tomeasure companies' reputational/brand risk based on alleged involvement inadverse impact activities as reported by the media, nongovernmental organizations(NGOs), civil society groups, academia, regulators and other stakeholders.
Cases include alleged company violations of existing laws and/or regulations towhich they are subject to, or an alleged company action or event that violates
commonly accepted international norms, including, but not limited to, global norms
and conventions, such as the International Labour Organization (ILO) Fundamental
Conventions. 1
A case can be a single event such as a spill, accident or regulatory action, or a set ofclosely linked events or allegations such as health and safety fines at the samefacility, multiple allegations of anticompetitive behavior related to the same productline, multiple community protests at the same company location, or multiple
individual lawsuits alleging the same type of discrimination.
The MSCI ESG Controversies analytical framework organizes ESG controversies
within three Pillars: Environment, Social and Governance. In particular, the Social
Pillar is further divided into three Sub-Pillars representing different stakeholders:
community (Human Rights & Community Impact Sub-Pillar), workers (Labor Rights &Supply Chain Sub-Pillar) and customers (Customers Sub-Pillar).
Pillars and Sub-Pillars are further divided into 28 Themes (see Exhibit 1). Allassessed ESG controversy cases are associated with at least one Theme. Since asingle event or an ongoing situation may have a broad array of implications, such an
event may result in MSCI ESG Research profiling multiple ESG controversy cases indifferent Themes. For example, an oil spill incident may result in the profiling of an
ESG controversy case assessing alleged impact on the local ecosystem (under the
Biodiversity and Land Use Theme) and a separate case assessing alleged impact on
the local population (under the Impact on Local Communities Theme). Each case is
For all references to laws, rules or regulations, please note that the information is provided “as is” and does
not constitute legal advice or any binding interpretation. Any approach to comply with regulatory or policy
initiatives should be discussed with your own legal counsel and/or the relevant competent authority, as needed.

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assessed separately based on the severity of impact and other factors detailed
below, and is monitored over time for remediation action.
MSCI ESG Research analytical personnel assess the severity of controversy casesthat involve corporate entities in our coverage universe on an ongoing basis. ESG
analytical personnel review the reported allegations and assign a score and a colorcoded flag for each controversy case, based on the Severity of Impact in each case,the alleged Role of the company in each case and the Status of each case (which isdetermined by the state of resolutions, if any, between involved stakeholders).
Exhibit 1: MSCI ESG Controversies thematic framework
SOCIALENVIRONMENTGOVERNANCE

HUMAN RIGHTS &COMMUNITY
IMPACTLABOR RIGHTS &SUPPLY CHAIN

CUSTOMERS

Biodiversity & Land
Use

Impact on Local
Communities

Child Labor

Product Safety &Quality

Bribery & Fraud

Energy & Climate
ChangeHuman Rights
Concerns

Collective
Bargaining &Unions

Anticompetitive
Practices

Controversial
Investments

Supply Chain
Management

Civil Liberties

Discrimination &Workforce
Diversity

Customer
Relations

Governance
Structures

Water Stress

Other

Labor
Management
RelationsMarketing &Advertising

Other

Toxic Emissions &Waste

Supply Chain
Labor Standards

Privacy & Data
Security

Operational Waste(Non Hazardous)

Health & Safety

Other

Other

Other

Each ESG controversy case is assessed for the Severity of its impact on society or
the environment as Very Severe, Severe, Moderate or Minor.
Each ESG controversy case receives a Score and an associated color-coded Flagbased on a combination of the assessed Severity of the controversy as well as theassessments of the company’s alleged Role and the Status of the case remediation
and resolution (see Exhibit 2).
Where a company has multiple ESG controversy cases, the Overall Company Score
and the corresponding Flag are determined by the lowest-scoring case.

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A company-level Overall Flag indicates the following:•

A Red Flag indicates that a company is directly involved in one or more VerySevere Ongoing controversies.

•

An Orange Flag indicates that a company has either:

•

•

•

Settled most but not all of the stakeholders’ concerns related to its
direct involvement in one or more Very Severe controversies;•

Continues to be indirectly involved in one or more Very Severe
controversies; or•Is directly involved in one or more Severe controversies.

A Yellow Flag indicates that a company either:•Has been implicated in one or more Concluded Very Severe or Severe
controversies;•

Has settled most or all of the stakeholders’ concerns related to its
alleged direct involvement in one or more Severe controversies orindirect involvement in one or more Very Severe or Severe
controversies; or•Continues to be indirectly involved in one or more Severe
controversies or directly involved in one or more Moderatecontroversies.

A Green Flag indicates that a company either:•Has fully or partially settled one or more Moderate controversies inwhich it was involved;•

Is indirectly implicated in one or more Ongoing Moderatecontroversies;•

Is either directly or indirectly implicated in one or more Ongoing,
Partially Concluded or Concluded Minor controversies; or•Has not been implicated in any controversy.

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Exhibit 2: MSCI ESG controversy assessment scoring matrix (effective forcontroversy cases reviewed after June 20, 2022)
Status of the case
Severity of
the case

Companyrole

Ongoing

Partially
Concluded

Concluded

Very Severe

Direct0

1

2

Very Severe

Indirect123SevereDirect1

2

3

SevereIndirect234Moderate

Direct4

56Moderate

Indirect

5

6

7

Minor

Direct

6

7

8

Minor

Indirect

78

9

MSCI ESG Controversies Flags are leveraged to identify corporate entities implicatedin third-party allegations concerning practices or incidents that may contradict
recommendations under the following global norms and conventions:•

The Organisation for Economic Co-operation and Development (OECD)
Guidelines for Multinational Enterprises;•

The Ten Principles of the United Nations Global Compact (UNGC);•The International Labour Organization’s (ILO) fundamental conventions and ILO
Declaration on Fundamental Principles and Rights at Work; and•The United Nations Guiding Principles on Business and Human Rights (UNGP).

For additional details on the definition of Flag scales, refer to the ESG Symbols andDefinitions available here.
MSCI ESG Controversies is not designed to verify or confirm any allegations or
claims of violations. Instead, it provides a consistent assessment of controversies in
the form of scores and color-coded flags.

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1 ESG controversy case assessment methodology
1.1 ESG controversy case assessment overview
An ESG controversy case is created when allegations concerning an event or acompany’s practices, products or businesses could lead to reputational risk due totheir potential negative environmental, social and/or governance impact.
MSCI ESG Research analytical personnel identify new ESG controversy cases andupdate existing cases by researching companies’ public documents, media sources
and nongovernmental organization publications. Please refer to “MSCI ESG
Controversies and Global Norms Methodology – Process” for details on thefrequency of updates, sources and review process. 2
Exhibit 3: Assessments made for a controversy caseFor each ESG controversy case, MSCI ESG Research determines:
1. The Severity of the case based on the nature of harm and scale of alleged
impact, and application of specific exacerbating or extenuating
circumstances: Very Severe, Severe, Moderate or Minor.
2. The Role of the company implicated in the case: Direct or Indirect.
3. The Status of the case: Concluded, Partially Concluded, Ongoing, Archived or
Historical Concern.

All information considered in such an assessment must meet the criteria set out in the ESG Controversies
sources section of “MSCI ESG Controversies and Global Norms Methodology – Process.” In general, we do notuse sanctions lists, trade restrictions, or other “black” lists of companies operating in a specific territory as asource of ESG controversies. These sources typically do not include specific allegations against companies ordetails on specific adverse impacts associated with companies’ actions or products. If such allegations arefound in other sources, they will be processed similarly to all other controversies, assessing the severity of theallegations, the company’s role, and the status of the resolution.

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Based on these three inputs, an overall Score and a corresponding Flag aredetermined for each of the ESG controversy cases.
Written summaries for Severe and Very Severe cases provide details of eachcontroversy and are included in each company’s MSCI ESG Controversies report.

1.2 Severity Assessment
The Severity of each case is assessed based on the Nature of Harm and alleged
Scale of Impact of the event, practices, products or businesses on the environmentand society. In some instances, the Severity assessment can be adjusted based on
exacerbating circumstances that include activities constituting deliberate action withregard to social or environmental harm, or involve the most vulnerable ecosystems
or demographic groups. The Severity assessment may also be adjusted due toextenuating circumstances. This adjustment is applied if a case is determined to belinked to a legacy issue that continues to present a reputational or legal risk to thecompany.
1.2.1

Nature of Harm

The Nature of Harm is assessed on a scale ranging from Very Serious to Minimal
harm:
Exhibit 4: Nature of Harm scale
Very Serious

SeriousMediumMinimalVery Serious harm generally applies to events and actions that lead to irretrievable or
long-lasting damage to the environment, result in fatalities, contribute to major
financial or economic crisis, or correspond to a most serious crime against
humanity.
Minimal harm generally refers to cases where actual impact is projected in the
future. This includes cases alleging adverse impact of planned or forthcoming
actions, for example, protests against the construction of an oil pipeline based on
concerns over possible adverse impact on land and water resources.
1.2.2

Scale of Impact

The Scale of Impact is assessed on a scale ranging from Extremely Widespread to
Low.

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Exhibit 5: Scale of Impact
Extremely
Widespread

Extensive

LimitedLow

The Scale of Impact is an assessment of the extent of the alleged harm and isdetermined, for example, based on the size of the area or number of people affected,
the size of the operating footprint of companies involved in high-impact controversial
activity, and the number of regions or jurisdictions affected by high-impact
controversial business practices. Low Scale of Impact is attributed to controversies
that have an undeterminable, but probable extent of harm where the impact is likely
to be insignificant.
See Appendix B for more details and examples of Nature of Harm and Scale of
Impact assessments.
1.2.3

Combining Nature of Harm and Scale of Impact

Nature of Harm and Scale of Impact assessments are combined to reach an initialdetermination of Severity; multiple scenarios can lead to the same Severity
assessment (see Exhibit 6).
Exhibit 6: Initial assessment of controversy case Severity

Scale of Impact

Nature of Harm
Very Serious

SeriousMediumMinimalExtremely
Widespread

Very Severe

SevereSevereModerate

Extensive

Very Severe

SevereModerate

Moderate

LimitedSevereModerate

Minor

Minor

Low

Moderate

Moderate

Minor

Minor

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1.2.4

Exacerbating Circumstances

Certain circumstances may warrant a controversy case Severity assessment to be
adjusted: cases that have an Exacerbating Circumstance have a controversy
assessment that is more severe than otherwise would have been determinedthrough the Nature of Harm and Scale of Impact alone.
Exacerbating circumstances can be assessed if any of the following three criteria aremet:1) Vulnerable demographics: controversy cases that negatively impact themost vulnerable demographics. See Appendix C for more details.
2) Vulnerable ecosystems: controversy cases that negatively impact themost vulnerable ecosystems. MSCI ESG Research defines vulnerable
ecosystems as those included on the United Nations Educational,
Scientific and Cultural Organization (UNESCO) World Heritage List.
3) Deliberate action: controversy cases that arise from allegations that thecompany, company’s representatives or employees are involved in
activities constituting deliberate action with regard to social orenvironmental harm. These may include deliberate obstruction of
investigations, attempts to cover up the event or activity, or thepunishment or termination of employees voicing their concerns orparticipating in protests against the company.
1.2.5

Extenuating Circumstances

Certain situations may warrant a controversy case Severity assessment to be
adjusted based on extenuating circumstances. Cases that face such Extenuating
Circumstances have a controversy assessment that is less severe than otherwise
would have been determined through the Nature of Harm and Scale of Impact alone.
Extenuating Circumstances are assessed if a case is determined to be linked to alegacy issue that continues to present a reputational or legal risk to the company.
MSCI ESG Research defines a legacy issue as the following:•

A high-impact event that occurred 20 or more years ago (e.g., use of prison labor
during World War II); or•

A high-impact product or practice that was discontinued and/or remediated 20 ormore years ago (e.g., asbestos, lead paint, polychlorinated biphenyls [PCBs],
perfluorooctanoic acid [PFOA][in some cases], perfluoroalkyl and polyfluoroalkyl
substances [PFAS], hexavalent chromium [Cr(VI)], etc.).

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Exhibit 7: Example of Severity assessment with exacerbating and extenuating
circumstances triggers applied

1.3 Company Role assessment
A company’s Role is MSCI ESG Research’s assessment of the level of control acompany may have in avoiding or mitigating harm. The Role is assessed as either
Direct or Indirect.
1.3.1

DirectMSCI ESG Research consider companies to have a direct involvement in an ESG
controversy if the negative impact is directly attributed to the company’s actions,practices, products or businesses; whereby harm could not have happened without
such actions or activities; or if the ESG controversy relates to an entity or a joint
venture in which the company has significant control. MSCI ESG Research’s
determination of significant control is based specifically on the ownership structure
as disclosed by the company. If an entity has 30% ownership or higher or is a primary
operator in a joint venture project, it is assessed as having significant control.
Examples:•A company is implicated in a workplace incident that led to several employee
fatalities.

•

An oil refining company is facing substantial community opposition to a pipeline
construction project that is carried out by a subsidiary of the company, of which
it owns 30% of the shares.

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A medical device manufacturer is facing a class-action lawsuit filed by patients
who sustained injuries linked to malfunction of the company’s pacemakers.

1.3.2

Indirect

MSCI ESG Research considers companies to have an indirect involvement in an ESG
controversy when the negative impact may have been facilitated by the company’s
actions, practices, products or businesses, but the company is not considered as
playing critical or essential role (e.g., it is involved as a supplier or a client of adirectly involved company, or when the company had a minority ownership (<30%) in
a company or joint venture involved in an ESG controversy case). Indirect Role is also
attributed to companies in cases of adverse impact due to natural causes (e.g.,
earthquake, tsunami), whereby the company is still responsible for impact
remediation.
Examples:•A company faces allegations of unsafe working conditions at one of its
supplier’s factories.

•

An oil refining company is facing community opposition to a pipeline
construction project. The project is managed by a joint venture, in which therefining company holds 20% ownership.

•

A medical device distributor is linked to a controversy related to a class-action
lawsuit filed by patients who sustained injuries linked to malfunction ofpacemakers. The pacemakers are produced by one of the firms whose products
are sold by the distribution company.

As events unfold or additional information becomes available, the company’s Role isreassessed as warranted.

1.4 Controversy Status assessment
ESG controversy cases are monitored on an ongoing basis to determine the status ofremediation activities to resolve disputes with affected stakeholders. 3 Cases may be
determined to be:•

Active cases (determined as either Ongoing, Partially Concluded or Concluded);or•Inactive cases (determined as either Archived or Historical Concern).

3 MSCI ESG Research does not recommend any specific course of action for corporate entities implicated incontroversies.

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Only cases identified as active by MSCI ESG Research affect the overall MSCI ESG
Controversy company assessment. The assessment of the controversy case statusis based on the remedial action taken by involved entities, as reported in public
sources.
1.4.1•

Active Cases

Ongoing: A case is considered Ongoing if the company has not implemented
remediation steps to satisfy the claims of affected stakeholders.
Examples:••A company was implicated in a workplace incident that led to several
employee fatalities yet has not scoped out remediation action.

•

A company was implicated in a workplace incident that led to several
employee fatalities. The company allocated compensation funds but
funds have not been distributed yet.

Partially Concluded: A case is considered partially concluded if there isreasonable evidence that the company has taken action towards the remediationof the relevant issue, while some concerns and disputes over the original claims
may still be ongoing.
Remediation activities include payment of penalties, distribution ofcompensation, settlement agreements, reclamation and rehabilitation activities,
discontinuation of the controversial practices or businesses, and implementationof industry best practices to mitigate the adverse impact of the controversial
activities.
In cases where community criticism pertains to ongoing adverse impact fromoperations (e.g., Arctic drilling), a case may not be fully concluded until thecompany completely discontinues such operations and settles all outstanding
claims.
Examples:•A company was allegedly implicated in a workplace incident that led toseveral employee fatalities. It has engaged families of the victims todetermine a compensation plan and has upgraded health and safety
equipment, which are now aligned to international safety standards.
However, several workers claimed that the incident may have affected
their health, and the investigation into these claims remains ongoing.

•

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operations and sold assets of the implicated subsidiary to a third party,
but continues to be involved in a lawsuit over alleged insufficientcompensation to the victims’ families.
••

A large palm oil producer is criticized by NGO groups for adverse impactof palm oil production on tropical forests, biodiversity and natural carbon
storage. A company certifies over 30% of its palm oil to the moststringent certification standard. Such level and stringency of certificationis considered to be the best practice in the industry and can constitutepartial conclusion of the case despite ongoing opposition to palm oil
production.

Concluded: A case is considered Concluded if the above-described corporate
actions or case resolution actions are implemented and the company does not
face any pending legal action or ongoing criticism over the controversy.
Examples:•A company was implicated in a workplace incident that led to several
employee fatalities. It has engaged families of the victims to determine acompensation plan and has upgraded health and safety equipment,
which are now aligned to international safety standards. A lawsuit filed
by several workers claiming that the incident affected their health was
dismissed and not appealed.

•

A large food producer was criticized by NGO groups for using palm oil in
its products. Palm oil production is commonly linked to tropical forests
destruction, loss of biodiversity and disturbance of natural carbon
storage. The company has since completely discontinued its use of palm
oil in food products and was not implicated in palm oil-sourcing
controversies.

Some Moderate- or Minor-Severity cases may be determined to beConcluded without an intermediate Partially Concluded step due to a narrow
scope of impact that may require a simple resolution. Moderate or Severecases may also be classified as Concluded if targeted research seeking
updated information has yielded no results for at least two consecutive
years, subject to review and approval by designated methodology
committees (see “MSCI ESG Controversies and Global Norms Methodology– Process” for details).
1.4.2•

Inactive Cases

Archived: Concluded cases with no new escalations are eventually assessed asArchived and removed from companies’ assessment and profiles.

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Due to the narrow scope and low level of impact of Minor controversies,
case conclusions are not often reached or reported. Therefore, Minor
Ongoing cases can be assessed as Archived one year after a case’s
initiation if no further updates to the case are available.

•

Moderate ESG controversy cases are assessed as Archived one year
after conclusion.

•

Severe and Very Severe ESG controversy cases are assessed as Archived
three years after conclusion.

Historical Concern: Certain Concluded cases may be determined to be highprofile on a case-by-case basis where these form an important part of thecompany’s ESG history. The designation of a case as a Historical Concern
requires MSCI Controversies Methodology Committee approval. These cases
remain in the company’s profile but do not affect the scoring.

1.5 Determining Controversy Score and Flag
ESG controversy cases are scored based on a combination of Severity, Role andStatus. Within a given Severity level, Ongoing cases score lower than those that are
Partially Concluded or Concluded, and those that are Direct score lower than thosethat are Indirect (see Exhibit 8).

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Exhibit 8: MSCI ESG controversy case assessment scoring matrix 4
Status of the case
Severity of
the case

Companyrole

Ongoing

Partially
Concluded

Concluded

Very Severe

Direct0

1

2

Very Severe

Indirect123SevereDirect1

2

3

SevereIndirect234Moderate

Direct4

56Moderate

Indirect

5

6

7

Minor

Direct

6

7

8

Minor

Indirect789

1.6 MSCI ESG Controversies methodology – transitional
periodThe current MSCI ESG Controversies methodology for case assessment was
updated in June 2022 and is effective for controversy cases initiated or reviewed
after June 20, 2022. On that date, the case assessment transitioned from the priormethodology to the methodology described in Sections 1.1 to 1.5 above.
Controversy cases last reviewed prior to June 20, 2022, are assessed based on theprior methodology. The prior methodology differs from the current methodology inthe following ways:•

The prior methodology used Controversy Types (Structural or Non-Structural)
distinguishing instances of systematic and repetitive allegations suggesting apattern of corporate behavior instead of company Roles (Direct or Indirect) todetermine Controversy Scores.

•

The prior methodology did not include a Partially Concluded Status.

The MSCI ESG Controversies methodology outlined in this document is effective for controversy cases
reviewed after June 20, 2022.

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Under the prior methodology, a score of 0 and a corresponding Red Flag wasapplied to all cases assessed as Very Severe, regardless of other criteria.

•

Prior to the introduction of the Company Role assessment, to determine whethera case extended to a related company, an evaluation was applied of whether the
related companies were under common control and shared senior leadership (orsenior leadership who were first-degree relatives).

1.6.1

Controversy Type Assessment

For cases last reviewed prior to June 20, 2022, the assessment of Controversy Types
applied the following definitions:•

Structural: evidence suggests an underlying problem at the company — poor
culture, or lack of adequate governance and oversight — that caused orcontributed to the occurrence of the controversy. The incident would likely havebeen avoided if the company had governance and oversight procedures in place.
Indications of a structural issue may include executive misconduct, a history ofignoring warnings or a pattern of incidents across locations or business units.

•

Non-Structural: The controversy appears to be linked to misfortune or rogue
employees rather than poor management or governance failures. Better
governance and oversight could not reasonably have been expected to prevent it.

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Exhibit 9: Discontinued ESG controversy case scoring matrix (applied to cases last
reviewed prior to June 20, 2022)
Ongoing

Concluded

Very Severe

Structural

00Very Severe

Nonstructural

00

SevereStructural

1

2

SevereNonstructural2

3

Moderate

Structural

4

5

Moderate

Nonstructural

5

6

Minor

Structural

7

8

Minor

Nonstructural

89

Note: Some companies’ cases may still have reflected prior scoring methodology during thetransitional period.

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2 ESG Controversy Scores aggregation
2.1 ESG Controversy Scores hierarchy
Individual ESG controversy cases are grouped into 28 Themes (or Thematic
Indicators), which are organized into 5 Sub-Pillars and 3 Pillars: the Environmental,
Social and Governance Pillars. The overall Company Score and Flag are derived fromthe Pillar-level scores.
Exhibit 10: ESG controversies hierarchy

Please see Appendix A for a complete list of Themes and descriptions of the typesof ESG controversies captured within each one.

2.2 Determination of Themes, Sub-Pillar, Pillar and Company
Scores and Flags
As the objective of MSCI ESG Controversies assessments is to highlight reputationalrisk to a company based on its alleged involvement in controversial practices or
events, no averaging or weight adjustment of scores is applied. An Overall Company
Score is generally determined based on the lowest-scoring controversy case in which
the company is involved. Unless there is a pattern of controversial involvement
within a specific Theme, this approach is applied through the entire ESG
controversies hierarchy structure (see Exhibit 11 for a detailed example):© 2024 MSCI Inc. All rights reserved. Please refer to the disclaimer at the end of this document.

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Thematic Indicators receive the score corresponding to the lowest-scoring
controversy case within the same Theme. An additional score deduction may
apply if a pattern of involvement in similar cases is established.

•

Sub-Pillars receive the score corresponding to the lowest scoring Thematic
Indicator within the Sub-Pillar.

•

Pillars receive the score corresponding to the lowest-scoring Sub-Pillar within
the Pillar.

•

The company’s Overall Score is ultimately determined by the lowest-scoring
Pillar.

Exhibit 11: ESG Controversy Score propagation through the ESG controversies
hierarchy
Example: A company is not involved in any major environmental or governance controversies, but isdirectly involved in an Ongoing Very Severe (Red Flag) case alleging use of child labor in an ethnic
community subjected to systemic abuse, and three instances of workplace safety violations, two of
which resulted in injuries to several workers (Yellow Flags).

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2.2.1

Treatment of more than three cases within the same Theme

In situations where companies have three or more non-Minor controversy cases
within the same Theme, the Theme Score is reduced by 1 point. This rule applies
only at the Thematic Indicator level to reflect the greater reputational risk associatedwith multiple controversies of similar impact. There is no pattern-based scoreadjustment within the same Sub-Pillar or Pillar. Cases with a score of 1 (Orange Flag)or 0 (Red Flag) always result in a Thematic Indicator score of 1 or 0, respectively.
Exhibit 12: Example: ESG Controversy Score propagation for a company with threeor more Product Safety & Quality controversies

Scores across individual cases, Thematic Indicators, Sub-Pillars, Pillars and at thecompany level translate to a corresponding color Flag indicating the Severity ofcontroversies in which the company is involved.

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Exhibit 13: Interpretation of a Company Flag
Company
Flag

Flag Description
Red Flag: indicates that a company is directly involved in one or more
Very Severe Ongoing controversies.
Orange Flag: indicates that a company has either:oSettled most but not all of the stakeholders’ concerns related to its
involvement in one or more Very Severe controversies,oContinues to be indirectly involved in one or more Very Severe
controversies, oroIs directly involved in one or more Ongoing Severe controversies.

Yellow Flag: indicates that a company either:oHas been implicated in one or more Concluded Very Severe or
Severe controversies,oHas settled at least some of the stakeholders’ concerns related toits alleged involvement in one or more Severe controversies orindirect involvement in one or more Very Severe controversies, oroContinues to be indirectly involved in one or more Severe
controversies or directly involved in one or more Moderatecontroversies.

Green Flag: indicates that a company either:oHas fully or partially settled one or more Moderate severity
controversies in which it was directly involved,o

Is indirectly implicated in one or more Moderate controversies,oIs either directly or indirectly implicated in one or more Ongoing,
Partially Concluded or Concluded Minor controversies, oro

Has not been implicated in any controversy.

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3 MSCI ESG Global Norms screens overview
MSCI ESG Global Norms screens leverage MSCI ESG Controversies Flags to identify
corporate entities implicated in third-party allegations that may contradict
recommendations under internationally agreed global norms and conventions.
These global norms and conventions have been selected to help support investors tobenchmark their investment strategies and objectives against these globally
recognized standards or to assist investors in applying regulatory frameworks whichreference such norms and conventions.
MSCI ESG Global Norms screens are not, however, intended to verify companies’
compliance with global norms and conventions, assess the quality of internal
policies and procedures, or measure companies’ contributions towards
sustainability.

3.1 Scope of the MSCI ESG Global Norms screens
3.1.1

Global norms and conventions within the scope of the MSCI ESG Global
Norms screens

MSCI ESG Research has reviewed and developed screens for the following global
norms and conventions:•

The Organisation for Economic Co-operation and Development (OECD)
Guidelines for Multinational Enterprises;•

The Ten Principles of the United Nations Global Compact (UNGC);•The International Labour Organization’s (ILO) Fundamental Conventions and ILO
Declaration on Fundamental Principles and Rights at Work; and•The United Nations Guiding Principles on Business and Human Rights (UNGP).

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Exhibit 14. Global norms and conventions within the scope of the MSCI ESG Global
Norms screens

3.1.2

UN Guiding
Principles (2011)

ILO Fundamental
Conventions (1995,
latest update 2022) and
Declaration on
Fundamental Principles
and Rights at WorkOECD Guidelines
for Multinationals(1976, latest
updates 2023,
2011)

UN Global Compact(2000)

Universal
Declaration of
Human Rights(1948)

International Covenant on
Economic, Social andCultural Rights (ICESCR) +International Covenant on
Economic, Social andCultural Rights (ICCPR)(1966)MSCI ESG Global
Norms screens

Together Known
as International
Bill of Human
RightsRecommendations outside the scope of the MSCI ESG Global Norms
screens

The following are not considered as part of the MSCI ESG Global Norms screens
assessment:•

Recommendations concerning good governance.
o•

Example: UNGP recommendation to have “a policy commitment to meettheir responsibility to respect human rights, a human rights due diligenceprocess to identify, prevent, mitigate and account for how they address
their impacts on human rights and processes to enable the remediationof any adverse human rights impacts they cause or to which they
contribute.”

Recommendations concerning positive contributions.

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recommendation to “contribute to economic, environmental and social
progress with a view to achieving sustainable development.”

3.2 Methodology
3.2.1

Mapping ESG Controversy categories to Global Norms and Conventions
recommendations

MSCI ESG Research mapped ESG Controversy categories to recommendations that
aim to prevent or minimize the risk of adverse impacts to rights holders,
communities or the environment (hereafter referred to as recommendations).
The above-listed global norms and conventions build on and often cross-reference
one another as well as other internationally recognized norms and conventions, andtherefore they may best be interpreted in the context of each other.
•

Example: Both the UNGP and the Ten Principles of the UNGC are derived fromthe Universal Declaration of Human Rights (and other sources). Principles 1 and
2 of the UNGC also refer to the UNGP.

These global norms and conventions vary in terms of scope, structure, primary
addressee, and types of recommendations. From a thematic perspective, the OECD
Guidelines for Multinational Enterprises may be viewed as the broadest of the global
norms, while ILO Fundamental Conventions and the ILO Declaration on Fundamental
Principles and Rights at Work have the narrowest scope, covering only labor rights.
However, even where a topic is covered by two or more of these norms andconventions, the expectations for the topic under each of them may vary.

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Exhibit 15: Thematic intersection between MSCI ESG Controversies and Global
Norms screens
Scope

Human
RightsLabor

Environment

Economic &Business
IssuesCustomerIssuesThematic areas

OECD

UNGC

UNGP

ILO

Civil Liberties
Censorship & SurveillanceControversial Regions
Controversial Sourcing
Indigenous Peoples’ Rights
Child Labor
Forced/Slave Labor
Kidnapping & Attacks
Working Conditions/Pay
Discrimination & Harassment
Opposition to Unions/
Unionization
Health & Safety
Land Use & Logging
Biodiversity & Endangered
SpeciesMarine Biodiversity
Electronic Waste
Packaging Material & Waste
Energy & Climate Change
Operational Waste
Pesticides/ Persistent
Organic Pollutants
Toxic Releases to
Air/Water/Land
Supply Chain Management
Water Stress
Oil Spill
Bribery & Corruption
Controversial Investments
Money Laundering
Import/Export Violations
Anticompetitive Practices
Predatory Lending
Fraud & Billing
Restricted Access to
Products/ Services
Misleading Claims
Pesticides, Chemical Safety





















X
X
X
X
X


























X

X
X

ILO (ex
H&S) 5
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
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
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
X

5
The ILO’s fundamental conventions and Declaration on Fundamental Principles and Rights at Work (excluding
health and safety).

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ScopeCommunity
Development

3.2.2

Thematic areas

OECD

UNGC

UNGP

ILO

Product & Service
Safety/Quality
Structural Integrity &Materials
Privacy & Data Security
Impact on Communities



X

X

X

ILO (ex
H&S) 5
X



X

X

X

X




X

X





X
X

X
X

Evaluation Types

The following MSCI ESG Global Norms screens assess companies based on theirinvolvement in ESG Controversies that potentially conflict with the recommendations
defined by each global norm or convention. The assessments depend on the severity
and the status of the allegations and the roles of the companies in ESG
Controversies:•

OECD Alignment.

•

UN Global Compact Alignment.

•

UNGP Alignment.

•

ILO Alignment - Fundamental Principles and Rights at Work.

•ILO Alignment - Fundamental Principles and Rights at Work (ex H&S).

MSCI ESG Global Norms Scale
In the evaluation for each global norms and conventions screen, a three-point scale
is applied:•

Fail: An alleged involvement in a one or more Red Flag controversies in an area
covered by the corresponding set of norms or conventions results in thecompany receiving an overall Fail designation under that particular MSCI ESG
Global Norms screening factor.
−

Example: a Red Flag case related to an extensive and long-lasting impact on
customers due to issues concerning chemical safety could result in a Faildesignation under the OECD Alignment screening factor but will not affectthe company’s assessment against the ILO Alignment - Fundamental
Principles and Rights at Work and ILO Alignment - Fundamental Principles
and Rights at Work (ex H&S) screening factors, given that the ILO
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Principles and Rights at Work do not include recommendations concerning
customers’ safety.
•

Watch List: The company has either:
1. Settled most of the concerns related to its alleged involvement in a VerySevere controversy within the scope of one or more recommendations of therelevant global norm or convention,
2. Continues to be involved in such a controversy indirectly through its business
partners, or
3. Allegedly is directly involved in an Ongoing Severe controversy within thescope of one or more recommendations of the relevant global norm orconvention.

•

Pass: The company has not been implicated in any controversy cases within thescope of one or more recommendations of the relevant global norm orconvention, or its involvement in such cases is not considered to be severe
enough to warrant a Fail or Watch List designation. Therefore, a Pass
designation neither indicates absence of third-party allegations within the scopeof one or more recommendations of the relevant global norm or convention, nor
indicates alignment with the relevant global norm or convention.

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Appendix A – ESG Controversy Pillars, Sub-Pillars andThematic Indicators
Pillar and Sub-Pillar

Thematic Indicators
Biodiversity & Land Use
Toxic Emissions & Waste

Environmental

Energy & Climate Change
Water Stress
Operational Waste (Non-Hazardous)
Supply Chain Management
Other
Anticompetitive Practices
Customer Relations

Social: Customers

Privacy & Data Security
Marketing & Advertising
Product Safety & Quality
Other
Impact on Local Communities

Social: Human Rights &Community Impact

Human Rights Concerns
Civil Liberties
Other
Labor Management Relations
Health & Safety

Social: Labor Rights & Supply
Chain

Collective Bargaining & Union
Discrimination & Workforce Diversity
Child Labor
Supply Chain Labor Standards
Other
Bribery & Fraud

Governance

Governance Structures
Controversial Investments
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Environmental
Biodiversity & Land Use
ESG controversies related to a company's use or management of natural resources,
where there is an alleged or anticipated negative impact on the environment,
especially in ecologically sensitive areas.
Topics covered under this indicator include issues such as species loss, reduction in
biodiversity, habitat damage, depletion of or competition for natural resources, lossof economic value (for example, in fisheries or tourism), as well as post-consumer
waste issues.
Biodiversity impacts primarily caused by toxic releases are captured under the Toxic
Emissions & Waste Theme.
Competition for water resources and ESG controversies regarding water usage arecaptured under the Water Stress Theme.
When there is a substantial adverse impact on a local community that results froman environmental ESG controversy classified under Biodiversity & Land Use, anadditional ESG controversy case is logged and assessed under the Impact on
Communities Theme in the Human Rights & Community Impact Sub-Pillar, with afocus on the community impact rather than the environmental impact.
Toxic Emissions & Waste
ESG controversies related to a company’s operational non-GHG emissions orreleases to land, air and/or water.
Topics covered under this indicator include issues such as accidental spills or
releases as well as the environmental impacts of standard operational emissions,
whether within or in exceedance of levels allowed by permit.
When there is a substantial adverse impact on a local community that results froman environmental ESG controversy classified under Toxic Emissions & Waste, anadditional ESG controversy case is logged and assessed under the Impact on
Communities Theme in the Human Rights & Community Impact Sub-Pillar, with afocus on the community impact rather than the environmental impact.
Energy & Climate Change
ESG controversies related to a firm’s climate change and energy-related impacts.
Topics covered under this indicator include issues such as lawsuits over acompany’s alleged contribution to climate change, public controversy or criticism of© 2024 MSCI Inc. All rights reserved. Please refer to the disclaimer at the end of this document.

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a company’s contribution to climate change, or status as an exceptionally large
emitter of GHGs, as well as resistance to calls for improvement.
Water Stress
ESG controversies related to a firm’s water management practices.
Topics covered under this indicator include issues such as ecological damage
resulting from water withdrawals, depletion of water resources for other users andregulatory action or community disputes regarding the company’s water usage.
This indicator does not capture water pollution cases, which are covered under the
Toxic Emissions & Waste Theme.
When there is a substantial economic impact on a local community that results froman environmental ESG controversy classified under Water Stress, an additional ESG
controversy case is logged and assessed under the Impact on Communities Themein the Human Rights & Community Impact Sub-Pillar, with a focus on the community
impact rather than the environmental impact.
Operational Waste (Non-Hazardous)
ESG controversies related to the impact of a firm’s non-hazardous, non-toxic
operational waste, meaning waste, emissions or effluents produced through normal
operations and/or as part of the production of a product.
ESG controversies related to toxic and hazardous waste emitted to air, land or water
are captured under the Toxic Emissions & Waste Theme. ESG controversies related
to post-consumer waste are captured under Biodiversity & Land Use.
Supply Chain Management
ESG controversies related to the sourcing of raw materials or other inputs that havea substantial negative environmental impact.
Topics covered under this indicator include issues such as degradation of natural
resources through use of raw materials that are resource intensive and/or waste
intensive, including tropical hardwoods, palm oil or unsustainable fisheries.
Other
Any environmental issues that fall outside of the more targeted indicators listed
above.

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Social: Customers
Anticompetitive Practices
ESG controversies related to a firm’s anti-competitive business practices.
Topics covered under this indicator include issues such as price fixing, collusion, bid
rigging and predatory pricing. Business-to-business claims are generally not covered
unless a regulator joins the suit. Similarly, standard pre-merger regulatory inquiries
are not considered controversial.
Marketing & Advertising
ESG controversies related to a firm’s marketing and advertising practices.
Topics covered under this indicator include issues such as false or deceptive
marketing or advertising, marketing of products for off-label uses, controversies
regarding the marketing of products to children or other vulnerable populations, thelabeling of such products, and spam or adware.
ESG controversies about known product safety issues are covered under the Product
Safety & Quality Theme.
Product Safety & Quality
ESG controversies related to the quality and/or safety of a firm’s products andservices.
Topics covered under this indicator include issues such as food safety, controversial
media content, product recalls, service disruptions and the use of chemicals ofconcern in products.
Customer Relations
ESG controversies related to how a firm treats its customers or potential customers.
Topics covered under this indicator include issues such as fraudulent or improper
billing, excessive or hidden fees, predatory financial products and restricted or
discriminatory access to products or services.
Privacy & Data Security
ESG controversies related to a firm’s privacy and data security practices.
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these, and changes to a company’s policies or practices that may affect or violate
customer privacy.
Privacy issues affecting employees are captured under the Labor Management
Theme in the Labor & Supply Chain Sub-Pillar. Government surveillance and related
issues are captured under the Civil Liberties Theme in the Human Rights &Community Impact Sub-Pillar.
Other
Any customer issues that fall outside of the more targeted indicators listed above.

Social: Human Rights & Community Impact
Impact on Communities
ESG controversies related to a firm’s interactions with communities in which it does
business.
Topics covered under this indicator include issues such as land use disputes,
negative economic impacts resulting from environmental damage or from thepresence of company operations, disputes over access to economic opportunities orjobs, impacts of facility closures, and disputes over access to clean water, clean air
or other natural resources.
ESG controversies that are primarily about environmental impact are classified under
the appropriate Environment Pillar Thematic Indicator (e.g., Biodiversity & Land Use,
Toxic Emissions & Waste). A case in which there are substantial environmental
impacts in addition to community impacts may be logged and assessed under andenvironmental Themes as well as under Impact on Communities.
Civil Liberties
ESG controversies related to the impact of a firm’s operations or products on civil
liberties.
Topics covered under this indicator include issues such as cooperation withrepressive governments requiring censorship, conducting surveillance or limitations
on other civil liberties such as freedom of movement and freedom of the press.
Violations of customer privacy are captured under the Privacy & Data Security Themein the Customers Sub-Pillar. Violations of employee privacy are captured under the
Labor Management Relations Theme in the Labor & Supply Chain Sub-Pillar.

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Human Rights Concerns
ESG controversies related to the impact of a firm’s operations or products on humanrights.
Topics covered under this indicator include issues such as complicity in killings,
physical abuse, displacement or other rights violations, as well as complicity withsuch actions by governments or other parties.
Other
Any human rights or community issues that fall outside of the more targetedindicators listed above.

Social: Labor Rights & Supply Chain
Labor Management Relations
ESG controversies related to a firm’s labor-management relations.
Topics covered under this indicator include issues such as instances of wrongfultermination, reductions in benefits, mistreatment of either employees or contractors,
controversial workforce reductions, ESG controversies over wages and hours,
employee privacy issues and forced labor.
Health & Safety
ESG controversies related to the health and safety of a firm’s employees, temporary
employees and contractors, and franchisee employees.
Topics covered under this indicator include issues such as on-the-job accidents,
injuries and fatalities; mental health issues; as well as kidnappings and physicalharm experienced by employees in the field.
This Theme does not include health and safety issues in the supply chain, forexample in supplier factories; those issues are captured under the Supply Chain
Labor Standards Theme.
Collective Bargaining & Unions
ESG controversies related to a firm’s union relations practices.
Topics covered under this indicator include issues such as anti-union activities;
efforts to prevent nonunionized employees from unionizing; strikes, lockouts, and theuse of replacement workers; acrimonious contract negotiations; and ESG
controversies regarding alleged breaches of union contracts. Organized strikes by
nonunionized employees are also captured under this Theme.

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Union issues in the supply chain are captured under the Supply Chain Labor
Standards Theme. Health and safety issues raised by a union but not primarily about
the company’s relationship with the union are captured under the Health & Safety
Theme.
Discrimination & Workforce Diversity
ESG controversies related to a firm’s workforce diversity, including its own
employees as well as temporary employees, contractors, and franchisee employees.
Topics covered under this indicator include issues such as allegations of
discrimination on the basis of gender, race, ethnicity or other characteristics.
Discrimination at supplier facilities is captured under the Supply Chain Labor
Standards Theme. Discrimination on the basis of unionization or union sympathies is
captured under the Collective Bargaining & Unions Theme.
Child Labor
Child labor ESG controversies in a firm’s own operations or its supply chain.
Topics covered under this indicator include issues such as allegations that thecompany uses or has used underage workers or that underage workers are present
at supplier facilities.
Supply Chain Labor Standards
ESG controversies related to workers in a firm’s supply chain.
Topics covered under this indicator include issues such as allegations of unsafe
working conditions, inadequate pay, excessive working hours or overtime, union
issues at supplier facilities, the use of forced labor or prison labor by suppliers anddiscrimination.
Underage labor in supplier operations is captured under the Child Labor Theme.
Other
Any labor issues that fall outside of the more targeted indicators listed above.

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Governance
Bribery & Fraud
ESG controversies related to a firm’s business ethics practices.
Topics covered under this indicator include issues such as bribery, tax evasion,
insider trading, money laundering, tax evasion or avoidance, violations ofgovernment sanctions and accounting irregularities.
Governance Structures
ESG controversies related to the potential negative impacts of a corporate entity’s
governance structure and practices. Impacted constituencies include shareholders,
bondholders and society.
Topics covered under this indicator include alleged failures to manage conflicts ofinterest (which, depending on the ownership structure, may include those related to
executive pay or related-party transactions) and other alleged failures of oversight bya relevant governance body (whether that is the executive management, the board of
directors or supervisory board, external auditors, or other oversight bodies that havea role at the corporate entity).
Alleged negative governance impacts may also relate to structural concerns
including the entity’s legal form, jurisdictional-related concerns, and misalignment of
economic interests between shareholders and management or between minority andcontrolling shareholders.
Certain of these controversies may be highlighted by way of the outcome of votes atshareholder meetings or through the submission of shareholder proposals.
Controversial Investments
ESG controversies related to the social and environmental impact of a firm’s lending,underwriting and financing activities.
Topics covered under this indicator include issues such as financing projects thatare controversial because of their actual or anticipated environmental or social
impact, as well as criticism of mining companies, real estate investment trusts andsimilar companies that receive royalties or own shares in a particular project thatthey neither own nor operate.
Other
Any governance issues that fall outside of the more targeted indicators listed above.

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Appendix B – Criteria for determining Scale of Impact
and Nature of Harm
Below is an indicative list of criteria used to determine the Scale of Impact andNature of Harm of an ESG controversy case, arranged by Pillar. The measurements
take different forms depending on the type of impact. Note that the criteria listed
below are representative but not comprehensive.

Environmental Pillar
The Nature of Harm for ESG controversies in the Environmental Pillar is determinedbased on the degree of damage and the irreversibility of damage (alleged). In
general, the Scale of Impact of an Environmental Pillar ESG controversy isdetermined by the size of the area affected, whether of land, water, air, or thegeographical range of the wildlife impacted. Cases with undetermined or unspecified
environmental Scale of Impact are assessed as falling within a Limited Scale of
Impact. Note: neither exacerbating nor extenuating factors are part of the Nature ofHarm or Scale of Impact assessment, and are reflected, if applicable, as a separate
adjustment factor (see section 1.2.4 and 1.2.5 for details) in the assessment of ESG
controversy severity.

Scale

Nature of Harm

Extremely Widespread:

Very Serious•≥100 km2, whole watershed system.

•

Plant/wildlife death.

•

Impact on global species.

•

Habitat/ecosystem destruction.

•> 60,000 barrels spilled.

Serious•Top 10 contributors (by sales or
production) involved in high impact
activity.

•

Events or activities causing long-lasting(over 5 years) and very severe harm
across multiple sovereign states.

Extensive:•

10-99 km2, large bay or portion of river.

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

•

Debilitation plant/wildlife injury/illness.

•

Major habitat/ecosystem damage (noteasily remediated).

Medium•Short-term damage to plant/wildlife.

•

Short-term habitat/ecosystem damage.

•

General pollution with damages not
specified.

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ScaleNature of Harm•

Regional/country species impact.

•

5,000-59,999 barrels spilled.

•

One of many companies involved in theactivity or business.

Minimal•

Impact is projected or not scoped out.

Limited:•

1-9 km2, stream/small river, lake.

•

Local wildlife impact.

•

Spill 1,500-4,999 barrels.

Low:•

Scale of Impact is insignificant or not
determined.

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Social Pillar
The Nature of Harm for ESG controversies in the Social Pillar is determined based on
irreversibility of damage (alleged) to human health, livelihood and properties. With
three underlying Sub-Pillars (Customers, Human Rights & Community Impact, andLabor Rights & Supply Chain), the Nature of Harm of a social ESG controversy mayvary by the type of stakeholder involved. In general, the Scale of Impact for a Social
Pillar ESG controversy is determined by the number of people or properties affected(for example, in the case of activities damaging home values).
Note: neither exacerbating nor extenuating factors are part of the Nature of Harm or
Scale of Impact assessment, and are reflected, if applicable, as a separate
adjustment factor (see section 1.2.4, 1.2.5 and Appendix C for details) in theassessment of ESG controversy severity.
Scale

Nature of Harm

Extremely Widespread:

Very Serious•

1,000+ people.

•

2,000+ properties.

•

Top 10 contributors (as claimed or bysales or production).

•

Events or activities causing long-lasting(over 5 years) and very severe economic
harm (greater than USD 10B) acrossmultiple sovereign states.

Extensive:•

Death, permanent disability, torture,rape, enslavement, human rights
violation signifying most serious crimes.

•

Destruction of livelihood or traditional
way of life, property destruction.

•

Product or practice is one of the leading
causes of death, permanent disability.

Serious•

Debilitating injury/illness.

•

25-999 people.

•

Major property damage.

•100-1,999 properties.

••

One of many companies involved in theactivity or business.

impairment of livelihood or traditional
way of life, displacement.

•

Labor and civil rights violation (e.g.,
privacy, collective bargaining) withevidence of concrete resulting harm.

•

Product or practices poses health risk.

Limited:•10-24 people.

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Scale
•

Nature of Harm
10-99 properties.

Low:•

Scale of Impact is insignificant or not
determined.

Medium•Treatable short-term injury/illness.

•

Non-serious property damage (easily
repaired).

•Non-serious impairment to livelihood or
traditional way of life.

•

Products or practices that could be
associated with adverse impact without
direct causality.

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

•

Inconveniences, minor disruptions•

Impact is projected or not scoped out.

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Governance Pillar
In the Governance Pillar, when assessing Scale of Impact and Nature of Harm, MSCIESG Research distinguishes between Business Ethics issues and Governance
Structures issues.
For Business Ethics issues, Scale of Impact is generally measured by size of themarket or government affected, or the degree to which either company executives orexternal parties such as government officials were involved.
For Governance Structures issues, measurements of the Scale of Impact varydepending on the nature of the ESG controversy but generally include metrics suchas the percentage of shareholder votes or number of shareholders voicing an
opinion, number and position of executives or directors involved, number and type of
external parties voicing an opinion, or the portion of the company that is affected or
implicated. Measures of the Nature of Harm are focused around impacts on
investment value and on shareholder rights. Most cases are assumed to be of
medium impact, barring circumstances that go beyond typical scenarios andindicating more serious harm.
Measures of the Nature of Harm vary by the type of violation that occurred andinclude factors such as financial impact on the company or other impacted parties,
the value of bribes or ill-gotten gains and other negative impacts that resulted from
illicit or unethical activities.

Scale

Nature of Harm

Extremely Widespread:

Very Serious•

Global or 3+ G20 countries involved,
1,000+ people involved.

Extensive:•

Activity substantially destabilized anational government or economy.

•

Total bribes paid or losses to company
exceed USD 1B or value of contracts orother ill-gotten gains (e.g., taxes
avoided) obtained exceeds USD 10B.

1 of G20 countries or 3+ non-G20
countries involved, 25+ people involved.

Limited:••1-2 non-G20 countries/local
municipalities involved, 10-24 people
involved.

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

Serious•

Activity bankrupts the company or a
non-govt customer; material financial
impact on a govt body (incl public
pension funds).

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Scale
•

Nature of Harm
Scale of Impact is insignificant or not
determined.

•

Total bribes paid exceed USD 100M or
Value of contracts obtained exceeds
USD 5B.

Medium•Corruption & fraud allegations among
business entities, not affecting
individual customers•

Most corruption & government fraud
activities: harm is real but diffused.

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

Impact is projected or not scoped out

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Appendix C – Vulnerable Demographics
Vulnerable demographics are limited to (1) indigenous populations, 6 (2) national (i.e.,
civilians and refugees), ethnic, racial and religious groups identified by ongoing
Human Rights Council-mandated Investigative Bodies (HRC-mandated Investigative
Bodies) or ad-hoc country reports issued by the United Nations Office of the HighCommissioner for Human Rights (OHCHR), 7 and (3) nationals (i.e., civilians andrefugees) located and/or originated from countries with ongoing international armed
conflicts or military offensives 8 (see Exhibit 16). 9
The list of vulnerable demographics undergoes a review, typically annually, toaccount for updates to the HRC-mandated Investigative Bodies, new ad-hoc reports
issued by the OHCHR and the Geneva Academy’s RULAC project.
The Vulnerable Demographics exacerbating factor is not applied for the following
groups:•Local communities that fall outside the abovementioned parameters.

•

Demographic groups defined by age (e.g., children, elderly), gender or sexual
orientation (e.g., women, LGBTQ+) unless they belong to the national (i.e., civilians
and refugees), ethnic, racial and religious groups identified by the abovementioned
sources.

•Refugees from areas not characterized by ongoing international armed conflictor military offensives, unless they belong to the national (i.e., civilians andAccording to the United Nations and the World Bank, “indigenous peoples are suffering systematic humanrights violations, internal displacement, the loss of cultural identity, the destruction of livelihoods, poverty,
permanent environmental damage, pollution, and the loss of biodiversity in their traditional lands andterritories.” State of the World’s Indigenous Peoples: Rights to Lands, Territories and Resources. 5th volume.
Department of Economic and Social Affairs of the United Nations Secretariat. 2021; World Bank. Indigenous
Peoples.
6

Only country-level reports are considered. When multiple reports for the same country have been issued only
the most recent will be considered. In the absence of a report, an oral update may be considered. Only reports
issued in or after 2020 will be considered. In the event that a country-level report is issued by the OHCHR for acountry with an ongoing HRC-mandated Investigative Body, only the most recent report from either body will beconsidered.
7

Based on the Geneva Academy of International Humanitarian Law and Human Rights’ Rule of Law in Armed
Conflicts [“RULAC”] project. Non-international armed conflicts are not considered as part of the assessment ofvulnerable demographics.
8

The assessment of whether a controversy case negatively impacts vulnerable demographics is done at thetime the case is opened and when the case is reviewed and is based on the criteria described in this appendix
at the time of such assessment. Changes to the Exhibit 19 will be reflected on individual cases only once thecase is reviewed/updated following our standard procedure.

9© 2024 MSCI Inc. All rights reserved. Please refer to the disclaimer at the end of this document.

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refugees), ethnic, racial and religious groups identified by the abovementioned
sources.
Undocumented immigrants or seasonal migrants that fall outside theabovementioned parameters.

•

Exhibit 16: List of national (i.e., civilians and refugees), ethnic, racial and religious
groups identified by ongoing HRC-mandated Investigative Bodies or ad-hoc country
reports issued by the OHCHR and nationals (i.e., civilians and refugees) locatedand/or originated from countries with ongoing international armed conflicts or
military offensives 10

Country/Region 11

National (civilians and refugees),ethnic, racial and religious
groups identified by ongoing
HRC-mandated Investigative
Bodies or ad-hoc country reports
issued by the OHCHR

Nationals (i.e., civilians
and refugees) locatedand/or originated fromcountries with ongoinginternational armed
conflicts or military
offensives

Abkhazia,
Georgia, and theTskhinvali
region/South
Ossetia

Civilians and refugees

N/A

Aksai Chin andArunachal
Pradesh, and anumber ofsmaller regions
along the SinoIndian border

N/A

Civilians and refugees

Civilians and refugees

N/A

Uyghurs

N/A

Belarus
China – Xinjiang
Autonomous
Region10

Accessed April 2024.

11
The Independent International Fact-Finding Mission for the Sudan was stablished in October 2023 and its
first oral update and report are due in June-July 2024 and September-October 2024, respectively.

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Nationals (i.e., civilians
and refugees) locatedand/or originated fromcountries with ongoinginternational armed
conflicts or military
offensives

Country/Region 11

National (civilians and refugees),ethnic, racial and religious
groups identified by ongoing
HRC-mandated Investigative
Bodies or ad-hoc country reports
issued by the OHCHR

Colombia

Indigenous Peoples and personsof African descent

N/A

CrimeaN/A

Civilians

CyprusGreek Cypriots and Turkish
Cypriots

Civilians and refugees(Northern part of Cyprus)

Civilians

N/A

Democratic
Republic of the
Congo
Democratic
People’sRepublic of
Korea

Civilians and refugees

Donetsk andLuhansk

N/A

Civilians and refugees

GuatemalaIndigenous peoples and personsof African descent

N/A

Haiti

Civilians and refugees

N/A

Honduras

Civilians and refugees

N/A

Palestinians

Civilians and refugees

IsraelIsraelis

N/A

Iran

Civilians and refugees

N/A

Iraq

N/A

Civilians and refugees

Kashmir

N/A

Civilians and refugees

West Bank, Gaza
Strip, East
Jerusalem© 2024 MSCI Inc. All rights reserved. Please refer to the disclaimer at the end of this document.

N/A

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National (civilians and refugees),ethnic, racial and religious
groups identified by ongoing
HRC-mandated Investigative
Bodies or ad-hoc country reports
issued by the OHCHR

Nationals (i.e., civilians
and refugees) locatedand/or originated fromcountries with ongoinginternational armed
conflicts or military
offensives

Libya 12Civilians and refugees

N/A

MyanmarRohingya Muslims and civilians
and refugees

N/A

NagornoKarabakh

N/A

Nicaragua

Civilians and refugees

N/A

Philippines

Civilians and refugees

N/A

Country/Region 11

South Ossetia
and Abkhazia
South Sudan

Civilians and refugees

Syria

Civilians and refugees

Civilians and refugees

Civilians and refugees

N/A

N/A
Civilians and refugees(Northern Syria)
Civilians and refugees

Golan Heights
and Shebaa
Farms

N/A

Transdniestria

N/A

Civilians and refugees

UkraineCivilians and refugees

Civilians and refugees

Venezuela

Civilians and refugees andindigenous populations

N/A

N/A

Civilians and refugees

Western Sahara

Sources: Human Rights Council-mandated Investigative Bodies list of current mandates and OHCHR
country reports (accessed April 2024).

12
The Office of the High Commissioner in cooperation with the United Nations Support Mission in Libya(UNSMIL) has issued a report on the situation of human rights in Libya, and the effectiveness of technicalassistance and capacity-building measures received by the Government of Libya. However, the IndependentFact-Finding Mission on Libya by the Human Rights Council-mandated Investigative Body has ended.

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Key Definitions
MSCI ESG Research relies on the following definitions:Indigenous People
According to the United Nations and the World Bank, over 476 million indigenous
people across 5,000 distinct groups and spread over 90 countries make up about 6%of the global population. While the UN Declaration on the Rights of Indigenous
Peoples does not include a definition of indigenous people, self-identification as
indigenous is considered a fundamental criterion.
The UN identifies common factors among indigenous populations:•

A historical continuity with a given region prior to colonization and a strong linkto their lands.

•

Distinct social, economic and political systems.

•

Distinct languages, cultures, beliefs and knowledge systems.

Systematic abuse of indigenous populations specifically is defined by the UN
Declaration on the Rights of Indigenous Peoples Article 8 and includes:•

Any action which has the aim or effect of depriving them of their integrity as
distinct peoples, or of their cultural values or ethnic identities.

•

Any action which has the aim or effect of dispossessing them of their lands,
territories or resources.

•

Any form of forced population transfer which has the aim or effect of violating or
undermining any of their rights.

•

Any form of forced assimilation or integration.

•

Any form of propaganda designed to promote or incite racial or ethnic
discrimination directed against them.” 13

Refugees
The United Nations defines refugees as “persons who are outside their country oforigin for reasons of feared persecution, conflict, generalized violence, or othercircumstances that have seriously disturbed public order and, as a result, requireinternational protection.”

13

United Nations. 2008. United Nations Declaration on the Rights of Indigenous Peoples. United Nations.

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Key References•

United Nations Declaration of Human Rights.

•

United Nations Declaration on the Rights of Indigenous Peoples.

•International Labour Organization Convention No. 169: Indigenous and Tribal
Peoples.

•International Labour Organization Convention No. 105: Abolition of Forced
Labour Convention.

•

United Nations Minorities Declaration.

•

Convention against Torture and Other Cruel, Inhuman or Degrading Treatment or
Punishment.

•International Convention for the Protection of All Persons from Enforced
Disappearance.

•

International Convention on the Elimination of All Forms of Racial Discrimination.

•

International Convention on the Protection of the Rights of All Migrant Workers
and Members of Their Families.

•

International Covenant on Civil and Political Rights.

•

International Covenant on Economic, Social and Cultural Rights.

•

Convention on the Non-Applicability of Statutory Limitations to War Crimes andCrimes Against Humanity.

•

Convention on the Prevention and Punishment of the Crime of Genocide.

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